VZCZCXYZ0002
PP RUEHWEB

DE RUEHC #8722 0360119
ZNR UUUUU ZZH ZDS
P 302055Z JAN 09
FM SECSTATE WASHDC
TO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 3229-3230
RUEHAS/AMEMBASSY ALGIERS PRIORITY 2484-2485
RUEHKU/AMEMBASSY KUWAIT PRIORITY 5377-5378
RUEHRH/AMEMBASSY RIYADH PRIORITY 0493/0494
RUEHDO/AMEMBASSY DOHA PRIORITY 0000
INFO RUEHTV/AMEMBASSY TEL AVIV PRIORITY 7085-7086
RUEHJM/AMCONSULJERUSALEM PRIORITY 4176-4177

UNCLAS STATE 008722 
 
SENSITIVE 
 
SIPDIS 
 
2ND C O R R E C T E D  COPY (CAPTION AND PORTION PARAS MARKING) 
 
E.O. 12958: N/A 
TAGS: EFIN PGOV PTER PHUM KPAL KWBG
SUBJECT: DEMARCHE REQUEST: IMMEDIATE BUDGET SUPPORT FOR 
THE PALESTINIAN AUTHORITY 
 
REF: A. STATE 732 
     ¶B. KUWAIT 22 
 
¶1. (U) This is an action request: see paragraph 3. 
¶2. (SBU) Summary: Special Envoy George Mitchell's trip to the 
region demonstrates the start of the Obama Administration's 
active U.S. engagement in the Middle East peace process. 
Empowering the Palestinian 
Authority (PA) is a focus of Mitchell's trip and critical to 
the success of the Israeli-Palestinian track of peace 
negotiations.  The PA needs urgent support from foreign 
donors to make February salary payments to its employees in 
both the West Bank and Gaza.  Not making these payments and 
accruing arrears would constitute a major political blow to 
Prime Minister Salam Fayyad and the improved reputation he 
has built for the PA.  In addition, the PA's immediate budget 
crunch limits its ability to take the lead in addressing the 
humanitarian and recovery needs in Gaza.   Last year, the 
U.S. made the largest single contribution to stabilize the PA 
budget.  European Union (EU) countries played a critical 
role, but contributions from regional countries were also 
important; Saudi Arabia, the United Arab Emirates (UAE), 
Kuwait and Algeria provided significant budget support to the 
PA in 2008 to help it avoid an end-of-year budget crisis and 
pay off outstanding arrears and private debt.  This cable 
follows a previous demarche to Arab and European capitals 
(ref A) and requests that posts again emphasize the PA's 
urgent need for budget assistance. End summary. 
 
¶3. (U) Action Request: The Department requests that action 
addressees' demarche relevant government officials to achieve 
the objectives listed below and report responses via front 
channel cable. 
 
Objectives 
- - - - - - - - - 
 
¶4. (U) Objectives include: 
 
-- Stress that Middle East Special Envoy George Mitchell 
intends to intensify US engagement in the peace process and 
has indicated that support for the PA is an essential 
component of bringing stability and peace to the region. 
Arab assistance to help empower the PA is critical to the 
success of this renewed effort. 
 
-- Urge addressees to provide immediate budget assistance to 
the PA so that it can make salary payments on February 4, 
including to its 77,000 employees in Gaza. 
 
-- Emphasize that budget support will help the PA take the 
lead on meeting the humanitarian and recovery needs in Gaza, 
including through direct transfers of assistance to families 
who lost their homes in the recent fighting. 
 
-- Express appreciation for 2008 contributions from Saudi 
Arabia, the UAE, Kuwait, and Algeria, which helped the PA 
avoid a budget crunch at the end of 2008.  Stress that the PA 
needs a similar influx of Arab financial support now. 
 
-- Stress that addressing the PA's immediate budget needs 
cannot be postponed until the international pledging 
conferences that are being planned in Cairo and Europe. 
 
Reporting Deadline 
- - - - - - - - - - - - - - - - 
 
¶5. (U) Please report all host country responses to NEA/IPA Desk 
Officer Andrew Lentz no later than February 4. 
 
Background 
- - - - - - - - - - 
 
¶6. (SBU) According to the IMF, the PA's revenues in 2009 will 
fall short of expenditures by $1.1 billion, or approximately 
$95 million per month, affecting the PA's ability to pay 
public sector salaries and provide essential public services. 
 PA Prime Minister Salam Fayyad has reported that he 
presently does not have sufficient donor funding in the 
pipeline to meet this shortfall and that his government will 
not be able to make this month's salary payments on February 
4 - including to 77,000 employees in Gaza - without assuming 
short term debt.  The costs associated with the recent 
fighting in Gaza are not included in the IMF's estimate and 
place a further strain on the PA's budget.  The PA has 
indicated that it may be forced to postpone future salary 
payments in order to fund its strategy for assistance to Gaza 
in the absence of alternative financing.  Accumulating salary 
arrears now would erode confidence in the government. 
 
¶7. (SBU) Saudi Arabia ($210 million), the UAE ($133 million), 
Kuwait ($80 million) and Algeria ($62.5 million) provided the 
majority of Arab state budget support to the PA from Arab 
states in 2008.  Saudi Arabia already has pledged $1 billion 
to assist with Gaza reconstruction, although it has not 
specified the mechanism through which this assistance will be 
delivered or if any of this money will be in the form of 
budget support to the PA.  Kuwait responded to a previous 
demarche about the PA budget (ref B), indicating that it 
plans to provide the PA with an additional $80 million in 
2009 but did not specify its timetable.  Algeria and the UAE 
have not indicated if or when they intend to commit budget 
support to the PA this year.  Support from these four Arab 
states would help send a strong signal of support for the PA 
and help solidify its lead role in addressing the 
humanitarian situation in Gaza. 
 
¶8. (U) Special Envoy Mitchell is traveling in the region to 
demonstrate active US engagement in the peace process and 
refocus international diplomatic efforts.  Through his 
meetings in Israel, Egypt, Saudi Arabia, Europe and with the 
Palestinian Authority he is seeking to advance several 
near-term objectives: consolidating the ceasefire in Gaza; 
increasing and sustaining humanitarian assistance into Gaza 
and enhancing assistance to the West Bank; and bolstering 
Arab moderates.  Central to achieving these objectives is 
empowering the PA.  The US provided the PA with $150 million 
in direct budget assistance in October 2008 as part of our 
fiscal year 2009 contribution.  The contribution brought our 
calendar year contribution to the PA's budget to $300 
million, the largest level of assistance to the PA from a 
single nation. 
 
Point of Contact 
- - - - - - - - - - - - - 
 
¶9. (U) The point of contact is NEA/IPA Desk Officer Andrew 
Lentz, ext. 7-2268, email lentzan@state.gov. 
CLINTON