VZCZCXRO8212
PP RUEHROV
DE RUEHTV #1182 1531028
ZNR UUUUU ZZH
P 021028Z JUN 09
FM AMEMBASSY TEL AVIV
TO RUEHC/SECSTATE WASHDC PRIORITY 2015
INFO RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHXK/ARAB ISRAELI COLLECTIVE

UNCLAS TEL AVIV 001182 
 
SENSITIVE 
SIPDIS 
 
NSC FOR MARA RUDMAN AND PREM KUMAR, TREASURY FOR DAN MOGER 
 
E.O. 12958: N/A 
TAGS: EAID EFIN PREL KPAL IS
SUBJECT: ISRAELIS AND PALESTINIANS MEET ON GAZA RECOVERY 
 
REF: 06/02/09 GOLDBERGER EMAIL 
 
¶1. (SBU) MFA Deputy Director Irit Ben Abba called EconCouns 
evening of June 2 to give a readout of the GOI-PA meeting on 
end-use assurances and Gaza recovery.  Ben Abba said the 
meeting had been led by she and Karim Nashashibi and had gone 
very well from the GOI perspective.  So well, in fact, that 
the GOI was rethinking its 'top down' approach to end-use 
assurances in Gaza and has put its end-use mechanism on hold 
for the moment while it explores a 'bottom up' mechanism with 
the PA.  Ben Abba said talks would continue, and that both 
sides agreed to limit discussion of end-use assurances at the 
June 8 Ad Hoc Liaison Committee meeting to a simple statement 
that the GOI and PA were working together to develop such 
assurances. 
 
¶2. (SBU) Ben Abba said the PA was proposing to use the Gaza 
banking system as its primary instrument for end-use auditing 
and reporting, though the Palestinians are still working out 
the specifics.  She said Nashashibi had asked for Israeli 
ideas on the type of auditing or other assurances that might 
be useful.  Ben Abba confirmed that both sides are looking at 
three levels of assurances: 1) basic humanitarian needs, 
which probably require no change from existing border 
procedures; 2) repairs, which would call for something akin 
to the end-use assurances offered under the earlier UNDP cash 
program run through the banking system; and 3) assurances for 
infrastructure and other major projects. 
 
¶3. (SBU) EconCouns noted that cash-based repair programs 
would require re-establishment of a building materials market 
in Gaza via the Israeli border crossings.  Otherwise, Hamas 
would benefit both from collecting the value-added tax on 
materials purchase for minor repairs and collecting the levy 
on items brought in through the tunnels along the Philadelphi 
corridor.  Ben Abba agreed that the GOI would have to make 
some hard decisions on expanding commercial traffic through 
the border crossings, but said PA commitment to workable 
end-use assurance measures would make it easier to argue for 
such an expansion. 
 
¶4. (SBU) The PA's desire to use the banking system, one of 
the few Gaza institutions over which it still has direct 
control, makes a lot of sense, according to Ben Abba.  She 
said Hassan Abu Libdeh would lead the PA side in future 
discussions.  However, given that the Joint Economic 
Committee had already set up a subgroup to discuss how the 
Palestinian Monetary Authority (PMA) is monitoring financial 
activity in Gaza, she said the details of audits and other 
end-use procedures could be developed by that subgroup.  Ben 
Abba confirmed that the next meeting of the subgroup would be 
a technical discussion between the Bank of Israel/KPMG 
consultants and their PMA counterparts on June 7. 
 
¶5. (SBU) Comment: In our previous meetings with the GOI on 
Israel's end-use mechanism, Emboffs had strongly underscored 
the need for the Israelis to work directly with the PA in 
developing an agreed mechanism to present to the donor 
community.  While we had hoped the two sides would have 
already made significant progress in time for the AHLC 
meeting, that did not happen.  Nonetheless, it is encouraging 
that they are talking now.  It will be important for the USG 
to support the outcome of those talks if the two sides reach 
agreement on how best to move forward with Gaza recovery. 
 
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CUNNINGHAM