After victory, Hamas faces money crunch

Just days after besting its rivals at the ballot box, Hamas now faces a far more challenging campaign: a fight to keep the international donor community, which has kept the Palestinian Authority (PA) functioning since 1994, from cutting off funding.

The US and the European Union, often at odds over Middle East policy, now appear united in their stance: If it wants the world's assistance, Hamas must change.

Germany's new chancellor, Angela Merkel, presented that message during a visit here Monday. She asked Palestinian President Mahmoud Abbas, leader of ousted Fatah, to press Hamas to forswear violence and recognize Israel.

"As a president, he should urge Hamas to respect certain principles," Ms. Merkel said. If Hamas holds to its hallmarks - calling for Israel's destruction and using suicide bombers - the EU would be unable to continue funding the PA, she said.

But in a statement Monday, the EU backed away from saying it would completely cut funding to a government led by the militant group. EU foreign ministers said they expected the new Palestinian Legislative Council to back the creation of a government "committed to a peaceful and negotiated solution of the conflict with Israel.... On this basis the EU stands ready to continue to support Palestinian economic development and democratic state-building."

The US is taking a much harder line on Hamas, which it considers a terrorist organization. "The Hamas party has made it clear that they do not support the right of Israel" to exist, President Bush said Monday. "And I have made it clear that so long as that's their policy that we will not support a Palestinian government made up of Hamas."

The pressure to keep foreign funding coming to the PA may push Hamas leaders to make some crucial decisions about their stances if Hamas wants to move into the business of governance and away from being branded terrorists.

At least half of the PA's $3 billion budget is dependent on funds from donors. Another major source of income is import duties, which are collected by Israel at the country's borders and later transferred to the PA's coffers. Acting Prime Minister Ehud Olmert warned that Israel might stop transferring the funds, a step Israel has taken before.

Since last week's election, in which Hamas took a remarkable 76 out of 132 seats, the militia-cum-political party has been sending mixed messages.

Analysts here have long delineated differences that are developing within the organization, between extremists and the more moderate forces in Hamas. What's more, the message from the top Hamas figures in the West Bank and Gaza differs from the tone being struck by the "outside," the Hamas spokesmen living abroad, primarily in Damascus, Syria.

Ismail Haniyeh, the No. 1 on Hamas's electoral list in Gaza, called on foreign donors Monday to continue to their aid.

"We confirm to you this income will be used to pay the salaries of [government] employees and fund daily running costs and infrastructure. You can confirm this through a mechanism that can be agreed upon," Mr. Haniyeh told reporters. "We call on you to understand the priorities of our Palestinian people at this stage and continue the spiritual and financial support in order to push the region toward stability rather than pressure and tension."

Haniyeh asked the EU to understand the "Palestinian reality" and not ask Hamas to disarm. Doing so would "increase the suffering of our people who are looking for freedom, right of [refugee] return, and independence," he said.

In Damascus, where the "outside" leadership is based, the Hamas message has struck a more belligerent tone. There, top Hamas spokesman Khaled Meshal said over the weekend that Hamas would look to form its own army now that it is in power.

In an interview aired on Al Arabiya television, another Hamas official, Mohammed Nazzal, said that cutting off funds would amount to punishment of the Palestinian people; another Hamas official called it blackmail.

"If the European Union countries and the American administration see this as a means that could lead to a change in Hamas's strategic position, then they are dreaming and are mistaken. Hamas will never accept that," Mr. Nazzal said.

Hamas itself, many of its new electees admit, was caught off guard by its win. It was preparing to be an opposition party in the new Palestinian parliament, not its main power broker.

As such, last week's vote also leaves the Quartet countries (the four key Middle East interlocutors: the US, United Nations, the EU, and Russia) at something of a loss about how to deal with Hamas. The Quartet partners held talks in London Monday on how to balance the aid commitments against the policy of not aiding any group deemed a terrorist organization.

Mr. Abbas tried after meeting with Merkel to distinguish between Hamas as a party and the PA as a whole. Under his leadership, he said, the Palestinians would still pursue negotiations with Israel.

One proposal being floated is the possibility of Hamas appointing a moderate prime minister who is sympathetic to Hamas, but not a member of Hamas itself.

Amid the controversy, many Palestinians have grown critical of US and European demands that Hamas change its position vis-à-vis Israel. They point out that the region has been under pressure to democratize, in particular by the Bush administration.

"Aid to the Palestinian Authority is aid to the Palestinian people: either they are still in need of this aid or not, they should not be subject to hardship because of whom they elect," says Mustafa Abu-Sway, a professor of Islamic Studies at Al Quds University in East Jerusalem.

"When we look at the region, we see that if there are open and free elections in all these countries, I'm sure that Islamists will rise to power in most if not all of them," he adds. "This is where people are casting their votes, and so you can't ignore the will of those people and not agree to deal with their leaders."

• Wires contributed to this article.

• The European Union is the largest donor to Palestinian projects. Last year it gave $612 million in aid, but halted direct payments to the Palestinian Authority (PA) due to concerns over the high level of government salaries.

• The United States gave the PA $400 million last year and has budgeted $234 million in assistance this year. Since 1993, the US has given the Palestinians more than $1.5 billion.

• Israel has suggested it would suspend customs revenue transfers to the PA, which total $40 million to $50 million per month and are crucial toward paying the salaries of 135,000 Palestinian employees.

• Hamas has rejected threats of a funding cutoff as blackmail and has said it could seek money from alternative sources, within the Arab world and beyond.

Source: Reuters