Cash has run out, but Hamas chief optimistic

To Ismail Haniyeh, the Palestinians' first-ever Hamas prime minister, the decision of Western countries to stop aid to the Palestinian Authority (PA) is hypocritical: The long push for free and fair elections hasn't been accompanied by support - particularly in financial terms - for the vote's outcome.

But Mr. Haniyeh shies away from belligerence, instead preferring businesslike calm with which he hopes to persuade donors to replace some of the $1 billion in annual foreign aid in jeopardy now that militant Hamas is in power.

"This decision [to cut aid] could increase the suffering of the Palestinians, and it also contradicts the rules of democracy when they link the bread of assistance with political issues," he says.

Hardly a week into his job, Haniyeh is facing the cash-flow crisis of a lifetime. The PA cannot pay salaries for its 140,000 employees, and needs about $170 million a month to stay in business. Some $50 million a month has been promised to Hamas by the Arab League, Haniyeh says, but doesn't come close to meeting operating expenses. The US, Canada, and the European Union have all said they will stop direct financial assistance to Palestinian institutions run by Hamas, which they deem a terrorist organization. But the EU's foreign policy chief said Wednesday that he would like to give Hamas some time to change. The organization's charter calls for Israel's destruction.

With his measured answers in an interview Thursday, Haniyeh hardly broadcasts the sense of extremism that much of the world has come to associate with Hamas. Instead of fiery rhetoric, he says he is open to dialogue. But the kind of change the international community is asking for - whether forgoing violence or recognizing Israel - does not appear to be on his agenda.

For example, Hamas made headlines early this week when hard-liner Mahmoud Zahar, now the PA's foreign minister, said in a letter to UN Secretary-General Kofi Annan that Hamas was interested in a two-state solution.

The very mention of there being room for two states here - one Arab and one Jewish - was read as a turning point for Hamas. It also implied an apparent willingness to consider reconvening peace talks, a de facto recognition of Israel.

But Haniyeh says there was a misunderstanding: the draft of an incomplete letter to Annan was faxed by accident, without the changes Mr. Zahar had suggested and without his authorization. "Somebody faxed the wrong version," he says. "It was a technical mistake."

Hamas as a whole is experiencing technical difficulties. Haniyeh inherits a PA that was already staggering during Mr. Arafat's last years.

Palestinian Finance Minister Omar Abdel Razeq told reporters this week he was surprised to find that the PA is at least $1.2 billion in debt to private creditors. Now, the Hamas-led government is having difficulties finding a bank to handle its finances, Reuters reported, because institutions such as the Amman-based Arab Bank are under pressure to stop working with the group.

Donor countries have suggested that they would try to find ways to circumvent Hamas and instead channel funds to Palestinian President Mahmoud Abbas, a moderate from the now-ousted Fatah Party. But at its first meeting Wednesday, Haniyeh's government froze all appointments and decisions made in recent months by the outgoing government, indicating Haniyeh is not keen to work with Mr. Abbas.

Along the northern edge of Gaza, the sound of shelling punctures the afternoon, a reminder that Haniyeh's challenges are not purely financial. Militants have made a habit of sending Kassam rockets into Israel. Israel responds with artillery shells, and earlier this week hit the presidential compound.

It is this "Israeli escalation," Haniyeh says, which caused Zahar to send the letter to Annan. He was also dismayed when he learned Thursday that Israeli forces arrested one of his cabinet ministers at a checkpoint outside Jerusalem, which he called a "serious message" vis-à-vis Israel's approach to dealing the Hamas-led government.

The PA will survive, he says, with "our own Palestinian resources" and with help from other countries in the region; he declines to say which ones.

And unlike some of the more ideological voices in Hamas, which have called for a fuller Islamicization in the territories, Haniyeh is also reticent about plans for domestic change. He says that Islam already permeates Palestinian life.

"As God says in the holy Koran, there should be no compulsion in religion," says Haniyeh, who is the father of 13 children and a former academic dean at the Islamic University here.

"We will not oblige people, but we can call people. We are not going to force people to abide by Islamic law. Most of the Palestinian people are Muslims and committed to Islamic values and if you walk Gaza and the West Bank, you can see and touch these commitments," he says.

Haniyeh says he will "deal seriously" with unrest here, bringing different militant groups under his government's wing. Several armed groups, most but not all of them affiliated with Fatah, the mainstream faction of the Palestine Liberation Organization (PLO), have challenged the Hamas government, resulting in gun battles.

"We are the first Islamic society in the region," he says with pride. Indeed, religious and secular Muslims alike are watching Hamas to see whether they can balance their stance on Israel with their desire for an audience abroad.

Beyond Islam, he says, it is Palestinian suffering that inspires everything he does: "The old lady sitting on the rubble of her destroyed home, the child under siege, the prisoners sitting in Israeli jails, the family of martyrs who pay more for their suffering: all of these are my inspiration because they symbolize our situation."