The expected Palestinian unilateral declaration of independence this month raises new and troubling questions about U.S.-Palestinian relations.
As I noted in my congressional testimony this week, the UDI (unilateral declaration of independence) is an outright rejection of the Oslo Accords, the legal framework for U.S.-Palestinian relations. In many ways, it is also a rejection of the U.S. role as the broker for continued diplomacy.
In fact, the Palestinian plan to declare a state this month is designed, in part, to isolate the United States from the Arab world. President Barack Obama has stated that the United States would veto the UDI at the U.N. Security Council, based on his belief that bilateral negotiations are the only true path to peace. If Abbas goes to the Security Council first, he may force the U.S. to publicly deny the Palestinians statehood on the world stage. As Fatah officials recently explained, even after the U.S. went to great pains to support the protest movements in Egypt, Libya, Syria, and elsewhere, America's decision to veto Palestinian independence would damage its credibility in the Arab world. This is why legislators are weighing a complete severance of U.S. aid.
What would be the economic impact of such a cut-off? In short, it would be devastating. The impact could be compounded if the Israelis, who collect some $100 million in Value Added Taxes (VAT) on behalf of the Palestinians each month, elect to withhold these funds. One Israeli official recently indicated that two scenarios - a Hamas-Fatah unity government or a Palestinian decision to go through with the UDI - could trigger such a move. These are the same events that could trigger a cut in U.S. funding. Collectively, U.S. aid and Israeli VAT amounts to more than $1.5 billion per year. This accounts for roughly three-quarters of the Palestinian Authority's annual budget.
According to senior Fatah officials, it could take as little as two months for the PA to run out of cash. Thanks to unprecedented economic growth in recent years, Palestinians have increasingly taken out loans to buy cars, homes, and other items. Unable to pay their bills, the frustration would likely boil over onto the streets. If this happens, there are two scenarios that officials have described to me.
The first scenario is violence against Israel. As they have done repeatedly in the past, the Palestinians could again challenge Israel. Indeed, Israelis have already expressed concern that the political theater surrounding this month's UDI, in which Palestinian leaders have called for mass protests, could lead to the outbreak of a third intifada. Additional unrest could undoubtedly result from a cut-off in aid. Conflict with Israel could draw other regional actors, such as Hamas and Hizbullah, into war.
Another scenario is an "intra-fada" - an uprising against Mahmoud Abbas and the Palestinian leadership. In keeping with the Arab Spring, the Palestinians of the West Bank may yet determine that their own government is the source of their frustration. While such a protest is long overdue, in light of the aforementioned corruption and unethical economic practices, unrest could destroy the delicate balance that currently exists in the West Bank. Indeed, in 2007 Hamas brought down the PA in the Gaza Strip through a lightning-fast and brutal military coup. Fatah officials are openly concerned about Hamas' attempts to undermine the West Bank regime in the event the Arab Spring comes to the West Bank.
There is also the question of U.S. influence. Should Washington cut aid, we could effectively relinquish all of our leverage with the Palestinians, leaving the door open for Iran or other actors to influence the PA in ways that could further threaten regional stability.
Still, Congress should not maintain the status quo. Because it controls the purse strings, Congres has an opportunity now to squeeze the power structures controlled by Mahmoud Abbas, thereby isolating him and his inner circle. As he runs afoul of U.S. policy, legislators should waste no time getting started.