State of Failure

by Jonathan Schanzer

  After the February 2009 election of Benjamin Netanyahu to a second tenure as prime minister, Secretary of State Hillary Rodham Clinton started discussions surrounding “the creation of a Palestinian state despite opposition from the incoming Israeli Government.”135 Thus began what appeared to be a US foreign policy that tilted in favor of the Palestinians and against the wishes of the Israeli leadership.

  In a much-anticipated global address, Obama delivered what became known as the “Cairo Speech” on June 4, 2009. The president declared, “Now is the time for Palestinians to focus on what they can build. The Palestinian Authority must develop its capacity to govern, with institutions that serve the needs of its people.”136

  By early 2010, mention of Palestinian statehood had become a somewhat commonplace occurrence among Obama administration officials. Speaking in February 2010 at the US-Islamic World Forum in Qatar, for example, Clinton voiced her support for a diplomatic solution that “reconciles the Palestinian goal of an independent and viable state. . . . We have encouraged the Palestinians to pursue their homegrown plan to build their institutions, end incitement, improve security, to lay the foundation for a future stable, democratic Palestinian state. We are supporting President Abbas and Prime Minister Fayyad in their efforts to build, train, and reform their security forces.”137

  Meanwhile, new tensions emerged between Israel and the United States. During a planned visit to the region in March 2010, Vice President Joseph Biden slammed a decision by the Israeli government to announce construction in Ramat Shlomo, a town that lay outside Israel’s traditional 1967 borders. Although the area was technically North Jerusalem, not East Jerusalem, which the Palestinians claim will be their future capital, Biden “condemned the action.” He further stated that the Obama “administration is fully committed to the Palestinian people and to achieving a Palestinian state that is independent, viable, and contiguous.”138

  This stormy encounter set the stage for returning Prime Minister Benjamin Netanyahu’s visit to Washington later that month. At the meeting between the two leaders, Obama presented the Israeli premier with a list of demands, including an extended freeze on development in East Jerusalem and the West Bank. Obama then left the prime minister and the Israeli delegation by themselves, withdrawing from the meeting to have dinner with his family and conduct other business.139 The president’s move was viewed internationally as a snub to the Israeli leader.

  Stories soon began to surface about the White House position on Palestinian statehood. Haaretz quoted Arab reports that Obama had promised the Palestinians a state by 2011.140 This came on the heels of a Washington Post piece positing that Obama was even considering a Palestinian unity government that could include Hamas—a position that challenged US policy dating back to Nixon, who stipulated that the United States would not negotiate with terrorist groups.

  In July 2010, Obama upgraded the diplomatic status of the PLO mission in Washington to general delegation. The president then announced the formal resumption of peace talks in September 2010, with the goal of achieving a viable state, living in peace with Israel, by 2011.

  Obama’s peace plan failed and so did his vision for a settlement freeze. But the latter inspired Abbas, along with scores of other countries, to pursue a new policy. It remains the cornerstone of an international campaign in place today to help the Palestinians lay claim to all lands on the Arab side of the 1949 armistice lines. According to Abbas, “It was Obama who suggested a full settlement freeze. . . . I said OK, I accept. We both went up the tree. After that, he came down with a ladder and he removed the ladder and said to me, ‘Jump.’”141

  Obama clearly climbed down from this metaphoric ladder. He ceased to focus on Israeli settlements and appeared to have improved his ties with Netanyahu during his trip to the Middle East in March 2013. Obama also staked out a rather permanent position against Abbas’s ongoing attempts to gain recognition of a Palestinian state at the United Nations. In July 2013, his administration initiated a new round of peace talks to help the Palestinians achieve statehood through diplomacy.

  But whether a given American president supports the Palestinian statehood initiative is less important than whether the initiative deserves American support. From a political perspective, the instinct is to simply say “yes.” After all, the Palestinians have been waiting for six long decades to declare their state, and president after president has seemed to grasp this with increasing urgency.

  But from a governance perspective, many questions remain. Former peace negotiator Aaron David Miller asks, “Do we have a stake in creating the conditions for a failed state?”142 Unfortunately, it appears that we do.

  3

  Guerrilla Governance

  The evolution of the problems surrounding Palestinian governance, particularly those tied to financial mismanagement, is not an easy one to track. The antecedents of the PA are guerrilla organizations—first the Fatah faction and then the PLO—that were decidedly not interested in employing the services of Ernst & Young. Nor were they interested in making their books open to the public.

  It would be wrong, however, to suggest that Palestinian political culture is inherently corrupt or prone to corruption. In reading the histories of pre–World War I Palestine or the British Mandate period, one gets no indication that corruption was any more of a problem among Palestinian Arabs than it was anywhere else in the region. For one, fully functioning Palestinian governments did not exist during these historical periods. It is therefore not a fair comparison. Moreover, the locally based Palestinian leaders during these periods presided over a system that looked nothing like the system in place today.

  The problems addressed in this book are decidedly contemporary. Their history begins a half century ago. And while pessimists might argue that this represents virtually all of the modern history of Palestinian nationalism, it might also be argued that 50 years is not so much time elapsed that the problem is irreversible.

  The cornerstone of today’s Palestinian leadership is the Fatah faction, which was founded in the mid-1950s in Kuwait by Yasser Arafat. Fatah is a reverse acronym for Harakat al-Tahrir al-Filastiniya (the Palestinian Liberation Movement). While hataf means “doom” or “death” in Arabic, fatah means “conquest,” “victory,” or “triumph.”1 And this is exactly what its members sought: the conquest of Israel, the Jewish state established in 1948.

  For at least a decade after the creation of Israel, the Palestinian nationalist movement was in disarray, if it was not fully defunct. Rashid Khalidi, reportedly a former PLO spokesman2 and now a professor at Columbia University, cedes that there was a “hiatus in manifestations of Palestinian identity for a period after 1948.”3 But this began to change when the members of Fatah established a clandestine network of paramilitary cells designed to attack Israel. The leader of Fatah at the time, Yasser Arafat, raised funds throughout the Middle East for this very purpose.4

  It should be noted here that Arafat claimed to have been part of a successful construction company during his time in Kuwait.5 However, as biographer Said Aburish notes, Arafat “did not create a construction company or become partner in one.”6 Andrew Gowers and Tony Walker, authors of another book on Arafat, say that although the Palestinian leader was involved in a contracting business, he was notorious for “exaggerating the scale of his business career and of the wealth it generated.”7 As it turns out, Arafat appears to have had a yearly salary of approximately $30,000 while in Kuwait, “which allowed him to give money to Fatah,” among other activities.8

  Arafat, at varying points in his life, may have had the backing of wealthy patrons. Aburish notes, for example, that during the 1960s, Arafat targeted “wealthy Palestinians who resided in Kuwait and other oil-rich countries,” such as Qatar, for financial support.9

  Whatever the sources of Fatah’s income, for completely understandable reasons, donors and accounts were kept secret. Fatah was, after
all, a violent revolutionary group. For this reason, most of its political activities were shrouded from the public eye. The secrecy of Fatah in Kuwait marked the beginning of a decades-long process in which the Palestinian leadership kept secret its finances and decision making.

  In 1965, the clandestine group embarked on a campaign of terrorist attacks launched out of Syria.10 By the end of the following year, Fatah reportedly executed 41 raids into Israel. In the first half of 1967, Fatah launched another 37 attacks.11

  While the attacks did not pose an existential threat to Israel, they were part of an overall trend: Israel was increasingly getting drawn into conflict. On May 15, 1967, Egyptian president Gamal Abdel Nasser ordered the United Nations to withdraw from the Sinai Peninsula on Israel’s border and positioned two Egyptian divisions there. Days later, he denied Israeli vessels access to the Red Sea port of Eilat. Fatah exacerbated these tensions by carrying out five additional attacks against Israel.12

  To preempt an Egyptian attack, the Israelis struck first on June 5, 1967, and in the process wreaked havoc on the Egyptian, Syrian, and Jordanian armies. In just six days, the Israelis captured from those three states significant territory, including East Jerusalem (Jordan), the West Bank (Jordan), the Gaza Strip (Egypt), the Sinai Peninsula (Egypt), and the Golan Heights (Syria).

  While these defeats were crushing across the Arab world, the country most significantly affected was Egypt. Nasser had been the unquestioned regional leader entrusted by the Arabs to “liberate Palestine.” With the fall of Nasser, the region was forced to look elsewhere. The Arab world looked to Arafat and his band of Palestinian guerrillas for answers.

  Soon thereafter, in 1969, Arafat ascended as the head of the PLO. This umbrella organization of Palestinian groups was not well known. Nor was it particularly effective. It was created by the Arab League in 1964 as Arab states postured and crowed about destroying Israel. But with Arafat’s leadership, the PLO became an infamous, secretive, and lethal organization that had a jarring impact on world security. The guerrilla leader initiated an epidemic of airplane hijackings.13 Subsequent high-profile terrorist attacks included the 1972 slaughter of Israeli athletes at the Olympic Games in Munich; the 1973 attack on the Saudi embassy in Sudan, which led to the murder of the US ambassador and his deputy; and the 1985 assault on the cruise ship Achille Lauro, where an elderly American Jew was shot dead and dumped into the ocean.

  The PLO established its first real headquarters in Jordan. Indeed, the Fatah-led PLO built a state inside the state of Jordan, a country that had already absorbed many Palestinians fleeing the 1948 and 1967 wars. The resulting power struggle between Arafat and King Hussein was Black September, a bloody war within Jordan in 1970 that resulted in thousands of Palestinian casualties and the reemergence of a free Jordanian state.

  From there, Fatah and the PLO again attempted to create another ministate, this time inside Lebanon. This effort in the late 1970s and early 1980s contributed to violence that ultimately led to the Lebanon civil war. In response to Palestinian violence launched against it from the north, Israel invaded Lebanon in 1982 and waged war against Arafat’s PLO. When Israel gained the upper hand, the Palestinians were again forced to abandon their ministate. Documents left behind, later translated by scholar Raphael Israeli, demonstrate that the PLO’s training and weaponry came from the Eastern Europe Soviet bloc and the former Soviet Union.14

  Based on anecdotes, the PLO’s financial well-being in Lebanon depended significantly on illicit activity. Khalidi notes that “cronyism, corruption, and the absence of discipline” were among the problems that “marred the PLO’s performance in Lebanon.”15 The PLO also reportedly resorted to crime. On January 20, 1976, PLO members robbed the British Bank of the Middle East in Beirut and took “anywhere from $20 million to $50 million worth of gold bars, Lebanese and foreign currency, stocks, and jewels.”16 And while Arafat personally opposed the drug trade, some PLO members were said to be involved in the trade of hashish that was harvested in Lebanon’s Bekaa Valley.17

  Over time, the corruption had a corrosive effect. In 1979, one PLO member found the state of affairs within the organization so bad that he quit because of the “intolerable corruption within the ranks of the revolution. . . . Leaders and commanders didn’t maintain the modest lifestyles they once had. They turned into merchants, each looking after their own interests. They are opportunists to a greater extent than can be imagined.”18

  Perhaps the most damning portrait of the bloated and ossified “Abus”—those with a kunya, as was common among the PLO leaders in Lebanon—comes from political scientist Fouad Moughrabi, writing in the Arab Studies Quarterly:

  An obese and comfortable elite began to emerge. The gap separating them from the majority grew severe. The Abus sent their children to camps in Europe, while the others sent their children to Ashbal (young cubs) camps in Lebanon or Syria. The Abus had chauffeured cars (a Mercedes or a BMW represented high status) and heavy billets of guards. Above all, each Abu had the backing of one or two millionaires. At National Council meetings, caucusing often took place in the suites of the millionaires where the Abus could escape the throng of the mob. Each Abu has his system of patronage and his own budget. Nothing may be done by one Abu to encroach on the turf of the other.

  As a result, Moughrabi notes, “the Palestinian movement suffered.”19

  This did not deter Arab states from donating to the cause, however. During the 1978 Baghdad Summit, Arab states agreed to provide $250 million to $300 million per year to the PLO. Most of this money would be spent on “arms, wages of fighters and their families, and representatives abroad.”20 Saudi Arabia agreed to provide $85.7 million, UAE $34.3 million, Algeria $21.4 million, Iraq $44.6 million, Qatar $19.8 million, Kuwait $47.1 million, and Libya $47.1 million.21 While in Damascus, Arafat said that he had personally received $67 million that year.22 The following year he reportedly received an airplane from Saudi Arabia’s foreign minister.23

  Following its ouster from Lebanon, the PLO leadership found itself in Tunisia in the mid-1980s. Khalidi notes that during this period, the PLO’s “institutions in exile became ossified and lost most of whatever vitality they once had.”24

  But whatever the PLO lacked in vitality, it made up for by buying influence. The Wall Street Journal reported in 1986 that Arafat and his associates were known to “distribute smaller bundles of money to ensure political support in sensitive areas.” In 1986, for example, the PLO gave $150,000 to the Al-Quds newspaper in Jerusalem. Shortly after the paper received the money, pro-PLO editorials reportedly began to appear in the traditionally pro-Jordanian outlet.25 Author Jillian Becker asserts that “PLO money was handed out directly to Palestinians in the camps [in Lebanon].”26 As one analyst explained, “The PLO’s far-flung bureaucracy and military . . . represents a huge patronage network.”27

  As the Wall Street Journal reported, the PLO had become an economic juggernaut, with assets ranging from $2 billion to $14 billion. It was, inter alia, “the largest producer of eggs in Guinea, an exporter of pineapples to France and the Soviet Union, distributor of $52 million in social security payments a year, co-founder of an airline in the Maldive Islands, and a partner in the duty-free shop in Tanzania’s international airport.”28 Sources of its income were murky, but the Saudis alone paid the PLO some $86 million per year, with another $40 million coming from taxes paid by Palestinians living in Arab states. Reports also suggest that the PLO received “material assistance” from China,29 as well as military and political assistance from the Soviet Union.30

  Among the PLO’s biggest cash cows was the Palestine National Fund (PNF). Donations from PLO supporters, in particular the Arab states, as well as the revenue from the “liberation tax,” went to the PNF. Indeed, the PLO exacted a “tax of between 5 and 8 percent on Palestinians’ wages throughout the Arab world” each year.31 According to Neil Livingstone and David Halevy, the tax “generated betwee
n twenty-five and thirty million dollars” each year.32 In 1978, it reportedly generated closer to $50 million.33 There was also the Palestine Martyrs’ Work Society (SAMED), which was designed “to create the nucleus for a Palestinian revolutionary economy, to develop economic self-sufficiency for the revolutionary and the masses, and to lay the foundation for the economic structure of the future Palestinian soviet.”34 In 1982, SAMED, which was under the control of Fatah,35 had gross revenue of $45 million36; it averaged approximately $40 million a year.37 SAMED operated at least 35 factories in Lebanon as well as numerous endeavors abroad, including farms and shops throughout Africa and the Middle East.38

  The Wall Street Journal estimated that PLO annual expenditures amounted to some $220 million, with line items for health care and diplomatic missions. The PLO’s social welfare system, on which some 60,000 Palestinians depended, was among the larger budget items.39

  In other words, from Jordan to Lebanon to Tunisia, the PLO was operating like a bloated government bureaucracy without actually governing a territory of its own.

  The road to PLO self-governance began on December 8, 1987, when an Israeli military vehicle truck crashed into a car filled with Gaza Palestinians returning home from work inside Israel, killing four. The funerals turned into angry demonstrations, which rapidly erupted in the West Bank, too. This was the start of the first Palestinian uprising, or intifada.40

  Without question, the intifada was a direct challenge to the Israeli government’s control of the territories captured in 1967. It was undeniably a political awakening and a watershed moment in the history of the Palestinian quest for statehood. But the intifada also led to a Palestinian unraveling. For one, it crippled the Palestinian economy as business owners both shuttered their shops in protest of Israel and boycotted goods that were critical to daily life.41 Moreover, the violence against Israel prompted reprisals, including the Israeli government’s decision to bar entrance to Palestinians, thereby denying them an opportunity to earn a living.42 Israel added to the economic devastation by destroying the homes and property of numerous Palestinian agitators.43