State of Failure
Page 7
One component of the PA’s human rights problem stemmed from the stifling of political dissent. But another component was the response to Hamas’s attempt to challenge the legitimacy of the PA. Encouraged by Washington and Jerusalem, the PA began to conduct operations against Hamas and arrested many suspected Hamas sympathizers without charge. Paradoxically, according to one Palestinian commentator, such operations “contributed to Hamas’ popularity as the political underdog and spokesman for the marginalized and forgotten.”28 The PA’s heavy-handed measures also laid the groundwork for the internecine conflict that eventually erupted in 2007.
At the time, however, countering Hamas was deemed to be in both the national and international interest. The Israelis needed Hamas violence kept to a minimum if they were to continue to maintain the support of the Israeli public for the peace process. The United States, too, needed Hamas pinned down if it were to preside over the completion of the process set in motion by the Oslo Accords, as President Clinton so clearly intended to do. Famously, US vice president Al Gore publicly lauded the PA’s legal system in 1995.29
But as Brown noted, “It is difficult to conceive of a court that would violate more judicial principals.”30 Yet none of the parties involved—the United States, Israel, or the PA—actively challenged the Palestinian legal system or the security services’ lack of oversight or legal framework, as long as the overall security environment was tolerable, meaning that Hamas remained contained.
Meanwhile, charges were accumulating against the PA. In April 1997, the Guardian contended that Arafat “and his coterie of unofficial economic ‘advisers’ have thrown up a ramshackle, nepotistic edifice of monopoly, racketeering, and naked extortion which merely enriches them as it further impoverishes society at large.”31 According to Bloomberg, between 1995 and 2000, Arafat “diverted $900 million of the authority’s tax and business income to personal bank accounts.”32 Another report from Bloomberg revealed that, between 1997 and 2000, the Palestinian leadership had transferred $238 million to Switzerland without notifying its donors.33
In June 1999, a report on Palestinian governance, penned by Palestinian academics Khalil Shikaki and Yazid Sayigh and released under the names of American activist Henry Siegman and former French prime minister Michel Rochard, noted that the PA needed to implement “reforms that are within the present powers of the Palestinian Authority.”34 Two months later, Arafat signed a decree to create a committee to follow up on the Rochard and Siegman report as a means to “strengthen Palestinian institutions.” Later that year, the Palestinian government reported that tax revenues were appropriately flowing to the treasury, as required, and that steps were being taken to halt the troubling practice of diverting funds to public companies without proper oversight.35
But the perception of corruption continued to dog the PA. In October 1999, Azmi Shuaibi, a member of the Palestinian Legislative Council and chairman of the Budget Committee, lamented that “Palestine, at such an early stage, already resembles the rest of the Arab countries in its traits of corruption.” He compared PA corruption “to the corruption that exists in the rest of the Arab countries’ governments. It is similar in its abuse of power by those in public positions.”36 The following month, a manifesto signed by 20 prominent Palestinians slammed Arafat and the PA for corruption. The manifesto, known as the bayan al-ashrin or the Statement of Twenty,37 stated that Arafat had “opened the doors to the opportunists to spread their rottenness through the Palestinian street.” In addition, it charged that the Oslo Accords had led to the “bartering of the homeland for the enrichment of the corrupted and corrupting in the PA.” Finally, it called on Palestinians “to sound the alarm against the PA’s misrule in every town and village, every camp and corner of the land.”38 Such a move was unprecedented in Palestinian society, let alone in the Arab world. The response, however, was mass arrests.
With pressure mounting for greater transparency, in July 2000, the PA released substantial information about its financial holdings. According to the New York Times, a statement sent to the International Monetary Fund (IMF) detailed how “Palestinian Commercial Services Company, which is owned by the Palestinian Authority but not supervised by its legislature or finance ministry, [controlled] large minority stakes in a Jericho casino, a Ramallah Coca-Cola bottler, a Bethlehem convention center, and myriad other private businesses, plus full ownership of a cement plant that had long enjoyed a government-protected monopoly.”39
The report further revealed that Palestinian Commercial Services was the
direct recipient of sales taxes—more than $500 million in the past two years alone—collected by Israel but owed to the Palestinian Authority under the 1993 Oslo peace accords. The tax receipts had been deposited in a Tel Aviv bank account controlled by Mr. Rachid and Mr. Arafat, a practice ended by Israel in April after persistent complaints by the World Bank, the International Monetary Fund, and other institutions. . . . Some of the tax money was used by Mr. Arafat for undisclosed official expenditures, but most went to the Palestinian Commercial Services Company, according to Palestinian officials.40
The New York Times also noted that the report contained “a few unexpected oddities, like small joint investment funds with the government of Qatar and the Peres Peace Center, a Tel Aviv foundation started by Shimon Peres, the former Israeli prime minister.” The report further found that Palestinian Commercial Services “put $9 million into a small biotechnology company in London, Ontario, Bioniche Life Sciences, its only disclosed investment outside the Palestinian territories.”41
Shortly after these blockbuster revelations, Arafat had little choice but to call for the creation of a sovereign wealth fund by presidential decree. The Palestine Investment Fund (PIF) would soon be created as a means to consolidate all of these assets and more.
During the 1990s, Palestinian-Israeli security cooperation and diplomacy were the dominant narratives in the West. The issue of Palestinian governance was a mere sideshow. But the problem was no less important to the Palestinians. By the time the Americans, Palestinians, and Israelis were gearing up for the final push for peace in the summer of 2000, a poll by the Palestinian Center for Policy and Survey Research found that 76 percent of Palestinians believed that corruption existed in PA institutions.42 It had become glaringly apparent to West Bankers and Gazans alike that throughout the 1990s, during the endless process of diplomacy and confidence building, the world had neglected to closely examine the economic and political culture of the nascent Palestinian polity. As Brown observed, the PA “could be oppressive and corrupt in ways unconnected with the Oslo Accords.”43
Thus, after nearly a decade of world leaders turning a blind eye to these problems, the Palestinian people had plenty of reason to doubt the peace process. Of course, this was not the primary reason for their rejection of the deal that Israeli prime minister Ehud Barak put on the table with Clinton’s blessing. But the bitterness that the West Bank and Gaza populations must have felt about the mismanagement over their national project could not have helped matters.
In 2000, the Palestinian people plunged into the second Palestinian uprising, now commonly known as the Al-Aqsa Intifada. As Khalidi notes, the circumstances left the “Palestinian polity drifting like a rudderless ship, without any recognizable strategy at a time of supreme crisis.”44 At this point, Washington realized its own shortcomings. As Dennis Ross recalled, “We should have been focused on the state-building enterprise. . . . We didn’t really focus on that until, in effect, after the collapse of Oslo and the beginning of the second intifada.”45
5
The Al-Aqsa Intifada
At the start of the second intifada in late September 2000, after seven years of attempted peacemaking with Israel, Arafat elected to turn his back on diplomacy. In essence, the longtime PLO leader also turned his back on the PA. As violence erupted throughout the West Bank and Gaza, the quasi government began to crumble and,
with it, Arafat’s standing as an international leader.
Although his choice of “resistance” initially resonated on the Palestinian street, Arafat soon began to lose the hearts and minds of his people at home. As the campaign of violence stretched from weeks to months, the rival Hamas organization ascended as the driving force of the attacks against Israel. As one Palestinian analyst observed, the new uprising had produced an “unknown, faceless generation of leaders, and nobody knows where they are going.”1 Arafat’s Fatah and PLO were increasingly less relevant.
But that was not where the bad news ended for Arafat and the Palestinian ruling elite. The Palestinian people, frustrated by the end of an optimistic era, began to demand that the PA account for the reports of corruption and mismanagement that mounted during the lead-up to the second intifada. Thus, as the PA struggled to function in a war-zone environment, it also came under fire from its own people.
In retrospect, it is somewhat surprising that accounting for financial mismanagement was a priority for the Palestinians, given the many hardships that they endured at the time. For one, the fatalities during this conflict were staggering. An estimated 2,647 Palestinians were killed in the West Bank and Gaza Strip from September 2000 through August 2003, with more than 36,448 injured.2
With the renewal of violence against Israel, Palestinians also began to attack each other. Some Palestinians charged others of “collaboration” with Israel. And according to Nathan Brown, the PA’s State Security Court “proved an efficient and ruthless device for meting out punishments to suspected collaborators.”3
Additionally, to reassert his control over the Palestinian territories, Arafat cracked down on rival factions and attempted to neutralize his political foes. His rivals responded to these attacks with violence. In November 2000, some 3,000 Islamist protesters clashed with PA police over the arrest of Mahmud Tawalbi, a popular Palestinian Islamic Jihad leader. In February 2002, Palestinian police battled with more than 200 demonstrators outside a jail in Hebron, from which 60 Palestinian Islamic Jihad and Hamas prisoners eventually escaped. These repeated clashes prompted one Israeli official to predict that the PA would “disintegrate” and Arafat would be “replaced by Hamas and Islamic Jihad.”4
The PA experienced a bruising financial crisis, too. According to some reports, the quasi government’s revenue plummeted from more than $600 million (at its peak) to just $27 million by 2001.5 According to another report, the PA’s total worth was down by more than two-thirds after the first year of conflict, thanks to widespread corruption, a steep drop in productivity, and the reluctance of international donors to give additional foreign aid.6 These financial woes forced the PA to cut administrative salaries. The Palestinian newspaper al-Hayat al-Jadida reported that senior PA figures began to desert their posts.7
Along with the depletion of its human and financial resources, the PA also lost its physical infrastructure. Although Arafat was not directly responsible for all the violence against Israel, the Israelis held him accountable. In April 2002, the Israel Defense Forces (IDF) carried out a large-scale military campaign known as Operation Defensive Shield, which hammered key PA security and government buildings. The damage to PA infrastructure was catastrophic.
Arafat, meanwhile, could not articulate a clear vision for the outcome of this crippling conflict. On the one hand, he embraced Islamism and violence. His Fatah faction created the al-Aqsa Martyrs Brigades (AAMB), which co-opted Islamic symbols and slogans. By 2002, the Brigades had claimed responsibility for dozens of headline-grabbing attacks in which Israeli civilians were killed. The group rivaled Hamas in this respect. On March 21, 2002, for example, an AAMB suicide bomber detonated himself in the middle of a crowded street in Jerusalem, killing 3 and injuring 86. Less than three weeks earlier, another AAMB suicide bomber killed 10 and injured 50 at a bar mitzvah celebration.8 The Brigades openly admitted their allegiance to Arafat. One commander in Tulkarem acknowledged, “We receive our instructions from Fatah. Our commander is Yasser Arafat himself.”9 Documents subsequently seized by the Israeli military from PA offices further demonstrated that Fatah (the dominant faction of the PA) bankrolled nearly every aspect of the Brigades’ terrorist operations—from explosives to guns and gas money.10
Yet at other times, Arafat embraced secularism and talked of peace. For example, Arafat jumped at a proposal made by the Middle East Quartet (the US, the EU, the UN, and Russia), known as the roadmap for peace, which promised a de facto Palestinian state, with final borders to be set by 2005.11 Having accepted the Quartet’s plan, in an attempt to regain control over Palestinian territories, Fatah requested that Hamas cease attacks against Israel. But with the PA unable to gain the upper hand, interfactional clashes spilled over onto the streets.12 Fatah responded by burning a Hamas press office and shooting at the homes of two Hamas leaders.13 The two factions exchanged blistering public barbs. A Fatah leaflet released on December 10, 2002, warned Hamas, “Anyone who wants to challenge [Fatah], his end will be in our hands.”14
While political tensions between these two factions existed since the launch of Hamas in 1987, and those tensions had certainly increased during the 1990s, the intifada exacerbated the Hamas–Fatah conflict. In many ways, the armed conflict against Israel set the stage for the decline of Arafat’s faction and the rise of Hamas.
Israel, meanwhile, had completely given up on Arafat as a peacemaker. Alongside the military efforts to weaken him, the Israelis also began to expose the corruption that had thrived under his rule. In November 2000, the Israeli newspaper Yediot Ahronot issued a story that referred to one PA account totaling some 1.6 billion shekels, composed of “tax returns on gasoline.” It concluded, “[Mohammed] Rachid claims that everything was transferred to the Palestinian Finance Ministry. Israeli officials heard from Palestinian ministers that most of the money was never transferred. Joseph Saba, director of the World Bank in the territories, said, ‘We have no idea what happened with this account.’”15 Rachid denied the story and added that revenues never exceeded $500 million.
Between the violence with Israel and the accusations that continued to fly, many Palestinian investors were scared off. In December 2000, a Palestinian American businessman said that he was unwilling to invest in the Palestinian territories because of the rampant corruption: “To invest in gasoline, steel, telephones, electricity, or cigarettes, you have to go to the same guy [Mohammad Rachid]. Smart people won’t go into a situation like this. Small businesses have been run out.”16
More broadly, the Palestinians simply did not trust their own government. A July 2001 poll by the Palestinian Center for Policy and Survey Research found that 83 percent of Palestinians believed that corruption existed in PA institutions.17 In December 2001, the number had decreased to 74 percent but still reflected a crisis in confidence that the PA had created.18
By the following year, the Israelis began to sense that Palestinian corruption was an issue they could exploit. In April 2002, the Jerusalem Post editorial board wrote that “evidence of high-level Palestinian corruption and misuse of donor nation funds, as well as PA repression of human rights and basic civil liberties, [must] be made available for all the world to see. . . . Israel has little choice but to send the PA leader packing.”19
One month later, with the intifada still raging, the Israeli government released a detailed report based on evidence obtained during Operation Defensive Shield that stated:
Corruption is rampant in the PA, it includes irregularities in the administration, management of the Palestinian economy by monopolies which enable the financial rewarding of senior PA officials and their families. In addition, the distribution of PA money amongst the Palestinian population was characterized by inequality and created large gaps between the majority of the Palestinian population and senior PA officials who enjoy a high standard of living, the expropriation of lands, and altering verdicts by bribery and threatening the lives of judges.20
The report also noted “forceful contributions and false arrest of businessmen by the PA security forces and their release in exchange for money and bribes. A senior businessman from Tulkarem was forced to pay $100,000 for the release of his brother who was arrested by the security apparatuses for collaboration with Israel. A Christian businessman paid $5,000 for the release of his brother arrested by counter-intelligence apparatus personnel.”22
The Israelis were clearly using the report as a means to galvanize international support for their military response to the Palestinian uprising. Of course, that did not mean that the report was untrue. As one EU diplomat admitted, the world had been turning a blind eye to Palestinian corruption. The diplomat was quoted as saying, “Everybody has known for quite some time now that money ended up in the wrong hands.”23
Even Arafat realized that he would need to tackle the problem before it tackled him. According to Brown, in May 2002 “Arafat responded to the growing domestic and international pressure by convening the Palestinian Legislative Council to deliver a speech vowing to launch a reform program and hold new elections.” Brown observed that this speech was “greeted cynically by many in the PLC whose experience with years of unmet or overly vague promises had convinced them that true reform was not likely to be forthcoming from the existing leadership, even as modified. And the decay of Palestinian institutions and lack of clear leadership during the intifada undermined the argument that supporting Arafat aided national unity.”24
US president George W. Bush was equally unimpressed with Arafat’s gestures. Granted, Bush was more concerned with Arafat’s support for terrorism. Nevertheless, the following month, he declared that Palestinian reform required “new and different leadership.” As Brown observed, in the president’s view “reform without replacing Arafat would not be deemed reform.”25 In the months that followed, Bush continued to push for Arafat’s exit but would never succeed. He did, however, succeed in promoting Mahmoud Abbas to the newly minted position of prime minister. The president’s message was clear: Arafat would no longer remain unchallenged as the leader of the Palestinian people.