United States Aid to the Palestinians

Order Code RS21594

March 4, 2005

CRS Report for Congress

Received through the CRS Web

United States Aid to the Palestinians

Clyde Mark

Specialist in Middle East Affairs

Foreign Affairs, Defense, and Trade Division

Summary

United States economic assistance for the Palestinians has averaged about $85

million per year since Israel and the PLO signed the 1993 Declaration of Principles.

Congress wants to ensure that U.S. assistance is used for legitimate humanitarian

projects and that no U.S. aid is diverted for military or terrorist use against Israel.

United States Aid to the Palestinians provides a description of the aid program and

tables with annual amounts for the Palestinians. The report will be updated as necessary.

See also CRS Issue Brief IB92052, Palestinians and Middle East Peace: Issues for the

United States, updated periodically.

Quick Facts

!

The United States has never provided aid to the Palestine Liberation

Organization (PLO).

!

The United States has provided aid directly to the Palestinian Authority

(PA) three times; $36 million in FY1994, $20 million in FY2003, and

$20 million in FY2005.

!

U.S. economic aid to the Palestinians has averaged about $85 million per

year since 1993; there has been no military aid. (See Table 3, page 6.)

!

The President has requested $150 million in FY2006 and an additional

$200 million in FY2005 supplemental aid for the Palestinians.

!

About 80% of U.S. aid to the Palestinians is channeled through

contractors and 20% is channeled through private voluntary

organizations, both groups selected and monitored by USAID.

!

U.S. aid for the Palestinians has not been earmarked in appropriations

bills since 1975.

Congressional Research Service ˜ The Library of Congress

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U.S. Aid for the Palestinians

The United States began providing assistance for the Palestinians in 1950 with

contributions to the United Nations Relief and Works Agency (UNRWA), the

international body created to provide food, shelter, medical attention, and education for

the Palestinian refugees from the 1948-1949 Arab-Israeli war. (See section on UNRWA

below.) In 1975, with strong support from private voluntary organizations, the United

States began to provide foreign assistance for Palestinian projects, primarily humanitarian

(child care, medical clinics) or infrastructure (clean water, roads, schools). Since 1975,

about 80% of U.S. aid funds for the Palestinians has gone through contractors and 20%

has gone through private voluntary organizations (PVOs). USAID selects the contractors

and PVOs, monitors their projects, and audits their accounts.

U.S. Pledge at the 1993 Donors Conference. After nine months of secret

negotiations, Israel and the PLO exchanged letters of mutual recognition on September

9, 1993, and signed a Declaration of Principles1 on September 13 that provided a

framework for negotiations intended to lead to a permanent peace settlement in five years.

At an October 1, 1993, Washington meeting, 46 donor nations pledged $2.4 billion for

the Palestinian entity. The donors established the “Holst Fund” at the World Bank

(named after Johan Jorgen Holst, the Norwegian Foreign Minister central to the

negotiations) to transfer funds from the international donors to the Palestinian entity. The

U.S. Administration offered $500 million ($125 million in loans or loan guarantees and

$375 million in grants) over 5 years for economic development of the Palestinian entity.

Palestinians drew only about $3 million of the $125 million available in loan guarantees.

The United States provided $36 million funding for the Palestinian Authority through the

Holst Fund. The remaining $339 million was delivered through PVOs and through

USAID contracts. No U.S. aid went directly to the PLO.

Table 1. U.S. Aid Obligations to the Palestinians, 1994-1998

(millions of dollars)

Totals

FY19941995

FY1996

FY1997

FY1998

Expand Economic

Opportunity

65.814

26.410

16.182

14.219

9.003

Scarce Water

193.269

69.832

32.764

50.969

39.704

Governance

35.160

3.073

9.364

11.500

11.223

Transition to Self Rule

49.268

39.132

.136

10.000

0

Short Term Develop. Needs

24.754

17.839

5.860

.300

.755

Totals

368.265

156.286

64.306

86.988

60.685

Program

Source: USAID Statistical Annex - FY1997, p. 139-141.

1

For a description and status of the peace negotiations, see CRS Issue Brief IB91137, The Middle

East Peace Talks, updated periodically.

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Wye Agreement.2 On November 30, 1998, then President Bill Clinton told a

second donors conference in Washington that the United States would provide $400

million in grants for the Palestinians. (The President also requested $1.2 billion for Israel

and $300 million for Jordan to implement the Wye Agreement.) According to a State

Department report presented to Congress in late October 1999, the Wye funding for the

Palestinians would be spent as follows:

$100 million

$30 million

$10 million

$100 million

$30 million

$100 million

$30 million

Palestinians: $400 million

— Community Development (health, education, water,

infrastructure, services)

— Rule of Law (law enforcement, human rights, train judges,

prosecutors, lawyers, etc.)

— Industrial Estate - West Bank

— Gaza Port, Gaza-West Bank passageway

— Scholarship Fund

— Jenin-Nablus Road

— Contingency Fund

Congress did not include funding for the Wye Agreement in the Foreign Operations

Appropriations bills for FY2000 (H.R. 2606, S. 1234). The President vetoed H.R. 2606

in part because it did not contain the Wye Agreement funding. After negotiations with

the White House, the House of Representatives passed H.R. 3196 on November 5, 1999,

that included the Wye Agreement funding; $1.2 billion for Israel, $200 million for Jordan,

$25 million for Egypt, and $400 million for the Palestinians. H.R. 3196 was set aside and

replaced with H.R. 3422, which was included by reference in H.R. 3194, the consolidated

appropriations bill signed by the President on November 29, 1999 (P.L. 106-113) with the

funding intact. The $400 million Wye funding for the Palestinians was disbursed in fiscal

years 2000 through 2003 and was in addition to the annual “regular” aid levels of about

$75 million each year. (See Table 3, page 6)

Jenin and Disaster Relief. The supplemental appropriation for FY2002 (H.R.

4775, P.L. 107-206, signed on August 2, 2002) included $50 million in contingent

emergency disaster relief assistance for the Palestinians to repair damages inflicted during

the April-May 2002 Israeli military operations in the Palestinian city of Jenin. The

President did not allocate the $50 million for the Palestinians or any of the contingent

emergency funds because he did not agree with Congress on the nature of the

emergencies. The Department of State announced on April 21, 2003, that $50 million

was allocated for the Palestinians from the supplemental appropriations (P.L. 108-11).

The United States announced on July 2, 2003, that $30 million of the $50 million would

be used for infrastructure projects and to support Palestinian enterprises that lost business

2

The October 23, 1998 Wye Agreement called upon Israel and the Palestinians to implement

previous agreements. Israel was to withdraw from Palestinian areas, and open the Gaza airport

and seaport, and the Gaza-West Bank safe passage corridor, and the Palestinians were to stop

terrorism, collect illegal weapons, reduce the police force, amend the PLO covenant, and end

incitement.

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during the Israeli closures,3 and that $20 million would go to the PA to pay for

infrastructure and overdue utility bills owed to Israel.

U.S. Aid to the Palestinian Authority. In 1994, the United States provided $36

million through the Holst Fund for the PA, but did not give any additional direct aid to

the PA because of suspicions that the funds could be siphoned off for terror activities4 or

to line the pockets of corrupt officials, and because of a lack of confidence in Palestinian

President Yasir Arafat’s peaceful intentions. The United States announced on July 8,

2003, that it would provide the remaining $20 million of the $50 million from the FY2003

supplemental as direct aid to the PA for infrastructure projects.5 Resuming direct aid to

the PA in 2003 appeared to be a U.S. gesture of support for newly installed Prime

Minister Mahmud Abbas, an opponent of terrorism and a proponent of the “road map”

peace process.6 In November 2004, the White House proposed providing $20 million to

fund the January 2005 Palestinian presidential election. Congress suspected that the funds

would be diverted for terrorism or corruption, so the Department of State proposed and

Congress accepted that the $20 million be given to Israel to pay overdue Palestinian utility

bills, thus freeing up $20 million in other revenues to fund the election.

United Nations Relief and Works Agency (UNRWA)7

United Nations General Assembly Resolution 212 (III) of November 19, 1948,

recognized the need to provide funding for the Palestinian refugees. Paragraph 7 of

UNGA Resolution 302 (IV) of December 8, 1949, established the United Nations Relief

and Works Agency (UNRWA) to administer the distribution of food, shelter, clothing,

medical treatment, and education for the refugees. The U.N. General Assembly has

renewed the UNRWA mandate each year since. Contributions to UNRWA are voluntary

and may be made in either cash or kind. Frequently, UNRWA appeals to donor nations

to increase their contributions to cover additional emergency expenses.

Some Members of Congress have questioned continuing U.S. contributions to

UNRWA. Critics claim that many “ghosts” are on the UNRWA rolls, collecting benefits

that are undeserved or unneeded, and that such benefits may be diverted to illegal or

terrorist purposes. Critics also claim that refugee camps housing UNRWA recipients are

used as training grounds for guerrilla armies and terrorists. Others claim that textbooks

3

“US Gives Palestinians $30 Million in Recovery Aid,” Reuters, July 2, 2003. See also

[http://www.usaid.gov/wbg/headline_115.htm].

4

The USAID Inspector General reported that 75 audits have produced no evidence that any funds

were diverted to terrorists. [http://www.usaid.gov/oig/public/semiann/sarc0409.pdf].

5

Kessler, Glenn, “U.S. Plans to Provide Direct Aid to Palestinians,” Washington Post, July 9,

2003. See also [http://www.usaid.gov/wbg/headline_116.htm]. Deputy Secretary of State

Richard Armitage submitted a waiver on July 8, 2003, to provide aid to the Palestinian Authority

citing Section 451 of the Foreign Assistance Act as amended.

6

The “road map” proposed by the United Nations, Russia, the European Union, and the United

States in April 2003, called for Israeli withdrawals, Palestinian Authority reforms, a Palestinian

state, and a resumption of final status peace negotiations within three years.

7

See CRS Report for Congress RS21668, United Nations Relief and Works Agency for Palestine

Refugees in the Near East (UNRWA).

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in UNRWA schools are anti-Israel or anti-Jewish. Another frequently heard compliant

is that UNRWA has made no effort to settle the refugees permanently, do away with the

camps, and end UNRWA’s existence.8 UNRWA’s defenders point out that UNRWA

periodically purges the rolls to ensure that only those eligible and in need are receiving

benefits, and that the camps are the property of the host country, and are operated and

policed by the host country. UNRWA has no police force to stop military training in a

camp. UNRWA runs the schools but uses host country textbooks and curriculum because

the refugee students have to pass host country examinations. UNRWA defenders suggest

that complaints about the anti-Israeli nature of the textbooks should be directed to the host

countries. And, others point out that UNRWA does not have a United Nations mandate

to resettle the refugees, only to ensure their welfare.9

Table 2. U.S. Contributions to UNRWA, 1950-2002

(millions of dollars)

Year

Amount

Cumulative 1950-1991

1,618

1992

69

1993

68

1994

78

1995

74

1996

77

1997

79

1998

78

1999

81

2000

89

2001

101

2002

100

2003

146

2004

127

2005*

88

Cumulative 1950-2002

2,873

Source: Department of State.

* Regular contribution only. Before an anticipated emergency funding request

8

For a sampling of UNRWA critics, see Bard, Mitchell, Rewriting History in Textbooks, Chevy

Chase, Maryland, American-Israel Cooperative Enterprises, December 1993. Rosett, Claudia,

“The Real World: The U.N.’s Twisted Refugee Policies,” Wall Street Journal Europe, January

8, 2003. Dudkevitch, Margot, UNRWA Used by Terrorists, Jerusalem Post, April 1, 2003.

9

See UNRWA at [http://www.un.org/unrwa/].

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Current Considerations

Arafat died on November 11, 2004, and was replaced by President Mahmud Abbas

in the January 9, 2005 election, raising hopes that the peace process would resume under

the more acceptable Abbas. .President George W. Bush requested that Congress

appropriate $150 million in FY2006 funds and $200 million in a FY2005 supplemental

appropriation for the Palestinians. The United States’ pledge coincided with a $330

million European Union pledge made at the London conference on 2 March 2005. The

funds are intended to support the Abbas government and the new cabinet sworn in on 24

February.

Table 3, U.S. Assistance to West Bank & Gaza, FY1975-FY2004

($ in thousands)

Fiscal Year

Expenditures

Fiscal Year

Expenditures

1975

$1,000

1991

7,663

1976

1,572

1992

7,074

1977

3,416

1993

29,557

1978

2,687

1994

56,769

1979

6,801

1995

80,263

1980

3,000

1996

63,806

1981

2,500

1997

68,680

1982

6,000

1998

60,685

1983

6,500

1999

80,092

1984

8,500

2000

118,641

1985

12,141

2001

114,292

1986

13,950

2002

181,036

1987

8,400

2003

173,907

1988

6,911

2004

84,786

1989

20,903

1990

12,618

Total

$1,244,150

Source: U.S. Department of State, Agency for International Development, available online at

[http://usaid.gov/wbg/budget.htm].