US plans new assurances on funds for Palestinians
By Arshad Mohammed
WASHINGTON, May 11 (Reuters) - The United States has decided to offer fresh assurances that giving money to the Palestine Liberation Organization would not violate U.S. financial sanctions, senior U.S. officials said on Friday.
The assurances, which could come through an exchange of letters with the European Union, aim to ease the flow of funds to a PLO account controlled by Palestinian Finance Minister Salam Fayyad.
The objective is to ensure that banks feel comfortable transferring money to the PLO and, in turn, to strengthen the hand of Palestinian moderates like Fayyad and President Mahmoud Abbas in their power struggle with Hamas.
Western donors have cut off direct funds to the Hamas-led Palestinian government, demanding it recognize Israel, renounce violence and accept existing interim peace deals.
The United States last year barred transfers to the Hamas-led government after the group -- which Washington regards as a terrorist organization -- defeated rival Fatah in January 2006 elections.
Since the March creation of a national unity government that is led by Hamas but includes independents and Fatah members, banks have become more reluctant to make transfers to the PLO even though it is not covered by U.S. sanctions.
As a result, the United States has decided to provide further reassurances, the U.S. officials said.
One official said the U.S.-EU letters, if they are sent, would make clear that money transferred to the PLO accounts cannot be transferred to the Hamas-led government, thereby keeping the ban on direct aid to the government in place.
Western diplomats said this means Fayyad could be able to use the account to make partial payments directly to government workers and contractors, but would not be able to finance the government's running costs directly from the PLO accounts.
Two Western diplomats involved in the matter said if letters are exchanged with the EU, this could make it easier for the Europeans to set up an additional mechanism to provide assistance to the Palestinians.
The diplomats said the so-called Temporary International Mechanism, which is administered by the EU, would be unchanged and would pay allowances directly to government workers in close coordination with Fayyad.
"Probably what we'll do is an exchange of letters with the European Union and European Commission. They will ask if it's permissible to do it (transfer money) to the PLO accounts and we will say 'yes,'" another U.S. official said.
In Brussels, a European Commission spokeswoman denied there was any planned exchange of letters and said any decision to make a direct payment to an account controlled by Fayyad would require the assent of the EU's 27 foreign ministers and it was not on their agenda for next Monday's monthly meeting.
"There is no letter. There is not even work on one. Neither today nor on Monday," European Commission external relations spokeswoman Christiane Hohmann said.
U.S. officials said there was no certainty of an exchange of letters. If not, they said Washington would find another way to offer reassurances.
Fayyad is counting on using the PLO account to receive $55 million that Arab League members promised to pay each month to cover about half the salaries of governmental employees.
Government workers have gone without full wages since Hamas Islamists came to power in March 2006. Some payments have been made in the past through Abbas's office but only sporadically. (Additional reporting by Adam Entous in Jerusalem and Paul Taylor in Brussels)
