Arafat Funding Terror, Intelligence Shows

Haartz News

17 February 2003

Palestinian Authority Chairman Yasser Arafat is acting like a "super treasurer" and allocating funds for the Fatah groups and activists dealing with terror, according to an Israeli intelligence report to the government recently.

The report says Arafat and the heads of the PA's security establishment are making it difficult for Palestinian Finance Minister Salem Fayyad to introduce proper norms and effect reforms in the Palestinian economy.

Recently the PA's financial situation has improved considerably, says the report. Since the beginning of the year Israel has transferred NIS 530 million to Fayyad, from the PA's tax funds collected by the Israeli treasury. These funds were added to the aid the PA received from Arab countries and Europe, and enabled the PA to pay its workers' wages earlier than expected.

Israel conditioned transfer of funds frozen since the beginning of the intifada on having U.S. accountants supervise the PA budget, to make sure the money is not used to finance terror activities. But, the report says, Fayyad is having trouble asserting his authority over the PA's financial system - Arafat remains in control, much to the Palestinian finance minister's chagrin.

Arafat persists in giving orders to the Palestinian treasury to earmark funds for five destinations: direct financing of Fatah activity, including terror infrastructures; financing Fatah institutions and organizations; aid to the families of Fatah suicide bombers; and compensating workshop owners in the Gaza Strip, whose holdings were destroyed by the IDF; and compensation for families whose homes were demolished by the IDF.

Arafat is believed to be using the money to strengthen his position, which was weakened among Fatah activists due to his financial difficulties. Arafat wants to prevent his people from turning to Iran for alternative financing. Israel believes Arafat will continue to allocate funds without spoiling his relations with Fayyad.

Fayyad's relations with the PA security chiefs are tense, following his attempt to regulate the wage payment to their people. He wanted the them to get their salaries via their bank accounts. The security heads objected, because they wanted to remain in control of the payments. Fayyad failed to overcome their objection, and Arafat refrained from taking a stand.