Banking on terror

By Rachel Ehrenfeld
February 27, 2003 
Jerusalem Post

A rumor that the European Parliament had passed legislation to 
begin an investigation into the Palestinian Authority's use of 
EU funds, is just that. Francois Zimeray, a MEP (Socialist 
Party, France) was quoted in Haaretz on February 24 as saying 
to the World Jewish Congress that such an investigation is 
underway. He either mis-spoke or was misquoted. 

On February 2, 170 members of the EU Parliament demanding 
accountability, despite Commissioner Chris Patten's strong 
objection, signed a petition to open a parliamentarian 
investigation into the EU's aid to the PA. 

The following day the European Anti-Fraud Office (OLAF) announced 
that it has begun an external investigation "in relation to 
allegations of misuse of funds donated by the European Union 
in the context of EU budgetary support to the Palestinian 
Authority." 

What has taken OLAF so long?
The PA's own documents demonstrating how the PA and Yasser Arafat 
used EU funds to pay for terrorism were discovered by the IDF 
and have been available for over a year. 

Volumes of the Palestinian Authority's own documents, including 
many graced by Arafat's own signature, ordering the Palestinian 
Ministry of Finance the recipient of hundreds of millions of 
dollars in EU budgetary aid (The EU's annual budget is about 
$101 billion) and additional $950 million in humanitarian aid 
just for the year 2002 to pay members of the al Aksa Martyrs 
Brigade for killing Israeli citizens, or else for procurement 
of explosives and illegal weapons. 

These and similar documents motivated Ilke Scroeder (Green Party, 
Germany) and a small group of like-minded ethically conscious 
European Parliamentarians to demand a full parliamentary 
investigation. 

Finally, on February 13, the Conference of Presidents of the 
European Parliament decided that instead of a full investigation, 
setting up a "Working Group" to look into the matter would be 
enough. But don't hold your breath, this "Working Group" is 
made of the very same members of the Budgetary and Foreign 
Affairs Committees who were supposed to monitor how the PA 
was spending the EU's taxpayers' money. 

EU donations to the PA since the Oslo Accords have included 
demands for accountability, and similar demands have been 
attached to the EU's direct budgetary assistance since the 
PA began attacking Israel in September 2000. However, despite 
EU claims to the contrary, no real effort to monitor how the 
money it provided the PA was actually spent has ever taken 
place. The EU claims that the International Monetary Fund 
(IMF) monitors the PA budget, and EU. 

Commissioner for External Affairs Chris Patten maintains that 
"EU assistance has clear conditions attached to it and is 
closely monitored by the IMF at the Commission's request."
His office has also stated that, "the IMF conducts a close 
review of monthly fiscal information covering the whole of 
the PA budget, including the wage bill." 

In bold contrast however, IMF staff members have contradicted 
Patten's claim on several occasions. The director of the IMF's 
Middle Eastern Department, George T. Abed, acknowledged on 
September 2002 that "with weak institutions and a budget of 
nearly $1 billion, there has, no doubt, been some abuse." 

And he added that even "the Palestinian Legislative Council 
itself has complained about this," and finally that "the 
IMF does not and cannot control downstream spending by the 
various Palestinian agencies." 

The EU has been arguing that it will only accept the fact 
that the money it sends has been funding terrorism if there 
are mechanisms to identify how each individual Euro is spent. 

But as money is fungible; and as the EU gave direct funding 
toward PA salaries, and additional money to the PA Ministry 
of Finance for various projects; and as the PA's own records 
prove that it used the Ministry of Finance to pay for terror 
activities, what other evidence is needed to show that the 
PA allocated money received from the EU to fund terrorism? 

In June 2002, after international condemnation of the PA's 
corruption, Arafat appointed a new Minister of Finance, 
Salam Fayyad. He is a former IMF official who, assisted by 
outside experts, began an attempt to overhaul the corrupt 
system. As a result, Israel agreed to renew its transfer 
of payments for Palestinian tax funds, which it had withheld 
fearing the money would go to fund terrorism. 

These payments, unlike the EU's are being monitored by a 
special group of accountants brought in by the US. 
However, there are already reports that Arafat ignores and 
circumvents Fayyad, by ordering others in the Ministry of 
Finance to pay to known terrorists, thus continuing to 
assert his control over the PA's funds. 

Despite all this, the EU decided to continue its financial 
aid to the PA on the grounds that it is not convinced that 
Israel will continue to transfer the money to the PA. 

This decision not only perpetuates the EU's unwillingness 
to account for the whereabouts of money it gave to the 
Palestinians, but also the EU's lack of accountability and 
transparency. 

Instead of coming clean, the EU Commission headed by Patten, 
and the Conference of Presidents thought it was better to 
sweep the investigation under the carpet. Only this time 
the red on the carpet is the blood of the victims of 
terrorism. 
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The writer is the director of the NYC based American Center 
for Democracy and the author of the forthcoming book 
Funding Evil.