Bassem Tellawi  /  AP file
Hamas leader Khaled Mashaal, right, talks to reporters in Damascus, Tuesday while receiving a Jordanian delegation of Islamic parties headed by Abdul-Majeed Zneibat of the Brotherhood party in Jordan, left.
By Tom Aspell Correspondent
NBC News
updated 2/1/2006 3:15:43 PM ET 2006-02-01T20:15:43
ANALYSIS

GAZA CITY — After the feast, as they say, comes the reckoning.

And for the Palestinian Authority, which gets most of its operating budget from foreign sources, the election last week of the militant Hamas to run the government of the Gaza and West Bank has led to big questions as to where much of that money will now come from.

The problem is immediate. On Wednesday, Israel announced that it is halting this month’s transfer of $45 million in tax rebates and customs payments, money that Israel collects on behalf of the Palestinian Authority and then hands over after taking a 30 percent service fee.

And on Monday, the Mideast Quartet (a grouping of the U.S., Russia, the European Community and the United Nations brought together to help solve the Israeli-Palestinian conflict) said that the international community is willing to continue providing financial aid only if the new Hamas-led government commits to non-violence, recognizes Israel’s right to exist and accepts current Mideast peace agreements — things Hamas is unlikely to do anytime soon.

Without such an inflow — which, with the cash flow from Israel, amounts to about $1.3 billion of the reported $2 billion budget of the Palestinian Authority — Hamas faces the prospect of a truly rocky road ahead. Any loss in the budget, particularly the foreign aid from the United States and the European Union, would bite hard into the living standards of all Palestinians, more than 100,000 of whom rely directly on the central government for their salaries.

Tough financial shortfalls in the immediate future
For instance, the Palestinians use the monthly payments from Israel to meet payrolls for government employees, including police and security services. Palestinian officials said Israel's payment for January already is several days overdue and they may not be able to pay the salaries of over one hundred thousand government workers.

The Israelis say that they are freezing the transfer because of increased fears of suicide attacks as a result of the Hamas victory.

Hamas is hoping the Arab world will step into the breach, and on Wednesday Saudi Arabia and Qatar pledged Wednesday to transfer millions to ease the crisis. Saudi Arabia is said to have promised $20 million and Qatar pledged $13 million in quick aid to help the Authority pay January salaries to 137,000 employees, a senior Palestinian official said on the condition of anonymity because the deal has not yet been finalized.

Reigning in radicals
A failure to pay the January salaries could pose the most difficult test yet for Hamas, which so far has resisted international demands to recognize Israel, disarm and renounce violence.

Adding fuel to the fire is the volatile situation within Israel, where Prime Minister Ariel Sharon is lying in a coma and an election is due to take place on March 25.

Meanwhile, Hamas leaders are in talks with Mahmoud Abbas, the leader of the rival Fatah party elected just over year ago as president of the Palestinian Authority. 

Abbas, who argued unsuccessfully with Israel and the United States to delay the Palestinian elections in order to give secular Fatah more time to campaign, should be able to persuade Hamas to delay forming a government until after the Israeli elections. Abbas will likely use the possibility of foreign aid as an enticement to get Hamas to agree.

Hamas could use the time to organize itself into a functioning government. Before it won the Palestinian election, Hamas was only dealing with a budget was about $60 million per year. (About 10 percent of the money came from Iran; Hamas also received money from other Gulf states, though much of it on the condition that the Islamic resistance movement remain under the control of secular leaders rather than clergymen.)

Now that Hamas has the opportunity of governing on a budget of $2 billion dollars, it is likely to be spending its first few months in power finding people with the right qualifications to administer its wider responsibilities. Otherwise it risks alienating the voters who elected them based on their platform to battle endemic corruption within Fatah.

Internal security will be its first priority, particularly a cleanup of the police and security forces, which employ more than 58,000 Palestinians. The leaders of all the security forces will probably be changed and payrolls trimmed.

Tom Aspell is an NBC News correspondent based in Tel Aviv, Israel. The Associated Press contributed to this report.

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