2006–07 economic sanctions against the Palestinian National Authority
The 2006–07 economic sanctions against the Palestinian National Authority were economic sanctions imposed by Israel and the United States against the Palestinian National Authority (PA) and the Palestinian territories, and the suspension of international aid to Palestinians, following the January 2006 legislative elections that brought Hamas to power.
Israel imposed sanctions on the Palestinians and suspended the transfer of the taxes it collected on behalf of the PA. The US also imposed economic sanctions and prohibited all Hamas-related financial transactions. The Middle East Quartet called for reviewing all assistance to any new government against its commitment to the principles of nonviolence, recognition of Israel, and acceptance of previous agreements and obligations. As a result, the international community suspended its international aid to the Palestinians, causing big damage to the Palestinian economy. Eventually, aid was diverted via a Temporary International Mechanism or directly to the accounts of President Mahmoud Abbas, bypassing the Hamas-led Palestinian Authority.
After the formation of an emergency government by Abbas, international aid to the Ramallah-based PA was resumed, but the Hamas-led government in Gaza remained boycotted. The US and Israel lifted sanctions against the Abbas government.
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After the 2006 elections
Following Hamas' electoral victory in the January 2006 Palestinian Authority legislative elections, the Middle East Quartet (United States, Russia, United Nations, and European Union) on 30 January 2006 issued a statement, saying that "It is the view of the Quartet that all members of a future Palestinian government must be committed to nonviolence, recognition of Israel, and acceptance of previous agreements and obligations, including the Roadmap," and concluded that it was inevitable that future assistance to any new government would be reviewed by donors against that government's commitment to those principles, which Hamas rejected.
Although the Quartet formally did not call for sanctions and did not explicitly prohibit the provision of aid to the Hamas-led Palestinian Authority (PA), but rather called for aid to be ‘reviewed’ against the three principles, a combination of political pressure and US threats of sanctions against banks handling aid monies served to halt transfers to the PA.
One week after the elections, on 1 February 2006, Israel announced that it was freezing the transfer of customs revenues to the PA. Israeli officials noted that future transfers will be put on hold while the issue is being reviewed. On 19 February, the cabinet approved punitive sanctions on the Palestinian Authority. Some $50 million in monthly PA customs revenues were withheld and travel restrictions on Hamas members imposed. Acting Prime Minister Ehud Olmert said that "It is clear that in light of the Hamas majority in the PLC Palestinian Legislative Council and the instructions to form a new government that were given to the head of Hamas, the PA is - in practice - becoming a terrorist authority". Israel considered Hamas to be in power on the day the new parliament was sworn in (18 February 2006); the start of Israeli sanctions would start on that day.
US Administration officials and some Members of Congress warned the Hamas leadership that the United States will no longer provide assistance to a Hamas-led PA government unless Hamas changes its charter to recognize Israel’s right to exist and renounces the use of violence.
Israeli officials and Western diplomats said that US and Israel were discussing ways to destabilize the Palestinian government so that newly elected Hamas officials will fail and elections will be called again. The intention was to starve the PA of money and international connections. The approach was being discussed at the highest levels of the US State Department and the Israeli government. Israeli military officials discussed cutting Gaza off completely from the West Bank and making the Israeli-Gaza border an international one. Hamas Members of Parliament would be denied to travel freely between Gaza and West Bank.
Under the Hamas-led Government
On 12 April 2006, the US Treasury’s OFAC formally determined that Hamas had property interest in the transactions of the Palestinian Authority. Consequently, all unauthorized transactions with the Palestinian Authority were prohibited. The general prohibition on transactions, however, also caused difficulty in carrying out financial transaction with non-PA related individuals and entities, as financial institutions around the world took protective measures regarding the OFAC determination.
The US ceased providing both indirect and direct foreign aid to the PA with the exception of some emergency humanitarian assistance. The US said it would withhold $411 million in aid over the next few years and asked for the return of $30 million it had already donated. The CRS Report for Congress wrote on 27 June 2007: "With the suspension of all USAID-managed economic aid to the West Bank and Gaza Strip and the general prohibition on financial transactions by U.S. persons with the PA, the United States has tried to assuage fears that its policies are causing Palestinian suffering."
Although despite the suspension of aid to the PA, aid to the OPT reportedly increased during 2006, poverty climbed sharply during the same period. According to Oxfam, this was because international aid did not compensate for the substantial loss of income created by the withholding of at least $475m of Palestinian tax and customs revenues by Israel. This accounted for around 50% of the PA’s monthly income in 2005. Also, the aid came late, it did not generate income, and was less effective. Moreover, the boycott has helped to trigger factional violence between Palestinians. Oxfam observed in 2006 dropping incomes, increased poverty, institutional collapse and economic decline. Media reports suggested that the humanitarian situation in the West Bank and Gaza Strip was worsening.
In February 2006, Quartet envoy James Wolfensohn warned that the Palestinian Authority was on the verge of economic collapse within two weeks time, because of the cessation of tax funds to the PA from Israel. In a letter to the US government, Wolfensohn warned that the economic situation could lead to violence. In his report of May 2006, Wolfensohn questioned the decision of Western powers to cut all but humanitarian aid to the Palestinians' Hamas-led government. He recalled the spent $1.3 billion a year on assistance to the Palestinians and asked: "Will we now simply abandon these goals?"
From April–June 2006, the EU delivered $143 million in emergency assistance. The US provided $300 million in humanitarian and other aid to the Palestinians, intended to bypass the Hamas-led Government, $42 million of which "for promoting democratic alternatives to Hamas".
The World Bank warned for a collapse of the Palestinian infrastructure that would be hard to reverse. On 9 May 2006, the Middle East Quartet issued a new statement, in which it reiterated its grave concern that the PA Government had so far failed to commit itself to the formulated principles. It noted that it had "inevitably impacted direct assistance to that government" and was deeply concerned about the consequences for the Palestinian people. The Quartet announced an international mechanism to ensure direct delivery of assistance to the Palestinians. In conjunction with the World Bank, the Quartet attempted to find a way to provide some relief to the Palestinians without working with the Hamas-led government. The US softened its hardline position to prevent the PA from collapsing and agreed with a mechanism for indirect funding under pressure of EU and Russia.
On 17 June 2006, the Quartet announced the establishment of a Temporary International Mechanism (TIM), aimed to channel funding directly to Palestinians, while bypassing the PA. The Quartet countries would no longer provide international aid to Hamas-led PA government.
Changes after Hamas takeover of Gaza
Following Hamas' takeover of Gaza in June 2007, Israel and the US announced plans to lift some of the sanctions on the West Bank, in order to support the Fatah government, while at the same time tightening the blockade of the Gaza Strip, in order to put pressure on the Hamas administration. On 16 June 2007, United States Consul-General Jacob Walles said that the US was planning to lift the ban on direct aid to the emergency government of Palestinian President Mahmoud Abbas. Some Israeli officials said $300 to $400 million in Palestinian tax revenues may be returned to the Palestinian National Authority, short of the $700 million Abbas was seeking. The Quartet voiced support for Abbas and concern for the humanitarian situation in Gaza, though they did not announce any change in the ban on direct aid.
Few days later, the US ended its 15-month economic and political boycott of the Ramallah-based PA, but the Hamas-led government in Gaza remained boycotted. The European Union similarly announced plans to resume direct aid to the Palestinians. On 25 June 2007, Israel agreed to transfer hundreds of millions of dollars in tax revenues it had seized to the Palestinian president Mahmoud Abbas in order to support the Fatah government.
A WikiLeaks cable from the US embassy in Tel Aviv dated 3 November 2008, however, revealed that Israel still maintained the economy of the Gaza strip "on the brink of collapse" without "pushing it over the edge,". The cable said that "Israeli officials have confirmed to Embassy officials on multiple occasions that they intend to keep the Gazan economy functioning at the lowest level possible consistent with avoiding a humanitarian crisis." In October 2010, papers were released which revealed a system to maintain the minimum level. It contained upper and lower warning lines, identifying surpluses and shortages of listed products in Gaza.
In May 2015, the World Bank reported that the Gaza economy was on the “verge of collapse”. Forty percent of Gaza’s population lived in poverty, even though around 80 percent received some sort of aid. It said the restrictions had to be eased to allow construction materials “to enter in sufficient quantities” and to allow exports. “The economy cannot survive without being connected to the outside world,” The World Bank said the tightened restrictions meant the construction sector’s output was reduced by 83 percent.
- U.S. Foreign Aid to the Palestinians. Jeremy M. Sharp and Christopher M. Blanchard, CRS Report for Congress, 27 June 2006 (RS22370)
- Quartet Statement London, 30 January 2006. un.org
- Reuters (June 16, 2007). "U.S. To Lift Sanctions on New Abbas Government". New York Times.
- Israel Will Support Abbas With Millions From Taxes. Isabel Kershner, New York Times, 25 June 2007
- U.S. Aid to the Palestinians, pp. 3-5. Jeremy M. Sharp, CRS Report for Congress, 2 February 2006 (RS22370)
- John Pike. "Hamas (Islamic Resistance Movement)". Globalsecurity.org. Retrieved 27 May 2010.
- Poverty in Palestine: the human cost of the financial boycott. Oxfam International, April 2007. Here available
- Israel to impose Hamas sanctions. BBC News, 19 February 2006
- U.S. and Israelis Are Said to Talk of Hamas Ouster. Steven Erlanger, The New York Times, 14 February 2006
- Hamas Leader Faults Israeli Sanction Plan. Steven Erlanger, The New York Times, 18 February 2006
- US opens the door for Europe to save Palestinians from funding disaster. Guardian, 10 May 2006.
- Wolfensohn warns of PA collapse. Jerusalem Post, 27 February 2006
- Wolfensohn bows out, critical of West's stand on aid to Palestinians. AFP, 3 May 2006
- Quartet Statement, 9 May 2006. un.org
- Quartet Statement, 17 June 2006.
- U.S. ends embargo on Palestinian Authority in move to bolster Fatah. Helene Cooper, International Herald Tribune, 19 June 2007
- Israel Deliberately Choked Gaza Economy: WikiLeaks. AFP, 5 January 2010
- Israel Releases Papers Detailing Formula of Gaza Blockade. Amira Hass, Haaretz, 26 October 2010
- Gaza Strip Economy on ‘Verge of Collapse,’ World Bank Says. New York Times, 22 May 2015