Even now, when the ground is burning and the future of the peace process is cloudy, senior PA officials find time to deal with the truly important things. The name of the game is money, or to be more precise, the pocket and account they land up in.

The Finance Ministry, the GSS, IDF Intelligence and DCO offices have innumerable stories and information about corruption in the PA. It was even suggested a week ago in the Prime Minister’s Bureau to threaten publishing this information if the violence continued.

This matter involves the heads of the Palestinian regime in a knot of complex circles of bribery, protection money, power struggles, politics and social structure problems.

The border crossings are an excellent example. This is how it works: Israel collects customs duties at the entrances and exits from the PA to Israel, to Egypt and Jordan, for itself and the Palestinians. Israel is obliged to return the portion owed to the PA, which after taking off commission, comes to 40%. In ’97, the Palestinians asked that their portion of the money collected at the Karni roadblock, about a million shekel a month, be transferred to a new account. The Israeli Airport Authority raised an eyebrow. It turned out that the new account was registered on behalf of the National Palestinian Transit Authority. Israel had not heard of this organization. An examination showed that the real owner of the account was Mohammed Dahlan, head of the Palestinian Preventive Service in Gaza. This was a private account, subject solely to Dahlan’s orders.

For Dahlan, this money serves as a base to fund his organization and his hedonistic lifestyle. To this should be added more millions of shekels from various taxes and protection money that he collects, such as the docks for loading and unloading on the Palestinian side of the Karni crossing.

Dahlan is not alone in this business. Funding for all the PA’s swollen organizations, mainly its security services, come from various taxes transferred to personal coffers and are not channeled through a central financial system. Some of the money goes into the private pockets of commanders. Intelligence sources in Israel say that these taxes also enable these organizations to increase their power in the struggle for Arafat’s legacy.

In Palestinian terms, a million shekel a month is a great deal of money. The Airport Authority decided a month ago to stop the party and to transfer the money to the central account of the Palestinian Finance Ministry in Gaza. Dahlan, say sources in the PA, exploded with anger and sent in his people, who demanded keeping the situation as it was.

Dahlan’s emissary, who conducted the struggle with the Airport Authority, was Arafat’s economic consultant and close confidante, Mohammed Rashid.

It is worth Rashid’s while to help Dahlan out. Rashid is the chief beneficiary of the PA’s monopoly on gasoline, one of the strongest and most profitable organizations in the PA.

This monopoly is dependent on a contract making him the exclusive contractor for gasoline signed with the Israeli Dor Energy company.

The organization providing the security entourage for Dor Energy trucks going in to the Gaza Strip are Dahlan’s people, who receive their salary from that fictitious account that is replenished by the Karni crossing money.

Israel knows that senior PA officials fear the sensitivity of the Palestinian public to stories of corruption. Security sources believe that these latest riots are, to a certain degree, a warning signal to Arafat.

They are an indirect protest of the insiders — those who were born and grew up and suffered in the territories, who did the ground manual work in the years of the Intifada and who make up the hard core of the Tanzim — against the outsiders, Fatah members who lived the good life in Tunis and Europe and took on the status of nouveau riche at the expense of the Palestinian public.

For this reason, the GSS believes, two senior security heads, Jibril Rajoub and Mohammed Dahlan, are not criticized and are safe from the public anger. Both served long years in Israel jails are considered to have paid a personal price. As for the rest, the anger toward them is great.

Israel exports goods worth two billion dollars a year to the PA while the PA exports goods worth two billion shekel a year to Israel.

A source in the IDF Planning Branch says: “This situation sheds a great shadow over the future of the PA as a sovereign state with a stable regime. Lack of economic planning, adopting erroneous policies that are mainly for narrow political interests and the rooting of corruption, nepotism and poor administration as a norm, can, in the final analysis, lead to a rise in the power of extremist movements in the territories and to a collapse of the peace agreements.

In intensive debates last week in the Finance Ministry and the Prime Minister’s Office, those attending presented a series of ways of hitting the PA and its leaders in their pocket. There were those who demanded cutting off the PA’s economic lifelines, and to publish embarrassing information about senior officials.

Finance Ministry officials were opposed and approached the matter from a purely economic angle: Israel must not, they argued, intervene in the PA’s internal matters. Legalists at the meeting concurred. Israel, they said, does not have the moral authority to demand excessive changes of Arafat and to set an ultimatum to stop transferring customs duties. Others said that such a step would not only be an obvious violation of signed agreements, it would also be interpreted as a political attempt to escalate the conflict with the Palestinians.

Security establishment figures said this would be an effective way of punishing Arafat for the riots but that not only the Palestinians suffer from corruption. They said that Israel would also bear the consequences if Hamas power increased because of economic distress and because of a lack of trust in the current leadership.

In any case, this is a decision for the prime minister. The security establishment hopes that a direct threat on Yasser Arafat’s good name, as well as on his associates, will be more effective. After one meeting an Israeli security source said: I am sure the Palestinians would be happy to know what we know about its leaders. The degree of the corruption, the lack of shame, the depth to which senior PA officials dip into the public pocket surprises me anew all the time. For example, a large Israeli company bought an apartment in Ashkelon and holds parties there — not necessarily of the moral kind — for a few senior PA officials, in exchange for giving that company a monopoly on supplying an important product.

There are some there whose fingerprints are everywhere: monopolies, importing cigarettes and gasoline, casino, border crossing taxes, licenses and etc. Some are not embarrassed to manage the most trivial deals themselves. Thus, for example, there are negotiations with garage owners in Jaffa and Ramle on servicing and improving their Mercedes in exchange for supplying them with stolen spare parts.

The main sources of corruption in the PA derive from the economic agreements signed with Israel. The Paris agreement, signed in ’94, states two laws: no economic border between Israel and the PA and one customs arrangement. This means that Israel collects all the customs duties on goods coming from overseas and gives the PA its share for goods entering the PA. Every month between 200 and 240 million shekel are transferred to the Palestinian coffers, constituting 60% of its budget.

The calculations on how much to transfer are based on receipts. The more receipts they present, the more the PA receives. Israel has intercepted messages passed by the Palestinian regime to merchants, asking them to obtain more receipts from Israeli merchants and to try not to give receipts for goods exported from the PA to Israel. So a large industry of receipt forgers developed. Israeli crooks manufacture receipts for their colleagues on the other side in exchange for goods that were never sold. The Palestinians transfer them to their own Finance Ministry who transfer them to Israel, which pays a lot of many, that is divided among everyone, who laugh all the way to the bank.

At Camp David, there were discussions on the final status arrangement between the economic and financial heads of both sides. Israel wanted to put an end to the tax return story, which leads to increasing corruption, and to create instead a free trade zone, where each side would collect its own taxes.

The Israeli team, headed by the head of the budget department, was surprised at the composition of the Palestinian team. “Where is Rashid,” they asked when he didn’t come. “Rashid is at Camp David with the chairman,Maher al-Matzri, the Finance Minister answered somewhat embarrassed.

Mohammed Rashid did not budge from Arafat’s side throughout the summit. Camp David established his status in the PA. He dresses elegantly, speaks excellent English, is married to a beautiful Canadian woman and can tell a good joke when it is called for. Rashid concentrates immense financial power in his hands, both as senior economic consultant to the rais and as a private businessman, nourished by the favors accorded him thanks to his other role.

Israel estimates today that Rashid is the only one whom Arafat trusts completely and he is also the only one, except for Arafat, who is familiar with all the intricacies of the PLO’s assets in the world and in the PA. Rashid’s businesses branch out in all directions. Attempts by Israel to follow the branches were useless. Rashid is linked to a network of companies that branch downwards. He only holds shares in the parent company, but the various subsidiaries are linked in practice to most of the economic activity in the territories.

The colossal sums that Israel transfers to the PA are under the direct control of Rashid. Thus two budget systems were created in the PA: Rashid’s, from which salaries are paid and over which there is no supervision, and the budget for development and building infrastructure, which includes the donations and is under the full control of the donor countries.

When the Paris agreements were to be first implemented in 1994, the Palestinians asked that the money be transferred to four different bank accounts in the Bank of Palestine and the Arab Bank in Gaza.

Tax returns on gasoline were to be transferred to a secret account in Bank Leumi in Tel Aviv. Only Rashid and the chairman were signatories to this account.

Until half a year ago, 1.6 billion shekel were deposited in the account. Then Rashid kept his promise and unified all the PA’s accounts into one central account in the Arab Bank in Gaza.

What happened to the money in the Tel Aviv account? It depends who you ask. Rashid claims that everything was transferred to the Palestinian Finance Ministry. Israeli officials heard from Palestinian ministers that most of the money was never transferred. Joseph Saba, director of the World Bank in the territories, said last year: “We have no idea what happened with this account.

The donor countries estimate that 30% of the hundreds of millions they gave were indeed transferred to the Palestinian Finance Ministry. Around 40% pay for activities by PLO institutions worldwide and are invested in welfare activities and support for orphans and widows in refugee camps in Lebanon. The remaining 30% is for the private needs of senior PA officials or were transferred overseas in case of an uprising or Israeli conquest.

Another major problem in the PA’s economic structure are the monopolies. When the PA was set up, several areas were declared monopolies. It is not clear why the PA finds it necessary to be involved in so many obviously private ventures, unless it wants to give franchises to those close to them, mainly Rashid.

The monopoly buys the product it is charged with for a certain price from either the manufacturer or the Israeli importer and sells it in the territories for much more. It is not clear where the difference goes, and we are talking about sums in the hundreds of millions.

The U.S. State Department noted in the past, that there were 20 monopolies in the PA. For example there are monopolies on gasoline, cement, cigarettes, gravel, animal feed, steel, meat, paint and construction materials.

Other products are also not open to others. Nabil Shaath’s Egyptian company, for example, imports computers into the territories; the Paaltek company in Ramallah for electronic entertainment goods is owned by Yasser Abbas (Abu Mazen’s son) and Sammy Ramlawi. Many Palestinian businessmen are very bitter over the monopolies, which have done away with competition and have closed markets that were open under the Israeli occupation.

Originally appeared in Yediot Aharonot, November 10, 2000

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