- The Washington Times - Sunday, June 3, 2007

RAMALLAH, West Bank — A new account set up to bypass an international boycott of Hamas has begun disbursing vital foreign aid to the Palestinians, with tens of millions of dollars expected to be used to partially pay civil-servant salaries this week, the finance minister said yesterday.

The move is key to restoring relations between the Palestinians and donor countries, but there is no end in sight to the boycott, which was imposed when Hamas came to power more than a year ago, Salam Fayyad said in an interview.

Arab countries and Norway have already paid $184 million into the new fund, but the two biggest donors to the Palestinians — the U.S. and European Union — have not committed to it, he said.

Mr. Fayyad, a U.S.-educated former International Monetary Fund executive and finance minister under Palestinian leader Yasser Arafat, returned to the Treasury in March after Hamas brought the moderate Fatah movement into the government.

One of the alliance’s main goals was to get the embargo lifted. But while most Western countries will deal with the non-Hamas members of the coalition, they’ve largely stuck to the boycott because the Islamic militants refuse to recognize Israel or renounce violence.

In mid-May, Mr. Fayyad established a new channel for foreign aid — an account in the Palestine Liberation Organization, the Palestinians’ political umbrella organization of which Hamas is not a member. Donor countries can send money to this account without concern that banks involved in the transfer would run up against U.S. anti-terrorism regulations, he said.

Mr. Fayyad said the United States has sent a letter to the European Union with such assurances. U.S. officials were not immediately available for comment yesterday.

It was not known how much money has already been disbursed or for what purposes.

“There has to be a better tomorrow for everybody, for both of us, Israelis and Palestinians,” Mr. Fayyad said. “Where we are right now is an extremely difficult and dangerous situation.”

His biggest challenge is to cover the bloated government payroll for 165,000 employees, half of them members of the security forces. The salaries feed about one-third of the Palestinians, and only partial payments were made under Hamas at irregular intervals.

The finance minister has told civil servants that there’s still not enough money for full salary payments, but he would pay them half on a regular basis. This week, he’ll make such a payment with $80 million the United Arab Emirates recently sent to the PLO account, he said.

Mr. Fayyad said his ultimate goal is to restore the single Treasury account that he operated before Hamas came to power in March 2006. After the account was dismantled by Hamas, donors bypassed the Finance Ministry by parceling out aid directly to recipients, such as subsidies to tens of thousands of unpaid civil-service workers.

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