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Special Report

Hamas Takes a Financial Hit

This is a partial transcript of "Special Report With Brit Hume" from Feb. 20, 2006, that has been edited for clarity.

BRIT HUME, HOST: Joining me now to discuss this latest development in the saga of Israel and the Palestinians is FOX News analyst Israel has said that these monies that it collects at the border in the — who are they collecting money from?

ROSS: They collect monies from a couple of different sources. One is customs duties. Nothing can get into the Palestinian territories unless it goes through Israel, because there isn’t a seaport, there isn’t an airport. So for those customs duties the Israelis collect, they typically turn those over to the Palestinians, although in the past when there have been acts of terror they’ve held them.

HUME: So this is really the Palestinians money?

ROSS: It’s Palestinian money, that’s right.

HUME: This isn’t Israeli aid?

ROSS: It is not Israeli aid. It is money that would be Palestinian money that the Israelis collect for the Palestinians by agreement, by the way, by an agreement that Hamas doesn’t recognize. But this is based on an agreement from the Oslo process.

HUME: So these, in effect, are Palestinian tariffs?

ROSS: Yes, they are, principally.

HUME: Principally, OK.

ROSS: There’s also some money that’s withheld from Palestinian workers that is also collected by the Israelis and then turned over to the Palestinian Authority.

HUME: So this is not Israeli taxpayer money?

ROSS: This is not Israeli taxpayer money. This is not an Israeli form of assistance that is going to the Palestinians.

But you are also a little bit more than a month before an Israeli election. To expect that an acting Israeli prime minister in a political campaign would be turning over monies to a Palestinian Authority that is now being run by Hamas would be an awful lot to expect in a political season.

After March 28, after the Israeli election, you might see this issue approached somewhat differently, depending upon the shape of the Palestinian government that emerges.

HUME: Now, what about the U.S. money? That’s aid money, right?

ROSS: That was aid money, but it was $50 million that was given to the Palestinian Authority, only 600,000 of which had actually been spent. And it’s as much because the money hadn’t been spent as to the potential misuse of it now that the U.S. is now asking for it to be returned.

HUME: And the Palestinian Authority, I take it, has agreed to return the money.

ROSS: That’s correct.

HUME: All right. So when you take these revenues that were supposed to have come from Israel and the money that’s from the United States and take it out of the coffers of the Palestinians, what kind of financial shape is the Palestinian Authority in?

ROSS: They were in terrible shape before this. Let’s understand that the Palestinian Authority is running a deficit of over $700 million right now, number one.

HUME: So they owe $700 million? They’re $700 million in the red?

ROSS: They can’t cover what, in fact, are their obligations.

HUME: And that means they can’t pay workers, right?

ROSS: That’s correct. Now, understand that they employ about 130,000 to 140,000 workers a month, and that number is probably 30,000 higher than it was before, because they were adding people to their public job rolls in advance of the election. They were also increasing the pay.

What happened before, quite independent of what the Israelis are doing, the World Bank cut off their administrative support monies that they were providing them precisely because the targets that had been agreed to with the Palestinian Authority were not being respected.

So even before this you had the international community saying, "We’re not going to provide you budgetary support because you haven’t been responsible, in terms of living up to targets that were agreed to with the international community."

HUME: So what is the likely effect of the cutoff? And is this the wise thing for Israel and the United States to be doing?

ROSS: There’s no question that there’s a financial crisis now, made worse by the Israeli decision, to be sure. Even if the Israelis were providing the money, the fact is there would still be a shortfall.

Now, the impact is to sharpen the realities that Hamas is going to face in government. One thing that they have not understood is that they can’t get a free ride. The reality is 80 percent of the Palestinian economy is dependent upon Israel, not because of this transfer of money, but because 80 percent of the economy is dependent upon trade with Israel and trade through Israel.

So if the Israelis are not cooperating with them because they’re facing a government that threatens their existence, they’re going to face some fundamental problems on the Hamas side.

HUME: So was this the right move to make?

ROSS: I believe, actually, it is the right move to make, because it sends a message to Hamas that: Look, you’re going to have to make some choices. If you want to be a government and be responsible, then you’re going to have to recognize your next-door neighbor. If you’re not prepared to do that, then you’re going to pay a price with your own people.

HUME: And likely bankruptcy and collapse?

ROSS: Very likely that could be the result. Now, bear in mind the Israelis will probably limit how far this goes, because they don’t want to become responsible for what happens in the Palestinian territories.

HUME: Got you, Dennis. Thank you. Always glad to have you here.

Watch "Special Report With Brit Hume" weeknights at 6 p.m. EST.

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