Hamas Faces Economic Isolation and Exclusion Due to Terrorist Ties

JERUSALEM – Even before it embarks on its first effort at governing, the militant group Islamic Hamas faces serious problems — international isolation because of its extremist policies and an inherited money crunch.

Acting Israeli Prime Minister Ehud Olmert said Sunday that after Hamas sets up a government, Israel will stop transferring tens of millions of dollars a month to the Palestinians in customs and taxes. Foreign donors, who have annually made up a huge budget shortfall, are also balking at funding a Hamas regime.

Meanwhile, Fatah leaders are refusing to cooperate with the new rulers, openly hoping for their failure after Fatah was beaten in last week's parliamentary election. Fatah won just 45 seats in the 132-seat parliament, while Hamas took 74, ending four decades of Fatah control over Palestinian politics.

"We will not allow ... anyone to take part in a government with Hamas," said Sufian Abu Zaydeh, an outgoing Fatah Cabinet minister. He told Israel's Channel 2 TV that Fatah is hoping Hamas falls flat on its first mission of governing.

"They said they have a different way of doing things, they can conduct negotiations without talking to Israel, without recognizing Israel — let's see them do it," he said.

The most immediate crisis, even before Hamas has a chance to form a government, is payday. The Palestinian Authority coffers are empty and the average transfer of $54 million a month from Israel could make the difference between paying salaries of security forces and civil servants or failing to meet the payroll.

On a larger scale, Palestinian experts estimate that the budget shortfall for this year will again approach $1 billion. Up to now the deficit has been covered by Western aid, but that might stop.

In Washington last week, State Department spokesman Sean McCormack said the situation is "very clear. The law and policy of the United States is that we do not provide funding, money, to terrorist organizations. Hamas is a terrorist organization."

The United States gave the Palestinian Authority $400 million in direct aid last year and several million more through various U.N. charities, said Jacob Walles, the U.S. consul-general in Jerusalem. President Bush has said the United States will not deal with Hamas as long as it seeks Israel's destruction.

At the beginning of a short visit to Israel, German Chancellor Angela Merkel said Sunday that she would be watching what Hamas does. "If Hamas does not change its positions, it would be unthinkable for the EU or Germany, bilaterally, to support the autonomy government with money, as we do today." Merkel visits the West Bank on Monday.

In an interview with CNN, Hamas leader Mahmoud Zahar accused Fatah operatives of previously skimming off most of the foreign aid for themselves and said he expected aid from the Arab world if the West stops its funding. Zahar, however, denied that Iran gives money to Hamas.

"We'll be able to open a new channel through our other Arabic and Islamic and international community, to help the Palestinian people without condition," he said. "We are looking for this money, but this money should not be conditioned."

Even if governments do not want to give money to a Hamas government, experts say one way out would be for foreign donors to fund aid projects directly, but that would still leave the headache of paying salaries for security forces and civil servants.

Failure to pay salaries on time could "create a mutinous military front," wrote analyst Zvi Barel in the Israeli Haaretz daily.

Already Fatah field commanders are saying they would refuse to turn over their positions to Hamas, and there have been armed clashes between the two sides.

Keeping security forces loyal is vital to Hamas success, said outgoing Palestinian Cabinet Secretary Samir Hleileh, since Hamas has no experience in governing.

"The immediate problem is financial, but they also have the problem of carrying out orders in the civil and security services. Even Fatah itself had problems in implementing orders" in the security services, Hleileh told The Associated Press.