As Sharon Ails, Palestinians Face Own Travails

Harold's List
By STEVEN ERLANGER New York Times

JERUSALEM, Jan. 7 - The sudden political disappearance of Prime Minister Ariel Sharon, struggling for life after a massive stroke, has thrown the future of any peace process with the Palestinians into question. But the Palestinian Authority itself is in such disarray that it may be incapable of negotiating on terms any Israeli leader could accept.

There is spreading chaos, a sense of deterioration and growing concern among both Palestinians and Israelis that the Palestinian Authority, nearly bankrupt and facing a huge budget deficit, may look like a failed state even before it becomes one.

Life for ordinary Palestinians is becoming harder, with less security and optimism than a year ago. The Israelis pulled out of Gaza - a thrilling moment for many Palestinians - but the territory has become practically lawless, not a model for a future state, and Palestinian voters seem set to punish the divided Fatah movement that monopolizes the Palestinian Authority.

Legislative elections on Jan. 25 are expected to bring the radical Islamic group Hamas, dedicated to a continuing armed struggle against Israeli occupation, into a significant share of power in the authority.

"All the chaos is coming from inside the Palestinian Authority and Fatah," said Khaled Duzdar, a Palestinian analyst at the Israel/Palestine Center for Research and Information. "Fatah almost seems to be working on behalf of Hamas. This is the lowest the Palestinian Authority has reached."

The splitting of the main Palestinian faction Fatah and the participation of Hamas and its militants in the authority are serious questions that any new Israeli leader will have to confront right away.

By itself, the victory of Hamas or its achievement of a blocking minority within the authority could be enough to put an end to the long-moribund "road map," the peace plan drafted and endorsed by the United States, as well as the Israelis and the Palestinians. Hamas is committed to keeping its armed wing and its weapons, and says it is running in this campaign "to protect the resistance." One of the road map's first requirements is that the authority disarm all militants, including Hamas, Islamic Jihad and Al Aksa Martyrs Brigades, which is affiliated with Fatah itself.

The Palestinian Authority's president, Mahmoud Abbas, has promised Israel and Washington to disarm the militants after the elections, but no American or Israeli policy maker or intelligence analyst interviewed over the last two months believes that he will be able to do so, and most think he is unlikely even to try.

So, outside of considerations of Israeli leadership, progress toward peace seems unlikely. That can only add to the Israeli inclination to sit tight and manage the current situation while continuing unilateral disengagement from the Palestinians, like the construction of the separation barrier.

"We have an ailing prime minister and the Palestinians have an ailing Authority, and both are on life support," said a senior Israeli intelligence officer, who could not be identified because of the nature of his work. "We have never been through such a period of anarchy in the Palestinian Authority. As far as security is concerned, the Authority is nominal - anyone in the territories does what they please."

In Gaza City recently, Ahmad el-Balawi, 20, said he had turned to Hamas from Fatah because of the corruption of the authority, the lack of jobs and the deterioration of ordinary life. "We are Muslims, and we need change," he said at his father's toy shop festooned with plastic guns. "We've had experience with Fatah, unfortunately."

Bashir el-Balawi, 46, his father, said: "The majority of them are Hamas now. It's because of the current situation, with no jobs and no safety and the corruption." Asked why he sells so many toy rifles, he threw up his hands. "The kids have fallen in love with weapons, it's just weapons they want, no other toys, they think they will fight against Israel." Does that depress him? "Not really," he said. "They want to feel powerful and free."

There are problems for Israel's interim leadership, too. Mr. Abbas has promised Hamas that the elections will not be postponed, but he has also said that if Israel will not allow Palestinians to vote in East Jerusalem, annexed by Israel after the 1967 war, the elections would be impossible. Israel does not want to be blamed for postponing the elections, especially since the Bush administration has called for them to go ahead.

Mr. Sharon had the stature to stand up to Washington on this issue, if he chose. It may be a harder choice for the acting prime minister, Ehud Olmert, whose performance will be watched closely by Israeli voters. He may want to show his independence from Washington and make a symbolic stand against Hamas participation by banning voting in East Jerusalem, but he would do that only if Mr. Abbas privately wanted him to.

The Palestinian Authority is in deep financial trouble regardless of how the elections proceed. It is spending almost its entire yearly revenue of some $1 billion on salaries, which were recently raised despite cries of alarm from donor countries and the World Bank. According to the authority's former finance minister, Salam Fayad, who quit in protest to run for election, it is essentially out of money, and unable to raise more funds from banks.

Donor countries at an aid meeting in London in mid-December refused to release a semiannual $60 million in aid because, said Nigel Roberts, the regional director of the World Bank, the Palestinians had broken their commitments to fiscal responsibility. "The Palestinian Authority is in imminent functional bankruptcy," Mr. Roberts said. "In any given month now, they might find themselves unable to pay their basic salaries and minimal operational costs."

In 2006, the Palestinian Authority is facing a deficit of about $900 million. It can hope for about $300 million to $350 million in additional funds from the Arab world and donor countries this year - presuming that they can work out another restructuring program with an authority run or dominated by Hamas. But even that would leave a net deficit of around $600 million.

The combination of the security chaos in Gaza and in large parts of the West Bank, the involvement of Hamas and the accumulated troubles of the Palestinian Authority is likely to drive off foreign investors, Mr. Roberts said. Yet it is only investment and job creation that can offer enough jobs for the growing population of young men.

Overall Palestinian unemployment is about 23 percent, but some 75 percent of young men from 16 to 25 years old in refugee camps are unemployed. Hiring some of them into the security services, which Mr. Abbas has done, makes political sense. The checkpoints and the barrier cost the Palestinian economy about 5 percent real growth every year, Mr. Roberts said. That is a major toll, given that 10 percent real growth would be needed to solve the unemployment problem.

In 1999, before this intifada and the Israeli response, the Palestinian Authority had a balanced budget and needed no outside support. Now, even though revenues have recovered to where they were in 1999, the deficit has ballooned. "You can't hire all these people and then increase their wages, that's what's broken the bank," Mr. Roberts said. "The salary bill is so high in relation to resources there are only two options, and both are unsavory. They have to cut salaries or cut staff."

Maj. Gen. Aharon Zeevi-Farkash, the departing director of Israeli military intelligence, said bluntly, "We are facing a real revolution in the Palestinian Authority." The clash of generations - the older group like Mr. Abbas, who went into exile with the late Yasir Arafat; the middle generation like Mahmoud Dahlan and Marwan Barghouti, who grew up under occupation; and the young generation of gunmen empowered by five years of armed conflict - is pulling Fatah apart, he said.

Fatah's divisions are accelerated by a reputation for corruption, arrogance and cronyism, and an inability - despite 70,000 men listed as part of the official Palestinian security services - to provide law and order. This has been fertile ground for Hamas, which is running under the slogan "Change and Reform."

Khalil Shikaki, director of the Palestinian Center for Policy and Survey Research, the most respected polling agency in the territories, said, "There is tremendous fragmentation evident in Fatah, with Fatah candidates competing with each other and the Fatah leadership impotent in stopping it."

Hamas, he said, "wants to win and is running like it wants to win," partly to resolve an old battle with the secular Fatah, partly "as a defeat for the accommodationists who want peace with Israel and follow the American lead, and partly as a victory for Islam everywhere."

Hamas wants to respond to demands for reform in the Palestinian Authority, Mr. Shikaki said. "Hamas wants to rise to the challenge. They've built a tremendous constituency and need to deliver."

But on the issue of Israel, neither Mr. Shikaki nor Mr. Duzdar, the Palestinian analyst, thinks Hamas will change its spots. "Anyone who thinks Hamas will become pragmatic if they win and it will be easier to settle the conflict is unrealistic," Mr. Duzdar said. "Hamas will never shift or change its charter or agenda. They want to have an impact on the Palestinian Authority from the inside, to be a tough opposition within the legislature and maybe cripple Abu Mazen and the Palestinian Authority in future negotiations," he said, referring to Mr. Abbas.

The Israeli intelligence officer said: "Hamas wants Israel gone and they want to keep the means of terror. Yet they are allowed into the political process by those who believe that afterwards, for some unknown reason, Hamas will change its soul or that Abu Mazen can deal with them. Hamas wants to enter the Palestinian Authority to promote its goals, not to change them."

Mr. Shikaki's latest poll, which incorporates constituency voting as well as votes for party lists, indicates that Fatah should win half the 132 seats at stake, with Hamas winning some 39 percent of them. About 14 seats will go to independents, some of them Hamas supporters, he said.

Mr. Duzdar and the senior Israeli intelligence officer say they think Hamas will do better than Mr. Shikaki's polls indicate and will get 45 percent or more of the seats - if the election is allowed to proceed. Senior Fatah members do not want to hand over so much power to Hamas, and there is a wide expectation that election day could be violent.

Israel and its policies in the occupied territories are partly to blame for Mr. Abbas's troubles, Mr. Shikaki said. "Israel could have helped him more," he said. "He did after all put the cease-fire in place. Wasn't this sufficient for Israelis to take more risks? To remove checkpoints, ease the economy, dismantle illegal outposts, freeze settlements, help Abu Mazen rebuild the security forces? But Israelis decided to take as little risk as possible."

Mr. Abbas showed little resolve himself, Mr. Shikaki admits, and embraced the old Fatah bosses rather than bringing along the next generation. "Israel certainly shares some responsibility and blame," Mr. Duzdar said. "But after they withdrew from Gaza, there is no reason for the Palestinian Authority to blame Israel for failing to provide law and order there."

Mr. Shikaki said: "If I were Israeli, I'd be very, very worried watching the rise of Hamas and the fragmentation of Fatah. It limits Israel's options in the West Bank in a big way. Even the simple task of unilateral withdrawal would be a nightmare without Fatah and a reliable Palestinian partner. With Hamas in control, unilateral withdrawals from the West Bank would be seen as a victory for Hamas."