IMF: “Arafat diverted $900M to private account”

September 25, 2003

CONTENTS

1. "The End of 'Arafat': Even if he lives, the idea of him must die" (Wall Street Journal, Editorial, September 17, 2003)
2. "IMF: Arafat diverted $900M to account" (AP, September 20, 2003)
3. "IMF says 560m was diverted to Arafat account" (Daily Telegraph, September 25, 2003)
4. "The price of Arafat" (Daily Telegraph, Editorial, September 25, 2003)
5. "Arafat's piggybanks" (Washington Times, September 18, 2003)



[Note by Tom Gross]

This is a follow up to the dispatch of February 28, 2003 ("Arafat appears on 'Forbes' world's richest list") and other previous dispatches regarding the corruption of the Palestinian Authority and Yasser Arafat's financing of the al-Aqsa brigades terror group.

It is a measure of how uninterested the Western media is in reporting anything negative about Arafat, that The Associated Press, the world's biggest news agency (to which almost every major news organization in the world subscribes) ran a report "IMF: Arafat diverted $900M to account" on September 20 (which I attach below) but almost no newspaper bothered to run this AP story, or ask their correspondents to follow it up. An exception is the London Daily Telegraph, which carries a news report and editorial on the subject in today's edition (attached below).

I attach five articles, with summaries first:

1. "The End of 'Arafat': Even if he lives, the idea of him must die" (Wall Street Journal, Editorial, September 17, 2003) "...The world would do well to think hard about how it came to pass, after so many years and so much talk and blood, that the era of Arafat arrived at this endpoint--with Israel saying that it may be worth the trouble simply to kill him... [Yesterday Colin] Powell spoke [yet again] of the need to soldier on with Yasser Arafat... the delusions [by Powell and the rest of the west] about Arafat must now end. "Arafat" should enter history not merely as the name of one autocratic man, but as the name we assign to an entire Western phenomenon of false thinking. "Arafat," we now see, has come to represent the act of self-delusion on a massive, international scale. Most importantly at this particular moment, "Arafat" is about allowing barbarism, or its techniques, to challenge the political tenets of civilized life.

"... If you look at the Nobel Prizes' own biography of Yasser Arafat, you find this remarkable sentence toward the end: "Like other Arab regimes in the area, however, Arafat's governing style tended to be more dictatorial than democratic." That is to say, Arafat by his own choice of governance - dictatorship over democracy - bears individual responsibility for the legacy he leaves... Arafat most recently threw over Mahmoud Abbas, and the fatigued West barely sighed in complaint. Where Yasser Arafat spends the rest of his life is not important. What matters is for the world to recognize that it is time to get rid of "Arafat." [I recommend reading this editorial in full.]

2. "IMF: Arafat diverted $900M to account" (The Associated Press, September 20, 2003). "DUBAI, United Arab Emirates (AP) - An audit of the Palestinian Authority revealed that President Yasser Arafat diverted $900 million in public funds to a special bank account he controlled, an International Monetary Fund official said Saturday... Hanan Ashwari, a Palestinian lawmaker and onetime Arafat spokeswoman, acknowledged there had been incidents of misuse of funds in the past but that the release of the information was an attempt to discredit the Palestinian leader." There is nothing innocent about the timing," she said. "This is a campaign against the president."... [But] Karim Nashashibi, IMF resident representative in the West Bank and Gaza, did not rule out the possibility that a portion of the funds were misused. He said he believes an accounting of the rest of the money will be conducted "at some point, but we're taking it all a step at a time."

3. "IMF says 560m was diverted to Arafat account" (Daily Telegraph, news report, September 25, 2003). Yasser Arafat diverted 560 million from the Palestinian Authority budget into a special bank account under his personal control, according to the International Monetary Fund. The disclosure prompted the European Commission, once a generous donor to his administration, to seek clarification last night from the IMF about which funds had been diverted... Karim Nashashibi, the IMF's representative in the West Bank and Gaza, told journalists in Dubai that an audit had uncovered the "diversion of revenue from the budget to a special bank account controlled by President Arafat".

4. "The price of Arafat" (Daily Telegraph, Editorial, September 25, 2003). "The agenda of a little-noticed press briefing in Dubai last Saturday was, first, the impact of the al-Aqsa intifada on the Palestinian economy, and, second, financial reforms undertaken during that period... a press briefing called to praise the Palestinians for their economic resilience and commitment to reform inadvertently provided further confirmation of their leader's gross misrule... A man incapable of rising above the role of revolutionary and guiding his people to statehood remains their leader... He is subjecting Palestinians to enormous economic and emotional strain."

5. Additional Note by Tom Gross: The 139 page report IMF report on the "West Bank and Gaza Economic performance and reform under conflict conditions", written by A. Bennet, K.Nashashibi, S.Biedas, S.Reichold and J.Toujas-Beranate, reveals that Yasser Arafat has diverted $900 million in public funds to a special bank account solely under his control. It also confirms that significant amounts of money are unaccounted for, or have been 'misused'.

It also confirms that contrary to countless previous media reports, the Palestinian economy was benefiting from the Peace Process, and it seems the Intifada was not motivated by a bad economic situation. In the years 1994-2000 the annual Palestinian growth was 9.2% and the GNP was up 14%.

To read the full report, visit: www.imf.org/external/pubs/ft/med/2003/eng/wbg/wbg.pdf

6. "Arafat's piggybanks" (The Washington Times, September 18, 2003). "Following the collapse of the U.S. road map for Middle East peace, the Bush administration, as it should be, seems more determined than ever to go after terrorist organizations like Hamas and Islamic Jihad. Unfortunately, the administration has yet to demonstrate the same degree of energy in working to mobilize the international community (particularly the Arab world) to cut off funding for the Al Aqsa Martyrs' Brigades, a shadowy terrorist group affiliated with Yasser Arafat's Fatah organization.

"Given the facts - A) over the past three years, the Al Aqsa group has carried out several dozen suicide bombings against Israel; B) captured financial records show that Mr. Arafat has authorized payments to its members to subsidize the violence; and C) the State Department lists it as a Foreign Terrorist Organization - one would think that the administration would be eager right now to defund the group. Instead, repeated calls yesterday to the State and Treasury Departments, asking what they are doing to cut off the Al Aqsa group, were not returned... For the sake of Mideast peace, the Bush administration needs to come up with a means to strip Mr. Arafat of the capability to finance his shadowy terrorist network."

 



FULL ARTICLES

THE END OF 'ARAFAT'

The End of 'Arafat'
Even if he lives, the idea of him must die.
Editorial
The Wall Street Journal
September 17, 2003

Reflecting the views of Israel's Cabinet, Vice Prime Minister Ehud Olmert said publicly over the weekend that "killing" Yasser Arafat was "one of the options." Secretary of State Colin Powell of course had to say that exiling or executing Arafat would incite Arab rage, that it would be most unhelpful to the peace process, etc., etc.

The truth is that Yasser Arafat's moment in history has ended. The world would do well to think hard about how it came to pass, after so many years and so much talk and blood, that the era of Arafat arrived at this endpoint--with Israel saying that it may be worth the trouble simply to kill him. How far we've come from the Rose Garden in 1993.

It is a fine irony that Mr. Powell spoke of the need to soldier on with Yasser Arafat while the Secretary himself was standing in Baghdad for the first time. Mr. Powell is in Baghdad because President Bush concluded after September 11, and after the political failure of the first Gulf War, that the years of Western self-delusion about the nature of global terror must be brought to an end. Similarly, the delusions about Arafat also must now end.

"Arafat" should enter history not merely as the name of one autocratic man, but as the name we assign to an entire Western phenomenon of false thinking. "Arafat," we now see, has come to represent the act of self-delusion on a massive, international scale. "Arafat" is about refusing to believe that an adversary is simply irredeemable. Most importantly at this particular moment, "Arafat" is about allowing barbarism, or its techniques, to challenge the political tenets of civilized life.

For years the Western nations that emerged from World War II and the Cold War have been playing with fire by pretending that their world and the alternative world of "Arafat" could somehow coexist. More than anything, this impossible notion reflected political and moral fatigue. Thus in the 1990s, the world came very close to letting "Arafat," this time in the person of Slobodan Milosevic, achieve its logical end on European soil, again. But the United States intervened and Milosevic is on trial for crimes against civilized humanity. George W. Bush's decision to go to war against the regime of Saddam Hussein was the opposite of "Arafat" thinking; it was a decision to refute "Arafat."

If you look at the Nobel Prizes' own biography of Yasser Arafat, you find this remarkable sentence toward the end: "Like other Arab regimes in the area, however, Arafat's governing style tended to be more dictatorial than democratic." That is to say, Arafat by his own choice of governance--dictatorship over democracy--bears individual responsibility for the legacy he leaves.

That legacy includes: the contemporary crime of hijacking and blowing up civilian-filled airliners; the attempted destabilization of Jordan and Israel and the successful destruction of Lebanon as a formerly sovereign nation; and decades of violated international agreements, culminating in the collapse of Oslo. Last year, in a perfect storm of bad faith, Arafat was caught paying for the shipment of arms from Iran to the Palestinian territories aboard the Karine A.

Across these years, the West, mainly the European nations, accomplished the post-World War II feat of pretending that crime is not crime, so long as the motives and politics for the crimes are moralized. The U.S. and Israel participated as well in the pretense, bringing Arafat out of exile in Tunis. The world has learned since that this apologetics (and much direct funding) has made possible any crime, culminating in the anti-moral act known as suicide bombers. Arafat most recently threw over Mahmoud Abbas, and the fatigued West barely sighed in complaint.

This past September 3, in an article published in the Palestinian daily newspaper Al-Ayyam, the Palestinian writer Tawfiq Abu Bakr wrote: "It is difficult to find a greater and more deeply rooted culture of self-deception than that in our Arab and Palestinian arena." But we in the West fomented that culture of self-deception, by perpetuating the conceit that Yasser Arafat--"Arafat"--was the singular vessel of peace for the Palestinians. He manifestly is not.

The Israelis are in the best position to know what to do at this point, though no option--seclusion, exile, trial or killing him--is particularly attractive. But Israel has to live (or die) with Arafat. The U.S. for its part, rather than sustain the Arafat conceit as it is doing now, should say it is no longer going to be associated with Arafat and what he stands for. As for the Palestinians and Arabs, the President of the United States has said many times that he supports a Palestinian state. Now they too have to decide whether the moment has arrived to get past "Arafat."

For those who will scream that this is more "unilateralism," we would say that for some 30 years there were crucial breakpoints, most recently the Oslo concessions and the Abbas opening, where credible pressure on Arafat from important players in the West and Middle East might have avoided arriving at where we are now. It never came. Not once.

Where Yasser Arafat spends the rest of his life is not important. What matters is for the world to recognize that it is time to get rid of "Arafat."

 

IMF: ARAFAT DIVERTED $900M TO ACCOUNT

IMF: Arafat diverted $900M to account
By Sam F. Ghattas
The Associated Press
September 20, 2003

An audit of the Palestinian Authority revealed that President Yasser Arafat diverted $900 million in public funds to a special bank account he controlled, an International Monetary Fund official said Saturday.

Most of the cash, which came from revenues in the budget, went into some 69 commercial activities located in Palestinian areas and abroad, said Karim Nashashibi, IMF resident representative in the West Bank and Gaza.

Hanan Ashwari, a Palestinian lawmaker and onetime Arafat spokeswoman, acknowledged there had been incidents of misuse of funds in the past but that the release of the information was an attempt to discredit the Palestinian leader.

"There is nothing innocent about the timing," she said. "This is a campaign against the president and the (Palestinian) Authority."

Nashashibi did not elaborate on the types of businesses the Palestinian Authority was involved in, but Palestinian Finance Minister Salam Fayad has said its interests range from cement to telecommunications holdings in Algeria and Jordan.

Nashashibi disclosed the Arafat account and figures to reporters at a news conference on the economic situation in the West Bank and Gaza. He said the information provided by the Palestinians were an example of the openness and transparency in Palestinian finances under Fayad.

However, Nashashibi did not rule out the possibility that a portion of the funds were misused. He said he believes an accounting of the rest of the money will be conducted "at some point, but we're taking it all a step at a time."

"What we're trying to do is have a level of disclosure and transparency so that future or present misuse does not happen ... At least there is a followup, there is disclosure," Nashashibi said

Nashashibi did not say which public monies were involved.

There have been charges of corruption and mismanagement and money-skimming in the Palestinian Authority, including some complaints from ordinary Palestinians, which officials have denied.

In a special annual issue of Forbes Magazine earlier this year, Arafat was reported to control $300 million.

U.S. and European governments have complained for years that the Palestinian financial structure is not transparent and does not allow donors to follow their money to projects for the benefit of the people.

Official Palestinian figures show that investment in the Palestinian private sector amounts to about $300 million. The money was funneled in the past through a fund operated by Arafat's financial adviser, Khaled Salam.

Nashashibi said that authority was involved in commercial activities, both at home and abroad, worth an estimated $700 million in today's market prices, "which probably in '99 were $900 million."

Nashashibi said Fayad, the Palestinian finance minister who was the resident representative of the IMF in the Palestinian territories in 2000, told Arafat at that time that the account must be disclosed.

Finance ministers from the wealthy industrialized nations who met here Saturday and spoke with Fayad also praised his efforts "to improve transparency in the budget and the operations of the Palestinian Authority," according to a statement issued afterwards.

As part of restructuring the way the Palestinian Authority deals with money, Fayad last year announced the creation of the Palestinian Investment Fund and said that all Palestinian Authority funds would pass through the new holding company.

Nashashibi said he thinks the authority wants to "get out of all these commercial activities."

The Palestinian economy has contracted by 30 percent because of the Palestinian-Israeli violence over the last three years and IMF officials said it needs an injection of about $1.2 billion in assistance.

Meanwhile, the Palestinian finance minister won a promise of additional assistance Saturday with the finance ministers of major industrialized nations as a World Bank official urged donors to help the troubled Palestinian economy, according to a statement issued by the group.

No figure of assistance was given, but an IMF official said Saturday the Palestinians would need "in the neighborhood" of $1.2 billion.

 

IMF SAYS 560M WAS DIVERTED TO ARAFAT ACCOUNT

IMF says 560m was diverted to Arafat account
By David Blair in Jerusalem and Ambrose Evans-Pritchard in Brussels
The Daily Telegraph (U.K.)
September 25, 2003

Yasser Arafat diverted 560 million from the Palestinian Authority budget into a special bank account under his personal control, according to the International Monetary Fund.

The disclosure infuriated Mr Arafat's Palestinian critics and prompted the European Commission, once a generous donor to his administration, to seek clarification last night from the IMF about which funds had been diverted.

Mr Arafat's chaotic handling of Palestinian finances has been widely condemned in the past but the IMF statement was the result of the first authoritative investigation.

Karim Nashashibi, the IMF's representative in the West Bank and Gaza, told journalists in Dubai that an audit had uncovered the "diversion of revenue from the budget to a special bank account controlled by President Arafat".

Mr Nashashibi said the sum involved was 560 million in a five-year period between 1995 and 2000.

Most of the money had been disclosed and was invested in 69 commercial enterprises linked to the Palestinian Authority.

Asked if there was a possibility of misuse of funds, Mr Nashashibi said: "In any system, you can always have a possibility of some misuse. What we are trying to do is raise the level of disclosure and transparency so that future or present misuse does not happen."

Hanan Ashrawi, a member of the Palestinian Legislative Council, said the disclosure was an attempt to discredit Mr Arafat. "There is nothing innocent about the timing," she said. "This is a campaign against the president and the authority."

But Mr Arafat's Palestinian opponents believe that corruption is widespread inside his administration.

Abdul Jawad Saleh, a member of the Palestinian Legislative Council, said: "At a time when the Palestinian people are starving and the universities are bankrupt, they transfer these sums."

The Palestinian Authority said the money diversion came to light because of financial reforms and rigorous auditing imposed by foreign donors.

Salam Fayad, the new finance minister who is widely respected abroad, said the money came from tax revenues collected by Israel and passed on to the Palestinian Authority. The EU stopped funding Mr Arafat's budget last December. A spokesman said the commission was in touch with the IMF.

"As far as we know, this money came from Israeli tax transfers but we're seeking clarification from the IMF. Our money never passed through the budget."

Encompassing everything from casinos to cement companies and Algerian telephones, the Palestinian Authority's tangled financial web is enough to baffle the most able accountant.

Yasser Arafat's chaotic administration boasts a 30 per cent stake in the Jericho Casino. Official monopolies of the supply of crude oil, tobacco and cement in Palestinian-run areas bring in a steady stream of revenue.

His administration may have a budget of only 750 million this year but it employs 120,000 people and still has difficultly accounting for the relatively modest sums at its disposal.

Mr Arafat can raise only 130 million from his own sources this year and his budget relies on outside donors and tax receipts transferred from Israel.

There is no suggestion that Mr Arafat profited personally from the funds transfer. He has always led a spartan life. But he clearly saw control of the purse strings as a crucial lever of power.

 

THE PRICE OF ARAFAT

The price of Arafat
Editorial
The Daily Telegraph (U.K.)
September 25, 2003

The agenda of a little-noticed press briefing in Dubai last Saturday was, first, the impact of the al-Aqsa intifada on the Palestinian economy, and, second, financial reforms undertaken during that period. The impact was severe but less than expected and the reforms were outstanding for that part of the world: those were the conclusions of the International Monetary Fund (IMF), at whose annual conference the briefing took place.

An interesting but not particularly riveting story, one might conclude. However, the new fiscal openness revealed that, between 1995 and 2000, about 560 million of revenue was diverted from the budget to a special account controlled by Yasser Arafat, president of the Palestinian Authority. Karim Nashashibi, the IMF's resident representative in the West Bank and Gaza Strip, said most of the money had been invested in assets still owned by the authority, but did not rule out the possibility that the remaining funds could have been misused. Thus a press briefing called to praise the Palestinians for their economic resilience and commitment to reform inadvertently provided further confirmation of their leader's gross misrule.

In 1997, a Palestinian internal audit revealed that 200 million out of a budget of 490 million had disappeared. Two years later, a report funded by the European Union, a major aid donor, pointed to egregious venality, overstaffing, incompetence and misuse of funds. One member of the Palestinian Legislative Council said he was worried that if anything happened to Mr Arafat they would not know where the money was, so tight was his control over it. In this, Mr Arafat was acting in typically autocratic fashion, using cash for political leverage, dispensing personal patronage and tolerating corruption to ensure future loyalty.

Thanks largely to Salam Fayad, the Palestinian finance minister and Mr Nashashibi's predecessor in the IMF job, the authority has moved on. All revenues now come into the Single Treasury Fund; investments have been consolidated in the Palestinian Investment Fund. However, these changes, while welcome in themselves, underline the tragic anomaly of Mr Arafat's position. A man incapable of rising above the role of revolutionary and guiding his people to statehood remains their leader. He has completely forfeited the trust of the Israelis and Americans as an interlocutor. He is subjecting Palestinians to enormous economic and emotional strain. Progress, such as that achieved by Mr Fayad, has been made in spite of him. At bay in his headquarters in Ramallah, Mr Arafat is determined to keep the revolutionary cause alive. But in so doing he betrays his people.

 

ARAFAT'S PIGGYBANKS

Arafat's piggybanks
The Washington Times
September 18, 2003

Following the collapse of the U.S. road map for Middle East peace, the Bush administration, as it should be, seems more determined than ever to go after terrorist organizations like the Damascus-based Hamas and Palestinian Islamic Jihad. Unfortunately, the administration has yet to demonstrate the same degree of energy in working to mobilize the international community (particularly the Arab world) to cut off funding for the Al Aqsa Martyrs' Brigades, a shadowy terrorist group affiliated with Yasser Arafat's Fatah organization.

Given the facts - A) over the past three years, the Al Aqsa group has carried out several dozen suicide bombings against Israel; B) captured financial records show that Mr. Arafat has authorized payments to its members to subsidize the violence; and C) the State Department lists it as a Foreign Terrorist Organization - one would think that the administration would be eager right now to defund the group. Instead, its public stance thus far has been lethargic. Repeated calls yesterday to the State and Treasury Departments, asking what they are doing to cut off the Al Aqsa group, were not returned. If early press reports are any indication, Treasury Secretary John Snow, who arrived in Israel yesterday, may spend more time discussing the Israeli budget deficit than talking about defunding the Al Aqsa Brigades.

It's long past time for Washington to challenge its allies to arrive at a plan for defunding Mr. Arafat's terror network. The challenge is immense. On the positive side, the PA's new finance minister, Salam Fayyad, was trying to clean up PA finances, cutting off much of Mr. Arafat's cash flow for terror and political graft in the process. Mr. Arafat is worth an estimated $300 million, Forbes Magazine wrote earlier this year, and much of that money is hidden in Swiss banks. But the Israeli newspaper Ha'aretz reported yesterday that, despite Mr. Fayyad's efforts to reform the way the PA does business, little has changed. An Arafat loyalist - not Mr. Fayyad - controls every new appointment in the PA, including the security services, which have been implicated in scores of attacks on Israelis. Mr. Fayyad has been blocked from implementing a new civil service law, apparently by Mr. Arafat, who remains free to pack the bureaucracy with his henchmen.

For the sake of Mideast peace, the Bush administration needs to come up with a means to strip Mr. Arafat of the capability to finance his shadowy terrorist network.


All notes and summaries copyright © Tom Gross. All rights reserved.