The Magazine

Arafat's Fat Wallet

As long as he holds the Palestinian purse strings, he still calls the shots.

Aug 25, 2003, Vol. 8, No. 47 • By RICHARD W. CARLSON
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MAHMOUD ABBAS'S and Ariel Sharon's ministerial jets passed in the Washington night recently as each man presented arguments and complaints to President George W. Bush. But, so far as is known, not a word was uttered about the 600-pound gorilla in the checkered keffiyeh, Yasser Arafat, whom Bush did not invite to stop by.

Money is a big reason Arafat, though sidelined, cannot be forgotten. He controls the Palestinian purse strings, vast sums that pour into Gaza from around the world. Thus he can order up terrorism at the drop of a hat and frequently does. He has been supplying funds and political support to the Al Aksa Martyrs Brigade--which last week claimed responsibility for the suicide bombings in Rosh Ha'ayin--among other Palestinian terrorist groups trying to kill Israeli citizens, disrupt the current cease-fire, and derail the Mideast peace plan. Yet, President Bush has announced plans to give $20 million to the Palestinian Authority as an incentive towards its stability. He said the money will go to boost "the daily lives of ordinary Palestinians."

This is not likely. The PA is deeply and thoroughly corrupt, and it is encouraged and supported in its corruption by Yasser Arafat's leadership. Tens of millions of dollars of its monthly income have been wasted through gross inefficiency and nepotism or misspent on expensive perks for favored bureaucrats. Financial controls and safeguards have not existed or are puny. Although a great deal of money is clearly coming in to the PA, there is no public disclosure of monies spent.

Yet hope springs eternal. White House officials have been crossing their fingers for the PA's finance minister, appointed last year, Salam Fayyad, a former official with the World Bank, who is widely considered to be honest and forthright. Fayyad admits to the existing corruption in the PA and has attempted some "cleaning."

But it's hard to see how Fayyad might curb the widespread corruption or neutralize Arafat's enormous financial leverage. According to Aharon Ze'evi, Israel's chief of military intelligence, as of last year, Arafat had a net worth of $1.3 billion around the time Fayyad took over the finance ministry. Now, if that sum seems incredible, consider that the European Union alone has sent Arafat and the PA an average of $150 million every year for the past decade. Also, the Arab League has donated $1 billion since 2000. Another $1.3 billion came last year from private donations. And in the past two years, the United States has given $375 million to the Palestinians through the United Nations.

Nor has this flow of international money pouring into Arafat's accounts ever been cut off by something so inconvenient as terrorist violence and murder. On June 19, following a series of suicide bombings in Israel by Arafat's Al Aksa Martyrs Brigade, the E.U. parliament proceeded to give the PA $17.7 million. Although the parliament demanded "full transparency," E.U. leader Chris Patten conceded to the Associated Press that it wasn't very likely. Given the corruption and other problems in the PA, Patten said the demand for transparency was "an impossible question to ask in the real world." The E.U. earlier admitted it had sent $10 million directly to Arafat's personal bank account.

What international largesse the PA receives is not controlled by Mahmoud Abbas or Salam Fayyad. Such monies are solely controlled by the wily Arafat from his Gaza office. It is no wonder he ranks as one of the world's richest men, having always treated the massive treasury of the Palestinian nationalist movement as his own. He demands that the millions donated every month by supportive Arab regimes be transferred to accounts in his name only. Over 120,000 Palestinians work in Saudi Arabia and, according to Janet and John Wallach's biography of Arafat, a 5 percent tax is levied on their salaries and sent to Arafat. And for decades, cash has poured in from the world's dictatorships and authoritarian governments: the Soviet Union, Eastern Europe, Libya, Cuba, as well as the Arab states.

Arafat's revolutionary organization has to be the richest nationalist movement in history without a state, though the millions of Arab Palestinians who have supported it are among the poorest of the world's citizens. The Palestinian Liberation Organization has been the Microsoft of Arab nationalism and Arafat is its Bill Gates. An ally at a meeting of Palestinian leaders once asked, "Where is the money for the Intifada?" "Here I am," replied Arafat.

Withdrawals and transfers from accounts in Arafat's name are, according to the Wallachs, allowed only under his signature. The Arab Bank in Amman and Cairo, a couple of Swiss banks, and the Chase Bank and HSBC Bank in New York are Arafat's favorites, according to informed sources, though he personally has accounts totaling hundreds of millions of dollars in a dozen other banks around the world. Indeed, all this money protects him from attempts to undermine his leadership. As Arafat himself has said, "He who controls the money has the power."

In the summer of 1993, Yasser Arafat told Larry King, "I don't take a salary. I live off the money I made in Kuwait." Arafat has a reputation for lying, even among his friends, and this one's a whopper. He worked as a modestly paid engineer in Kuwait forty years ago, though he has often claimed it made him a millionaire. A more accurate representation of his personal finances can be gleaned from documents recently publicized by the Middle East Media Research Institute, showing that $5.1 million donated by Arab states to ease the suffering of ordinary Palestinians was diverted to one of Arafat's personal accounts to cover the living and shopping expenses of his wife Suha and his daughter, who live in Paris.

Arafat's ministers are also corrupt, using public funds to build huge houses for themselves, or buy fancy cars, or just to fatten their own bank accounts. In the cache of PA documents seized by Israel last year was evidence that the foreign minister had drawn funds from the Ministry of Finance to pay for the expensive air conditioning system installed in his luxurious Ramallah home. The ministers' names and the details of their corruption are known to the Palestinians sipping sweet coffee at Gaza cafés, and there is great cynicism about the PA among Palestinians because of it. "There's no question the PA is deep in thievery," says a retired CIA officer with experience in the Mideast, "and they are deeply resented by your average Palestinian."

The president spoke last week of establishing a joint U.S.-Palestinian economic effort, presumably to give Palestinians the promised $20 million. He said he will send Treasury secretary John Snow and Commerce secretary Don Evans to the Mideast early this fall to take a look at economic conditions. Both men are able, and Evans is one of Bush's closest friends. Perhaps they can help. They should look long and hard at the Palestinian Authority, but first they should send minions to talk to a few of those Palestinians sipping sweet coffee in the Gaza cafés and get the names of the PA bureaucrats who are using the money as if it were their own. Of course, the first name on the list will be Yasser Arafat.

Richard W. Carlson is vice chairman of the Foundation for the Defense of Democracies, a Washington think tank concerned with terrorism, and a columnist for The Hill newspaper.