[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





   PROMOTING PEACE? REEXAMINING U.S. AID TO THE PALESTINIAN AUTHORITY

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                     THE MIDDLE EAST AND SOUTH ASIA

                                 OF THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 12, 2011

                               __________

                           Serial No. 112-51

                               __________

        Printed for the use of the Committee on Foreign Affairs







 Available via the World Wide Web: http://www.foreignaffairs.house.gov/

                                 ______



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                      COMMITTEE ON FOREIGN AFFAIRS

                 ILEANA ROS-LEHTINEN, Florida, Chairman
CHRISTOPHER H. SMITH, New Jersey     HOWARD L. BERMAN, California
DAN BURTON, Indiana                  GARY L. ACKERMAN, New York
ELTON GALLEGLY, California           ENI F.H. FALEOMAVAEGA, American 
DANA ROHRABACHER, California             Samoa
DONALD A. MANZULLO, Illinois         DONALD M. PAYNE, New Jersey
EDWARD R. ROYCE, California          BRAD SHERMAN, California
STEVE CHABOT, Ohio                   ELIOT L. ENGEL, New York
RON PAUL, Texas                      GREGORY W. MEEKS, New York
MIKE PENCE, Indiana                  RUSS CARNAHAN, Missouri
JOE WILSON, South Carolina           ALBIO SIRES, New Jersey
CONNIE MACK, Florida                 GERALD E. CONNOLLY, Virginia
JEFF FORTENBERRY, Nebraska           THEODORE E. DEUTCH, Florida
MICHAEL T. McCAUL, Texas             DENNIS CARDOZA, California
TED POE, Texas                       BEN CHANDLER, Kentucky
GUS M. BILIRAKIS, Florida            BRIAN HIGGINS, New York
JEAN SCHMIDT, Ohio                   ALLYSON SCHWARTZ, Pennsylvania
BILL JOHNSON, Ohio                   CHRISTOPHER S. MURPHY, Connecticut
DAVID RIVERA, Florida                FREDERICA WILSON, Florida
MIKE KELLY, Pennsylvania             KAREN BASS, California
TIM GRIFFIN, Arkansas                WILLIAM KEATING, Massachusetts
TOM MARINO, Pennsylvania             DAVID CICILLINE, Rhode Island
JEFF DUNCAN, South Carolina
ANN MARIE BUERKLE, New York
RENEE ELLMERS, North Carolina
VACANT
                   Yleem D.S. Poblete, Staff Director
             Richard J. Kessler, Democratic Staff Director
                                 ------                                

             Subcommittee on the Middle East and South Asia

                      STEVE CHABOT, Ohio, Chairman
MIKE PENCE, Indiana                  GARY L. ACKERMAN, New York
JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
JEFF FORTENBERRY, Nebraska           THEODORE E. DEUTCH, Florida
ANN MARIE BUERKLE, New York          DENNIS CARDOZA, California
RENEE ELLMERS, North Carolina        BEN CHANDLER, Kentucky
DANA ROHRABACHER, California         BRIAN HIGGINS, New York
DONALD A. MANZULLO, Illinois         ALLYSON SCHWARTZ, Pennsylvania
CONNIE MACK, Florida                 CHRISTOPHER S. MURPHY, Connecticut
MICHAEL T. McCAUL, Texas             WILLIAM KEATING, Massachusetts
GUS M. BILIRAKIS, Florida
TOM MARINO, Pennsylvania












                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Jacob Walles, Deputy Assistant Secretary of State, 
  Bureau of Near Eastern Affairs, Department of State............     7
Lieutenant General Mike Moeller, United States Security 
  Coordinator for Israel and the Palestinian Authority, 
  Department of State............................................    12
The Honorable George A. Laudato, Administrator's Special 
  Assistant for the Middle East, U.S. Agency for International 
  Development (USAID)............................................    17

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Jacob Walles: Prepared statement...................     9
Lieutenant General Mike Moeller: Prepared statement..............    14
The Honorable George A. Laudato: Prepared statement..............    19

                                APPENDIX

Hearing notice...................................................    44
Hearing minutes..................................................    45
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    46

 
   PROMOTING PEACE? REEXAMINING U.S. AID TO THE PALESTINIAN AUTHORITY

                              ----------                              


                         TUESDAY, JULY 12, 2011

              House of Representatives,    
                Subcommittee on the Middle East    
                                        and South Asia,    
                              Committee on Foreign Affairs,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10 o'clock a.m., 
in room 2172 Rayburn House Office Building, Hon. Steve Chabot 
(chairman of the subcommittee) presiding.
    Mr. Chabot. The committee will come to order. Good morning. 
I want to welcome all my colleagues to this hearing of the 
Subcommittee on the Middle East and South Asia. This hearing 
was called to assess the Obama administration's aid policy to 
the Palestinian Authority and to take stock of the challenges 
we continue to face.
    On January 22, just 2 days after his inauguration, 
President Obama appointed Senator George Mitchell as Special 
Envoy to the Middle East. Two and a half years later, just days 
after accepting Senator Mitchell's resignation, President Obama 
reiterated his belief that the resolution of the Israeli-
Palestinian conflict is one of America's core interests in the 
Middle East.
    Throughout these 2\1/2\ years, assistance to the 
Palestinian Authority has consistently remained a central 
pillar of the administration's policy toward the Israeli-
Palestinian conflict. Unfortunately, recent developments on the 
ground require that we reassess our current policy trajectory 
and, if necessary, adjust accordingly.
    I recently traveled to Israel and the West Bank where I was 
able to once again gain firsthand knowledge of our efforts 
there. Unfortunately, however, some of the challenges we face 
appear to intensify by the day.
    The current Palestinian leadership appears all too willing 
to sacrifice the tremendous gains that have been achieved by 
Prime Minister Fayyad's state building effort in the name of 
political theatrics.
    Instead of capitalizing on those gains through honest 
negotiations with Israel, the Palestinian leadership appears 
dead set on pursuing a unilateral declaration of independence 
before the U.N. General Assembly this September. True Israeli-
Palestinian peace will only be made between two peoples, 
Israelis and Palestinians, and not the other 191 other members 
of the General Assembly.
    The road to Palestinian statehood does not start in New 
York, and it is not the place for the United States or the 
United Nations nor any other country or institution to short 
circuit the requisite negotiations between the two parties. A 
unilateral declaration of independence is simply rejectionism 
by another name.
    Similarly, the recent unity agreement between Hamas and 
Fatah is a very troubling development. I was, in fact, in 
Ramallah discussing with Palestinian Prime Minister Fayyad his 
tremendously important state building efforts when this 
agreement was likely agreed upon, apparently without the 
blessing or maybe even the knowledge, of Prime Minister Fayyad.
    Shortly thereafter, I had the opportunity to meet with 
Israeli Prime Minister Netanyahu, who expressed grave concern 
both for Israel's security as well as for the prospects for 
peace. ``How,'' he asked us, ``could the Palestinian leadership 
be a serious partner for peace if it welcomed into its ranks 
vicious terrorists who continue to deny the very right of the 
state of Israel to exist?'' His concern is more than justified.
    Although very few details have emerged since this document 
was signed, and although it does not appear much has changed on 
the ground, the mere presence of this agreement raises serious 
concerns that, regrettably, we must now address.
    The Palestinian Antiterrorism Act of 2006 very clearly 
stipulates conditions that must be met in order for U.S. 
assistance to continue, including that any Palestinian 
Government accept the three Quartet principles: Acknowledging 
Israel's right to exist; renouncing violence; and agreeing to 
abide by past agreements.
    No U.S. taxpayer money can or should go to a Palestinian 
Government that does not embrace these three simple principles. 
For years, we have invested heavily both money and effort to 
help the Palestinians build a state for themselves, and our 
work has yielded results. The economy in the West Bank 
continues to improve. Parents are able to send their children 
out at night.
    Israelis have felt comfortable making concessions on 
security that would have been unthinkable even a few years ago. 
In no small part, this is due to the hard work of the United 
States Security coordinator for Israel and the Palestinian 
Authority.
    General Moeller, I would like to thank you for your 
continued service to our country. I am extremely impressed with 
the program that you are running, as well as the 
professionalism of the soldiers who are trained in it, and 
although I may have my concerns, given recent developments, it 
would be extremely unfortunate if we were to have to end this 
important program because of an irresponsible decision by those 
who would prefer the path of rejection to the path of peace.
    We are rapidly approaching a watershed moment in U.S.-
Palestinian relations. Both the reconciliation government and 
the pursuit of a unilateral declaration of independence at the 
U.N. could not be more contrary to U.S. interests in the 
region.
    The fact remains that rejectionist elements within the 
Palestinian leadership still refuse to sit and negotiate in 
good faith, even as Israel repeatedly reiterates its commitment 
to the establishment of a Palestinian state.
    Israel, like the United States, welcomes those who would 
make peace even as it fights those who would make war. Time and 
again, Israel has demonstrated its commitment to a Palestinian 
state, living as its neighbor in peace and security, but there 
are no shortcuts on the path to this outcome, and there is no 
getting around the hard concessions that will have to be made. 
Although short term security may be achievable unilaterally, 
peace is not. Palestinian rejectionism, whether by Hamas or 
Fatah, must be abandoned.
    I would now like to yield to the distinguished gentleman 
from New York, the ranking member of the committee, formerly 
the chair of the committee, Mr. Ackerman.
    Mr. Ackerman. I thank the chairman very much for a very, 
very important hearing, and a personal welcome to our very, 
very distinguished experts today.
    The first question we should consider at today's hearing is 
which Palestinian Authority we are talking about, since there 
appears to be two of them. This entity is quite apart from 
Hamas, which is a de facto authority in Gaza by way of 
perpetuating a military coup. The PA itself exhibits the kind 
of contradictory behavior that, in a person, might be diagnosed 
as a split personality disorder.
    So what do we make of this Jekyll and Hyde government? On 
the one hand, under the leadership of President Mahmoud Abbas 
and Prime Minister Salam Fayyad, the PA has ceased to be a 
coordinator and instigator of terror, and now combats it with 
growing efficacy and professionalism. On the other, Abu Mazen, 
as President Abbas is also known, has agreed to a unity 
agreement with the blood-soaked terrorists in Hamas who have 
never--not even for the briefest of moments--never considered 
or diminished or revised their insistence on Israel's utter 
annihilation, and the glory of using violence against Israeli 
civilians.
    This political reconciliation agreement may well never be 
implemented as both major political Palestinian factions, Abu 
Mazen's Fatah, and the terrorist Hamas, may have a greater 
interest in the concept of reconciliation than its 
implementation. Nonetheless, I would suggest to the PA 
leadership that, when you get into a cage with a tiger, you are 
not a partner. You are a lunch.
    Fatah leaders may think they have worked out a deal for a 
merger. They should consider the possibility that their more 
vicious counterparts in Hamas think they have got a deal for an 
acquisition. Abu Mazen, the PLO and his Fatah faction are all 
officially in favor of peace, support the Oslo Accord and the 
other subsequent Israel-Palestinian agreements.
    I, like many of my colleagues, have often met with and 
spoken with Abu Mazen, his key advisors, and Prime Minister 
Fayyad, as recently as 2 weeks ago. It becomes obvious 
immediately that their goal is to create a Palestinian state 
living side by side with Israel. These are men interested in 
creating a new Palestinian state, not in destroying the 
existing Israeli one. Nevertheless, as continues to be 
regularly documented, the PA, Abu Mazen's Fatah faction, and 
senior Fatah leaders continue to glorify terrorists and fail to 
recognize in ways both large and small Israel's existence and 
its right to live in peace and security.
    Incitement and the ongoing failure of Palestinian leaders 
to speak frankly with the Palestinian public about the need for 
give and take in negotiations continues to raise questions 
about Palestinian intentions. It is long past time for this 
convenient ambiguity to be resolved clearly and finally 
regarding the unacceptability of violence and the need for 
sacrifices on both sides to achieve peace.
    While Abu Mazen may continue to insist that Palestinians 
are still committed to directly negotiating a two-state 
solution to the conflict with Israel, his actions demonstrate a 
very different and dangerous alternative approach. The current 
Palestinian campaign to seek bilateral recognition around the 
world, culminating in September with an effort to force a vote 
in the U.N. on Palestinian statehood, is fraught with peril for 
all parties concerned, most of all the Palestinians.
    The Palestinian leadership seems to be running headlong off 
a cliff, because it can't figure out how to do what they 
probably already know would be best, to sit down to direct 
negotiations with Israel. So we in the United States, as the 
chief sponsor of the peace process and Israel's key ally, need 
to figure out where we, in light of our own fiscal reality, 
have to draw some red lines to get this process back on track 
and to keep it from getting out of control.
    I would suggest that there should be three requirements for 
our assistance, based not only on our interest in sound policy 
but consistent with our own current political reality.
    First, this reconciliation deal was, is, and will remain a 
bad idea. Palestinians may like the idea of their leaders all 
getting along, and may be willing to live with the 
contradiction of a government half-committed to peace and half-
committed to attacking school buses with anti-tank missiles, 
but we are not, and we never will be. As a matter of both law 
and basic decency, we will never do business with or provide 
aid to a government controlled by or reporting to terrorists, 
period, full stop.
    Number two: If you represent a party that says it is in 
favor of peaceful negotiations, then it is not unreasonable to 
expect you to engage in direct negotiations for peace. Abu 
Mazen, Prime Minister Netanyahu is waiting for you. A proposed 
initiative to force the issue of statehood at the U.N. is a 
clear and material breach of the Oslo Accords and a dangerous 
proposition for all parties. It needs to be shelved, and direct 
talks need to begin.
    No one but the Palestinian leadership is forcing the issue 
to the U.N., and no one but the Palestinian leadership can pull 
the plug on this misbegotten idea. American aid is intended to 
support the peace process. If the Palestinian leadership 
unwisely chooses to abandon that process in favor of running 
after the illusion of statehood at the U.N., that decision will 
likely come with an annual price tag in the hundreds of 
millions of dollars and, more expensively, the loss of any 
claim to common sense.
    Finally, the PA needs to get its act together with regard 
to its public communications, media approach, and official 
attitude regarding peace and the use of violence. The view of 
its senior leaders in favor of peaceful negotiations needs to 
be consistently represented in all areas in which the PA acts, 
whether in the PA media outlets, the naming of streets or grant 
awards, or school books.
    The PA can't wink and nod at the glorification of terrorism 
here and there, and expect the word not to get out, and that it 
will not have consequences. Incitement is not a phony issue. It 
speaks to intentions and undermines confidence in the 
Palestinian leadership which, given the issues of 
reconciliation and the U.N. initiative, is already severely 
strained.
    Since 2000, Israeli Governments under Prime Ministers Barak 
and Olmert have offered Palestinians full blown peace offers. 
Prime Minister Sharon orchestrated Israel's unilateral 
withdrawal from Gaza, and Prime Minister Netanyahu instituted 
the first ever freeze on settlements solely as an act of good 
faith. It is time for Abu Mazen to find the same kind of 
courage in his own convictions, and find a way to get back to 
the negotiating table. History is waiting for him. Thank you, 
Mr. Chairman.
    Mr. Chabot. Thank you very much. If other members of the 
panel would like to ask questions, we would be happy to give 
members 1 minute. The gentleman from Pennsylvania, Mr. Marino, 
were you interested in making a statement? Okay, thank you. Mr. 
Cardoza from California is recognized for 1 minute.
    Mr. Cardoza. Thank you, Mr. Chairman. I just wanted to say 
that I associate myself with the remarks of the chairman and 
the ranking member entirely. I also was in Israel speaking to 
Mr. Fayyad on nearly the day that Hamas and the PA reconciled, 
and I think it is an abomination.
    I don't support any further funding if they continue this 
process. I think we need to cease and desist. We can't be a 
party to providing dollars to terrorist organizations and to 
organizations who commit themselves to the destruction of the 
state of Israel. I won't vote for it, and I will work with the 
chair and others to lead the charge against it, if they 
continue along this path.
    Mr. Chabot. Thank you very much. The gentleman from South 
Carolina, Mr. Duncan, is a member of the full committee, not a 
member of this subcommittee, but asking unanimous consent that 
he be at the end of each on our side, be able to either make a 
statement or ask questions. Without objection. So ordered. Mr. 
Duncan, would you like to make a 1-minute opening statement?
    Mr. Duncan. Thank you, Mr. Chairman. Thank the committee 
for allowing me to participate today. I sent a letter around 
for other members to sign. This letter would be to the chairman 
of the House Committee on Appropriations, Mr. Rogers, basically 
requesting that in the upcoming appropriations process the 
committee restrict funding from going to the Palestinian 
Authority.
    So this is a very timely issue for me, and I appreciate the 
opportunity to participate, and I would ask other members of 
the committee to consider signing that letter. The deadline is 
close of business this Friday. Thank you.
    Mr. Chabot. Thank you very much. And the gentleman from New 
York, Mr. Higgins, is recognized for 1 minute.
    Mr. Higgins. Thank you, Mr. Chairman and ranking member. I, 
too, want to associate my thoughts to your statements and that 
of the ranking member, in that negotiating with the Palestinian 
Authority is not complicated by the integration of Hamas, its 
various groups. It obliterates its viability.
    When we look at the toughest places and toughest 
neighborhoods throughout the world, the precondition toward a 
negotiated settlement has always been renouncing violence and 
recognizing your adversary's right to exist. That is a 
fundamental basis from which you develop a peace agreement.
    The involvement of Hamas or the integration of Hamas 
seriously undermines the credibility of the Palestinian 
Authority to negotiate in good faith toward a peaceful 
settlement. So I look forward to the expert testimony of our 
witnesses. Thank you, sir.
    Mr. Chabot. Thank you very much. The gentleman from 
Virginia, Mr. Connolly, is recognized for 1 minute.
    Mr. Connolly. Thank you, Mr. Chairman. The recent 
reconciliation between Fatah and Hamas caught the attention of 
the international community. Last week's passage of the House 
Resolution 268 by an overwhelming vote of 407 to 16 displays 
the overwhelming support for the firm belief that any 
Palestinian unity government must publicly and formally 
foreswear terrorism, accept Israel's right to exist, and 
reaffirm previous agreements already made with Israel.
    The resolution also reaffirmed the United States' statutory 
requirement precluding assistance for a Palestinian Authority 
that includes Hamas unless and until the PA and all of its 
ministers abide by the three previously mentioned conditions, 
which have long been part of the United States' Middle East 
policy.
    When examining this policy, it is important to closely 
scrutinize one of those key components, economic aid, designed 
to facilitate basic services for the future. I look forward to 
the testimony this morning, Mr. Chairman, and thank you for 
holding this hearing.
    Mr. Chabot. Thank you very much. I would like to introduce 
our very distinguished panel here this morning at this time, 
and we will start with Jacob Walles who is the Deputy Assistant 
Secretary of State for Near Eastern Affairs, responsible for 
U.S. policy with respect to Egypt, Israel, Jordan, Syria, 
Lebanon, and the Palestinians. In over 25 years with the State 
Department, he has been an active participant in Middle East 
peace efforts dating back to the 1991 Madrid Conference. From 
September 2009 to June 2010, Mr. Walles was the Cyrus Vance 
Fellow for Diplomatic Studies at the Council on Foreign 
Relations. Before that, he served as U.S. Consul General and 
Chief of Mission in Jerusalem from July 2005 to August 2009. 
Mr. Walles also served as Director of the Office of Israel and 
Palestinian Affairs from 1998 to 2001, and as Deputy Principle 
Officer at the U.S. Consulate General in Jerusalem from 1996 to 
1998. We welcome you here this morning.
    Next, I would like to introduce General Moeller, General 
Michael Moeller. Lieutenant General Moeller is the U.S. 
Security Coordinator for Israel and the Palestinian Authority. 
He is responsible to the Secretary of State for assisting the 
Palestinian Authority to transform and professionalize its 
security sector, advocating for security initiatives that build 
trust and confidence, and supporting whole-of-government 
efforts to set the conditions for a negotiated two-state 
solution.
    General Moeller received his commission from the U.S. Air 
Force Academy in 1980. Prior to his current assignment, he was 
the Director for Strategy, Plans and Policy for U.S. Central 
Command. General Moeller is a command pilot with more than 
4,440 flying hours and 670 combat hours for Operations Desert 
Storm, Enduring Freedom, and Iraqi Freedom, and we welcome you 
here this morning, General, and thank you very much for your 
service, sir, to our country.
    Last but not least is George A. Laudato. Mr. Laudato leads 
the Middle East Bureau as the Administrator's Special Assistant 
for the Middle East at the U.S. Agency for International 
Development, USAID. He has more than 45 years of experience in 
international program development and management in the private 
and public sectors in Asia, the Middle East, Latin American, 
and Central Europe.
    From 1998 to 2007, Mr. Laudato was Managing Senior Vice 
President of the International Health Area at Abt Associates, 
directing programs across 40 projects and more than 350 
employees worldwide. Prior to joining Abt, Mr. Laudato served 
for 29 years with USAID where he directed major regional and 
policy bureaus and led country missions. He was Deputy 
Assistant Administrator for the Bureau for Asia and the Near 
East from 1991 to 1995, and we welcome you here, Mr. Laudato.
    I am sure all the panel members are aware of the rules, 
which basically give each of the witnesses here this morning 5 
minutes, and there is a lighting system. The yellow light will 
come on when you have 1 minute to wrap up, and we ask that when 
the red light comes up, that you stop right on time or be 
wrapping up.
    We will begin with Mr. Walles.

   STATEMENT OF THE HONORABLE JACOB WALLES, DEPUTY ASSISTANT 
SECRETARY OF STATE, BUREAU OF NEAR EASTERN AFFAIRS, DEPARTMENT 
                            OF STATE

    Mr. Walles. Thank you, Chairman Cabot, Ranking Member 
Ackerman, members of the committee. I am honored to be here 
today to provide you with an overview of U.S. assistance to the 
Palestinian Authority, and discuss how it promotes U.S. 
national security interests. I will keep my remarks brief, and 
I would ask that my full written statement be included in the 
record.
    Mr. Chabot. Without objection, so ordered.
    Mr. Walles. This administration believes that achieving 
comprehensive Middle East peace is in the national security 
interest of the United States. The administration has worked 
vigorously to achieve a negotiated Israeli-Palestinian 
agreement based on the core concept of two states for two 
peoples: Israel as a Jewish state and the homeland for the 
Jewish people, and Palestine as the homeland for the 
Palestinian people.
    A just, lasting, and comprehensive peace between Israel and 
all her neighbors is central to American interests in the 
Middle East, and it has been the objective of every U.S. 
administration dating back to President Harry Truman.
    To that end, we have been working intensively with the 
parties to resolve the issues between them through direct 
negotiations. This administration, like those before it, has 
been clear. Permanent status issues between Israel and the 
Palestinians must be decided through direct negotiations 
between the two sides, not at the United Nations or anywhere 
else.
    Our assistance to the Palestinian people is guided by this 
paramount U.S. national security interest. We strongly believe 
that building Palestinian Government institutions and a viable 
Palestinian economy serve our interests and are essential for 
peace, the stability of the region, and the security of both 
Israel and the Palestinians. Our programs are focused on 
helping the Palestinians build institutions of government and 
security forces that have gained the trust of the Palestinian 
people and their Israeli counterparts.
    As you know, institution building is a long and arduous 
process. I have been involved in different aspects of our 
assistance for the Palestinians for over two decades, starting 
with President Ronald Reagan. In the 1990s after the first 
Israeli-Palestinian agreements were signed, we began to support 
the newly created Palestinian Authority. In the last decade, we 
began a program to provide security assistance to the 
Palestinian Authority with the creation of the United States 
Security Coordinator in 2005. President Obama has continued 
these efforts in his strong support for the security assistance 
program and for our extensive economic and humanitarian 
programs for the Palestinians.
    Through our USAID programs, we are helping the PA to 
improve public services. These activities are designed to help 
the PA meet essential needs and to offer an alternative to 
those who reject a two-state solution and seek to exploit human 
suffering to radicalize the population and recruit supporters.
    Our assistance to PA Security Forces has been critical to 
the improved security situation in the West Bank. U.S. trained 
PA Security Forces have worked effectively with their Israeli 
counterparts to maintain stability in the West Bank. I recently 
returned from a visit to Israel and the West Bank and had the 
opportunity to meet with both Israeli and Palestinian 
officials. The Israeli officials I met with confirmed that 
Palestinian security efforts in the West Bank remain robust, 
and Palestinian officials assured me this would remain the 
case, regardless of political developments.
    We strongly believe that the continuation of U.S. 
assistance is essential to support a Palestinian Government 
prepared to make peace with Israel. Nevertheless, as President 
Obama has made clear, the Hamas-Fatah reconciliation agreement 
``raises profound and legitimate questions.'' Since the 
agreement was signed in May, however, key issues have remained 
unresolved between the two sides, and the agreement has not yet 
been implemented. If a new PA Government emerges, we will 
evaluate it carefully, and our assistance will be guided by all 
relevant U.S. laws.
    Let me be clear. In our decision making, the administration 
will ensure the full implementation of U.S. law, but as of now, 
the current PA Government under the direction of President 
Abbas and headed by Prime Minister Fayyad remains in place. 
President Abbas has made clear that he and his government 
accept the Quartet's principles, and Prime Minister Fayyad 
continues to make progress in building institutions and 
maintaining security. For these reasons, we believe they 
deserve our continued support.
    In conclusion, Mr. Chairman, I want to emphasize our view 
that assistance to the Palestinian Authority and to the 
Palestinian people is an important element in our effort to 
advance U.S. national security interests in the Middle East. On 
behalf of the administration, I thank you for the opportunity 
to brief you on this program, and for your support for our 
efforts. Thank you very much.
    [The prepared statement of Mr. Walles follows:]


    
    
                              ----------                              

    Mr. Chabot. Thank you.
    General Moeller, you are recognized for 5 minutes

  STATEMENT OF LIEUTENANT GENERAL MIKE MOELLER, UNITED STATES 
SECURITY COORDINATOR FOR ISRAEL AND THE PALESTINIAN AUTHORITY, 
                      DEPARTMENT OF STATE

    General Moeller. Thank you, sir. Mr. Chairman, Ranking 
Member Ackerman, distinguished committee members, thank you for 
inviting me here today. As United States Security Coordinator 
for Israel and the Palestinian Authority, I have the privilege 
of leading a 145-person joint, coalition and interagency team 
that includes nine international partners, of which Canada and 
the United Kingdom play critical leadership roles.
    The 16 U.S. Department of Defense personnel form the heart 
of this unique organization. These DoD members are assigned to 
the State Department, and my boss is the Secretary of State. We 
live in the region, with our headquarters in Jerusalem.
    Before I talk about the detailed part of the program, I 
would like to remind you that the Government of Israel approves 
all aspects of U.S. support to the Palestinian Authority 
Security Forces, and that the USSC would never advocate or 
sponsor activities that could threaten Israeli security. 
Additionally, our funding is separate from the $2.9 billion in 
direct assistance to the State of Israel.
    We use I&L funding to resource our security assistance 
efforts, which is the core of what we do. The program assists 
the PA in building the security force structure and 
infrastructure, including the required equipment and training 
needed to conduct the full range of missions currently allowed 
under Israeli and Palestinian security agreements. The program 
has enabled the Palestinian Security Forces to make significant 
progress.
    To date, almost 4800 Palestinian Authority troopers have 
graduated from the U.S. supported Jordanian International 
Police Training Center. All graduates receive extensive 
professional skills training that emphasizes respect for human 
rights, rule of law, and the proper use of force.
    The West Bank training initiative focuses on other 
specialty skills and leadership training and development. 
Palestinian instructors teach these courses. To date, we have 
seen 3500 service graduates.
    We take a holistic approach. So we also focus on the 
support infrastructure to match these force structure 
improvements. This infrastructure includes garrison camps with 
facilities and training areas required to maintain the security 
force's professional skills; joint operations centers for joint 
planning and command and control; and a national training 
center in Jericho. All projects are on track and on budget.
    This year, we are moving into the next phase of the 
program, building Palestinian Authority security force 
institutional capacity. In this phase, we will help the PASF 
develop the indigenous capability to maintain and sustain their 
force structure and infrastructure. The USSC also supports 
other U.S. rule of law programs that assist the Palestinians to 
improve the performance of their justice and corrections 
sectors.
    Despite recent events, including the Fatah-Hamas 
reconciliation, there have been no changes in personnel, no 
changes in security practices on the ground and, I should 
emphasize, no change in the chain of command. The current 
Palestinian Authority Government under President Abbas retains 
sole authority over the PASF.
    Additionally, Palestinian Security Forces continue to 
pursue bad actors across the West Bank, including members of 
Hamas. Security coordination is still very strong, and the 
Government of Israel continues to support our security 
assistance requests.
    Meanwhile, the Palestinian Security Forces just sent 50 
civil defenders to Jordan, including firefighters and ambulance 
drivers, for basic training. Last week, the Government of 
Israel approved the next deployment of the National Security 
Force's Special Battalion, which includes 500 Palestinian 
recruits, to begin their basic training in Jordan.
    As you know, militaries do not relax a security regime 
without a trusted, capable partner. In the last year, the 
Israelis have dramatically reduced the number of manned 
checkpoints and cut the number of combat brigades assigned to 
the West Bank. The PASF performance during the May 15 and June 
5 demonstrations provide excellent examples of the growing 
professionalism and competence of the Palestinian Authority 
Security Forces.
    These forces deployed to troubled areas, coordinated 
effectively across the military services, and expertly 
conducted their assigned missions. As a result, there was very 
little violence and limited criminal activity during those 
periods.
    In conclusion, we deeply appreciate your continued support 
for this critical program with a demonstrated record of 
success. The consensus is that the Palestinian Authority 
Security Forces is becoming an effective professional force, 
and that we must maintain our security assistance efforts.
    We understand the challenges and uncertainty ahead, but we 
believe that the USSC mission enables regional stability, 
enhances Israeli security, improves the lives of the 
Palestinian people and, most importantly, supports U.S. 
national security interests. Thank you, sir.
    [The prepared statement of General Moeller follows:]
    
    
    
                              ----------                              

    Mr. Chabot. Thank you very much, General.
    Mr. Laudato, you are recognized.

 STATEMENT OF THE HONORABLE GEORGE A. LAUDATO, ADMINISTRATOR'S 
    SPECIAL ASSISTANT FOR THE MIDDLE EAST, U.S. AGENCY FOR 
               INTERNATIONAL DEVELOPMENT (USAID)

    Mr. Laudato. Chairman Chabot, Ranking Member Ackerman, 
distinguished members of the committee. Thank you for asking me 
to testify today.
    Mr. Chabot. Could you pull the mic just a little closer? 
Thank you very much.
    Mr. Laudato. Thank you for asking me to testify on this 
timely and important topic today. I would like to highlight the 
impact of the U.S. Government's economic assistance programs 
and USAID's procedures to ensure that the programs reach their 
intended beneficiary.
    With our colleagues throughout the U.S. Government, USAID 
is supporting Palestinian efforts to create robust institutions 
and a viable economy, essential to a future Palestinian state, 
a state that will be a responsible neighbor and contribute to 
regional peace, security, and stability.
    Palestinian development efforts are based on a solid policy 
framework for sectors like health, infrastructure, economic 
growth and governance. These development policies provide a 
very solid foundation for effective donor programs. The U.S. 
Government's assistance program reinforces President Abbas' and 
Prime Minister Fayyad's vision for a viable Palestinian state 
that is responsive to the needs of its citizens.
    I would like to highlight just a few examples of how USAID 
programs support this vision and affect the lives of 
Palestinians. The U.S. Government has supported long term 
development of institutions necessary for a future Palestinian 
state, living side by side with Israel, by promoting rule of 
law, respect of human rights, and civil engagement.
    At the municipal USAID helps the Palestinian Ministry of 
Local Government to work effectively with local governments in 
delivering essential services to residents and in promoting 
community development through training officials in strategic 
planning, accounting, outreach, and other key government and 
management skills necessary for local governments.
    We also support the Palestinian Authority's justice sector 
strategy, and we are helping to strengthen performance and 
credibility of the justice sector institutions. We are 
increasing public knowledge of the rule of law and how to 
engage the justice system, an essential element of any balanced 
society. For example, USAID works to increase the legal 
literacy among Palestinians. We foster broader support for an 
effective and independent judiciary, and strengthen linkages 
between professional and academic legal communities.
    We have supported the development of water resources and 
roads throughout the West Bank. USAID's assistance in 
developing Palestinian capacity to manage scarce, fragile water 
resources is key to this effort. This is an area of mutual 
Palestinian and Israeli concern, and where there will be shared 
benefits from the improved management of limited--very limited 
resources.
    We have also refurbished over 450 kilometers of roads in 
the West Bank, making travel more commercially viable and 
opening access to health and education services for all 
residents. We are also helping to create jobs, increase 
competitiveness of key economic enterprises, and increase 
growth and opportunities across the region. USAID is working 
with Israeli based offices of U.S. high tech firms, such as 
Google, Sysco, and others, to help Palestinian firms integrate 
into the global IT community, and we have generated $12 million 
in investments with Palestinian counterparts under this 
program.
    To ensure that USAID programs reach the intended 
beneficiaries, USAID has designed a very stringent oversight 
procedure that prevent inadvertent support going to foreign 
terrorists organizations, including the Hamas controlled de 
facto government in Gaza. Before awarding a contract or grant 
to a local nongovernmental organization, USAID vets the 
organization's key officers through the law enforcement and 
intelligence systems, and checks the organization's lists 
against the lists of the Office of Foreign Assets Control at 
the U.S. Treasury.
    Organizations applying for grants must also certify that 
they do not provide material support for terrorism.
    Mr. Chairman, I appreciate the opportunity to discuss 
USAID's programs, and look forward to taking any questions that 
you may have.
    [The prepared statement of Mr. Laudato follows:]
    
    
    
                              ----------                              

    Mr. Chabot. Thank you very much.
    We appreciate the panel's testimony, all three, and at this 
time I would begin the questioning myself. So I recognize 
myself for 5 minutes.
    Since the mid-1990s--this would be for you, Mr. Walles. 
Since the mid-1990s, the U.S. Government has committed over $4 
billion in bilateral assistance to the Palestinians. 
Unfortunately, despite our commitment, the Arab countries of 
the Middle East have not been so forthcoming. A recent news 
story reported that the Palestinian Authority would only be 
able to pay its employees half of their July salaries due to 
the budget shortfall. The story further noted that, ``Of the 
$971 million pledged by donors for this year, $330 million of 
it has been paid so far, and Mr. Fayyad said the only Arab 
countries that had fulfilled their pledges this year were the 
United Arab Emirates, Algeria, and Oman.''
    Frankly, I find it outrageous that Arab countries, who 
claim to care so much about the plight of the Palestinians, are 
not willing to put their money where their mouths are. How much 
specifically have the Arab states contributed to help the PA 
over the past few years, and do you believe the Arab states are 
providing the appropriate levels of assistance to the 
Palestinian Authority and, if not, why not?
    Mr. Walles. Thank you, Mr. Chairman, for that question. 
According to the statistics that are maintained by the PA 
Ministry of Finance, Arab countries have contributed about $1.8 
billion in assistance to the Palestinian Authority since 2007. 
Of the Arab donors, Saudi Arabia has contributed the most, $749 
million since 2007.
    What I would note, however, is that in recent years the 
level of assistance from Arab donors has declined. Just to give 
you some numbers, in 2009 the total amount provided to the PA 
from Arab donors was $462 million. In 2010 that number was $287 
million, and so far this year in 2011 the Arab states have 
provided only $78.5 million. Of that amount, the largest 
contribution has come from the United Arab Emirates. That is 
$42.5 million. Algeria has provided $26 million, and Oman has 
provided $10 million.
    Clearly, the numbers provided--or the amounts of assistance 
provided by the Arab states this year are not at the same 
levels as before. This has contributed to the significant 
problems that Prime Fayyad has faced, particularly in the past 
month in meeting the needs of the Palestinian Authority.
    You are correct. This month Prime Minister Fayyad has not 
been able to pay full salaries. They have only been half-
salaries, and that is very worrisome. Those salaries, of 
course, include the salaries of the security forces that are 
being trained by General Moeller and his team. So this is very 
worrisome. It is a matter that we have discussed over the years 
with the Arab states. We will be discussing this with them 
again, and urging them to at least meet the levels that they 
have provided in past years, so that the Palestinian Authority 
can continue to function.
    Mr. Chabot. Thank you, and it seems the United States gets 
a lot of criticism on us not being supportive enough for this 
two-state solution, but they are getting a lot of lip service, 
I think, from a lot of the Arab countries, and it needs to 
stop.
    Let me go into another question here quickly. The 
Palestinian Authority has launched a campaign outside of direct 
negotiations in order to win admission as a full member of the 
United Nations, and is setting pre-conditions on final status 
issues which are supposed to be resolved through direct 
negotiations.
    Will the administration pledge to veto any Security Council 
resolution on Palestinian statehood, and can you assure us that 
there will not be a last minute effort to issue a statement 
that undercuts the very purpose of the veto, as happened, 
unfortunately, back in February 2011?
    Mr. Walles. Well, first, I think the President was very 
clear in a speech he gave on May 22nd that we do not support 
U.N. recognition of Palestinian statehood. We do not believe 
that unilateral attempts by the Palestinians to deal with 
permanent status issues in the United Nations or any other 
international body is the correct path.
    The correct path to achieve a two-state solution and to 
create a Palestinian state is a path of direct negotiations, 
and that is what we have been working hard with both the 
Israelis and the Palestinians to accomplish. We believe that a 
Palestinian state must emerge from these negotiations and 
cannot be created by the United Nations. We have worked closely 
with the parties on the negotiated outcome, and we have been 
clear in our conversations with the Palestinians that we will 
not support any unilateral effort of any kind in New York or in 
any other international organization.
    Mr. Chabot. Thank you for your answer, but I didn't hear 
any specific--and it may be above your pay grade to pledge not 
to recognize this and to veto any action at the United Nations, 
and again the statement that was issued last February gave many 
of us great concern about the administration. We appreciated 
the veto. We didn't like the statement. You don't have to 
respond. Thank you very much.
    I yield to the gentleman from New York, the ranking member, 
Mr. Ackerman, for 5 minutes.
    Mr. Ackerman. Thank you very much, Mr. Chairman. Just a 
comment on the last observation. I would observe that President 
Bush was the first President of the United States of America to 
proclaim that there should be a Palestinian state, and I don't 
know of any other President outside of President Obama who has 
said that he would veto any vote in the United Nations 
declaring the Palestinian state unless it was one that was 
negotiated between the parties.
    I am not saying that to find fault with either President, 
because I think in both contexts they were each right. I have 
to proceed, but I just wanted to make that clear, that we have 
to come up with a common sense policy that is in the American 
interest, that the parties themselves negotiate and live with.
    It seems to me we have a dilemma. We have two parties, 
mainly, within the Palestinian community. One is a terrorist 
organization, and one that proclaims peace, and they each seem 
to control a bit of real estate within the region. 
Commonsensically, you can't make peace with half of a wannabe 
country; with one that you are at peace with, and one that 
claims that their reason for existence is to destroy you. It 
just doesn't happen that way.
    Everybody understands that they have got to get their act 
together somehow, if they are going to be indeed, someday, a 
country and speak with one voice. What that voice will be is 
the question. So there seems to be international pressure for 
them to get together, and now there is an international 
pressure that they not--at least from this part of the world--
that they not get together, because of the identities that they 
represent.
    The only way to do it, one would think, is for one of them 
to give up their identity, either the guys who want to make 
peace, or the guys who want to destroy. What the world is 
saying under our leadership is that the people who are looking 
to make war have to give up their stripes, or their spots, 
depending on how you want to describe it.
    Can that happen? It seems to me that the Hamas faction only 
agreed to go into this unity government out of weakness. They 
are very concerned about what is happening in Syria. Do you 
think that is going to happen?
    Also, my understanding is that there have been no 
appointments from the Hamas faction into this new proposed or 
agreed-to coalition government. It is the same guys that have 
been there all along, most of whom have no political party 
affiliation, either with Fatah or Hams. There is probably a 
couple of Fatah guys, but certainly no Hamas people. Is that a 
fair observation?
    Mr. Walles. Well, thank you, Mr. Ackerman. I think you make 
a good point, that the Palestinian is divided, and it is hard 
to make peace with a divided--the other side of the divided. 
Our view has been that we are not opposed to the Palestinian 
immunity, but Palestinian immunity only makes sense if it is a 
road to peace and a negotiated outcome.
    That is why we have insisted on the Quartet principles, 
recognition of Israel, renunciation of violence, acceptance of 
all previous agreements. So that is the kind of government that 
could actually foster a two-state solution. That is why we have 
been very clear with the Palestinians about how our laws apply 
and the need to see that kind of government.
    I would say that we have tried to, through our assistance 
programs, indicate that there is a way, as we have seen in the 
West Bank, where the Palestinians can take responsibility for 
their affairs. They can provide security. They can provide 
services to their people. That is a path that is a model toward 
a Palestinian state that can live peacefully with Israel. The 
model we have seen in Gaza is something that is highly 
different.
    Mr. Ackerman. Let me ask you a second question in the few 
seconds I have. The chairman has brilliantly put together a 
most distinguished panel representing the humanitarian, the 
security aspects, and the political aspects in our three expert 
witnesses. We have to come up with a policy, should this thing 
come together between, this so called merger between the Hamas 
and Fatah.
    This is not a fairy tale. We don't have the wisdom of those 
people who write those things, and we very rarely get it just 
right. Either the porridge is too hot, or too cold; never just 
right with the work that we do. We will either underreact or 
overreact in our policy. What happens here--because I don't 
think we are going to underreact--my view of our colleagues 
suggests that we will probably, if that merger goes through, 
without the Hamas people reforming, if I can use that word, is 
that, likely as not, because of the U.N. and the merger, there 
will be a cessation of aid.
    What does that do to our humanitarian efforts? What does 
that do, General, to the security efforts? What does that do to 
our political inclinations, and does that become a disaster or 
does that become a good policy?
    Mr. Chabot. The gentleman's time has expired, but you can 
answer the question.
    Mr. Walles. Let me just provide a chapeau, and then I will 
ask my colleagues to respond as well.
    Just a few bits of background: The agreement between Hamas 
and Fatah was signed in Cairo on May 4th. Since then, no aspect 
of that agreement has been implemented. The first issue which 
they have tackled is who would be the Prime Minister of the new 
government, and they have reached an impasse on that. I think, 
as you are aware, President Abbas has proposed that Salam 
Fayyad continue as the Prime Minister. Hamas has not agreed to 
that, and they have not been able to resolve that question.
    None of the other issues that must be resolved--who else 
would be in the government, a government program, or the 
policies of that government--None of those things have been 
agreed. So the prospects for this agreement are very uncertain. 
I have learned not to predict the future in the Middle East, 
but we have seen so far is that there are considerable problems 
between Fatah and Hamas in implementing that agreement.
    Now in terms of the implications, if there is an agreement, 
we would certainly review any government that is formed based 
upon our law. We would look at the composition of the 
government. We would look at the government program, and we 
would look at the policies of that government. In particular, 
security would be an important factor that we would want to 
look at.
    Let me ask General Moeller to comment on that and how we 
view things now and how we might factor that into our 
consideration in the future.
    General Moeller. Thank you, sir, for the question. If we 
talk specifically about a cutoff of security assistance to the 
Palestinians as an instantaneous policy, as you know, sir, it 
would immediately halt our efforts to--our advise and assist 
efforts to help the Palestinians institutionalize that 
professional culture.
    It will also stop our build, train, and equip efforts at a 
time when we are beginning to transition them to the 
Palestinian Authority, so that they can have that self-
sustainment capability to conduct professional security 
operations.
    I believe that both the Israelis and the Palestinians would 
see it as a--It may not be as strong as a breach of faith, but 
they certainly would be very, very concerned that we are not 
continuing as their enduring security partners in this 
important part of the Middle East peace process.
    There is a negative regional aspect as well, as you know, 
because the Jordanians, along with the Israelis and the 
Palestinian Authority, have this trust and confidence circle 
that really offers us opportunities rather than challenges. So 
I would see a cutoff of security assistance in a negative light 
today.
    All that being said, again in all of my discussions with 
the senior Israeli general officers, they are adamant that we 
need to continue to help the Palestinians build a professional 
security force. In fact, they have been very helpful with 
offering me all kinds of different options.
    On the Palestinian Authority side, again we are at a very 
pivotal moment in the security assistance program where we are 
beginning to see that cultural, professional performance 
institutionalized at the lower levels, as well as the 
beginnings of an institutional depth in the ministerial levels 
as well.
    Mr. Chabot. Thank you very much, General. Mr. Laudato, did 
you have anything to add, briefly?
    Mr. Laudato. Just that the level at which we work at the 
institutional level is that it is the building block of a new 
Palestinian state, and we would, obviously, ensure that the 
full implementation of U.S. law--It would mean the end to that 
kind of work, and also, therefore, I think, compromise the 
environment that would be needed to move forward on any peace 
effort.
    Mr. Chabot. Thank you very much. The gentleman from South 
Carolina, Mr. Duncan, is recognized for 5 minutes.
    Mr. Duncan. Thank you, Mr. Chairman. If Hamas partisans do 
not take a direct role in the Palestinian Authority's power 
sharing government, but the movement is giving power to approve 
of the government's composition, would the level of Hamas' 
involvement disqualify the Palestinian Authority from continued 
U.S. assistance? Mr. Walles?
    Mr. Walles. Thank you. The standard in the law is a power 
sharing government, or a government that would be controlled by 
Hamas. So we would have to look very carefully, if there is a 
new government, at how that is structured, what is the 
composition, who are the ministers. Also we would look at 
whether there are any other committees or anything else outside 
the government itself that Hamas could use to exercise 
influence over the government and its decision making. We would 
also look as well at the legislative council where Hamas has a 
majority, if that were to be revived.
    So there are a number of actors that we would look at. We 
would have to take all those things into consideration to see 
whether there is any power sharing; in other words, whether 
Hamas does have any role in making decisions in the government.
    At this point, as I said, nothing in this agreement has 
been implemented yet. There is no new government. So it is a 
bit of a hypothetical question in terms of what the government 
would be, but if there is a new government, we would certainly 
look at it very carefully and, as I said earlier, we would 
ensure that our law is fully and completely implemented.
    Mr. Duncan. General Moeller, there was an article today in 
Financial Times talking about the Quartet that is meeting on 
the Middle East talks, and a senior Obama administration 
official said that more work needs to be done to close the gaps 
that exist before the Quartet can go forth publicly with the 
kinds of statements that might enable the parties to break 
through that impasse.
    What sort of statements might be necessary in order to 
break an impasse?
    General Moeller. Sir, I would defer to my distinguished 
colleague here to answer that question. I don't believe that 
the Quartet principles we are talking about, capability gaps 
when it came to the Palestinian Authority Security Forces or 
concerns by the Israeli Defense Forces on where the gaps on the 
security side need to be filled.
    Mr. Walles. If I could, I will just answer briefly. We have 
been very clear that the path forward to a peace agreement is 
direct negotiation between the two sides, and we are trying to 
create that as an alternative to any unilateral actions in New 
York and elsewhere.
    What we have been calling on the parties to do, both 
ourselves and through the Quartet, is for both sides to return 
to the direct negotiation on the basis of the speech the 
President gave in May. We have been working with the Quartet in 
a way to have that call come from the Quartet itself on both of 
the parties.
    Yesterday there was a meeting of the Quartet. Secretary 
Clinton led the U.S. delegation there. What we found, as you 
referred to in your article, is that there continue to be gaps 
between the two sides, and that is what sort of underlies the 
difficulties we have got in trying to get back to a negotiating 
process; but we are continuing those discussions. There are 
meetings at a lower level as we speak among the Quartet to try 
to find ways to submit a call to the Israelis and the 
Palestinians to return to negotiations on that basis.
    Mr. Duncan. You mentioned the speech in May, but Prime 
Minister Netanyahu has said that the '67 border is 
indefensible, and so the other side needs to come to the table, 
I think, with something different than that.
    The Quartet needs to come to the table with something 
different than the 1967 borders. We need to see, I think, more 
on the part of the Palestinian Authority coming closer to 
recognizing the State of Israel and not continuing to have 
Hamas fire missiles into--or rockets, rather, into the 
territory. I think, just yesterday, there were more rockets 
fired.
    So one quick question I had: About 6,000 tons of food and 
other aid goes into the Gaza Strip every day. Where does most 
of that come from, just for my edification?
    Mr. Walles. The food, the other things that are shipped 
into Gaza--some of those are commercial purchases, as in any 
other place, and some of those are donations financed by 
international donors. We provide roughly $77 million in 
assistance right now to projects in Gaza. These are 
administered by USAID. It includes support for the U.N. Food 
Program.
    We also do a number of health care, education, and small 
infrastructure projects. Everything that goes into Gaza for 
these projects or anything else must pass through Israeli 
checkpoints, and are inspected. So in order to implement these 
projects in Gaza, we work closely with the Israeli authorities 
to make sure that these bids can move in. Thereby, everything 
we are doing in Gaza is supported by the Israeli Government.
    In fact, as I mentioned, I was just in Israel and had some 
meetings with the Ministry of Defense officials, and they all 
expressed support not only for the programs that we are 
implementing in Gaza, but also from other donors, from Europe, 
from the World Bank, and from U.N. organizations as well.
    Mr. Chabot. The gentleman's time has expired. The gentleman 
from New York, Mr. Higgins, is recognized for 5 minutes.
    Mr. Higgins. Thank you very much, Chairman. General 
Moeller, you had indicated the Israeli officials have indicated 
that help in building the Palestinian Security Force is 
something that they continue to encourage. Is that in 
recognition of this power sharing agreement between Hamas and 
Fatah and the Palestinian Authority?
    General Moeller. Thank you for the question, sir. Actually, 
it is a result of, I believe, a longstanding appreciation for 
the Palestinian Security Force capabilities. The PASF has 
become very capable in ensuring--helping to ensure law and 
order across the entire West Bank, and of course, when it comes 
to the Israelis, especially in the Israeli Defense Force senior 
leaders, they understand that having a stable, secure West Bank 
is critically important to and reflects positively on Israeli 
security.
    Mr. Higgins. But doesn't the inclusion of Hamas, bent on 
the destruction of Israel, seriously compromise the credibility 
of that effort?
    General Moeller. Sir, as of the current date, there is no 
Hamas participation in any parts of the government. There is no 
participation by any members of Hamas in the Palestinian 
Authority Security Forces, and----
    Mr. Higgins. Right, but if they had a Fatah, Mahmoud Abbas 
is accepting of a power sharing agreement. I presume that that 
relationship, including the significant involvement of Hamas, 
will evolve and serve to undermine the credibility of the 
progress that has been made there, including especially in 
terms of the security force.
    General Moeller. Yes, sir. I think the Israelis, especially 
the senior leaders--they have the same philosophy that we do. 
Watch very closely as events unfold. Make sure that we are very 
cautious as we continue to support and provide assistance to 
the Palestinian Authority Security Forces, and with an 
understanding that, if there is any change in the environment, 
if there is any change in the willingness and the professional 
performance of the Palestinians, then we will reevaluate our 
support.
    That is, I think, consistent from the USSC perspective, as 
well as from the Israeli perspective.
    Mr. Higgins. When you look at the models throughout the 
world--and unfortunately,. there are too few--certain 
preconditions should exist, and if those parties don't agree to 
those preconditions, our commitment should be substantially 
pulled back.
    I look at the situation in Northern Ireland. It was 
required that Sinn Fein and the Irish Republican Army, to 
participate in peace talks, had to renounce violence, had to 
actually destroy their arms. International observers had to 
observe the destruction of those arms before negotiations could 
begin.
    It seems to me that what this effort on the part of the 
Palestinian Authority in this power sharing agreement--it lacks 
credibility, because if you are looking for a peaceful 
solution, a peaceful two-state solution, it would seem that all 
of the parties included should agree to certain preconditions 
that allow a basis for trust and understanding to allow the 
peace profess to evolve, and that doesn't seem to exist here.
    I yield back.
    Mr. Chabot. Thank you very much. I appreciate it. And the 
gentleman from California, Mr. Rohrabacher, is recognized for 5 
minutes.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman. Let me 
just note that my colleague who just finished his time was 
actually touching on a very important approach, and maybe a 
mistaken approach, that has been made in bringing peace to that 
region. Seems to me, following up on your line of questioning, 
that there is a difference between setting a precondition on 
one's assistance versus maintaining assistance, even though the 
parties who are receiving it are not necessarily committed to 
changing the status quo.
    So in one situation, actually, your assistance aids in 
maintaining the unacceptable situation, versus saying, when you 
do this or that, we are going to actually continue our aid, 
which leads me to one point that I think--I'm sorry, I can't 
pronounce your name.
    Mr. Laudato. Laudato.
    Mr. Rohrabacher. Okay. Probably still can't, but we are 
talking about water. Would it be something that we could, for 
example, set as a precondition that, if indeed there is an 
agreement between the Israelis and the Palestinians, couldn't 
we not set out our assistance in terms of water, saying we will 
build you the water system you need, but we are not going to do 
that until both parties have reached an agreement necessary for 
peace.
    Mr. Walles. Let me respond to your first point, and then I 
will ask my colleague to talk about water a little bit.
    One point I wanted to make clear is that we feel we have 
accomplished a lot with the assistance programs that we have 
run over the number of years with the Palestinians. Let me just 
read one fact. This is related to our security program, and 
this is information from the Israel Defense Forces, and it is 
public information.
    According to the IDF, the number of terrorist attacks in 
the West Bank has decreased from 841 in 2005 to 36 in 2010. 
This represents a 96 percent decrease in the number of 
terrorist attacks in 5 years. Now that is, obviously, 
significant, not just for the Palestinians. It is very 
important for Israeli security. It is very much in our national 
interest.
    So we believe we have been accomplishing things. We are 
not, in a sense, perpetuating an unacceptable status quo. We 
are actually accomplishing things, and we don't want to lose 
that.
    Mr. Rohrabacher. Let me note that 15 years ago the idea of 
a two-state solution was not accepted by both parties, and both 
parties seem to want--The Palestinian wanted Israel to 
disappear, and the Israelis wanted the Palestinians to 
disappear; and just the fact that we have got both sides now 
supposedly agreeing to a two-state solution is a major step 
forward, but let me just also amend that by saying it seems to 
me the major stumbling block to peace right now is nothing more 
or less than the Palestinians accepting that Israel has a right 
to exist as a Jewish state, meaning that the Palestinians will 
give up and just say, ``We do not believe in the right of 
return.''
    The moment that happens, you are going to have a huge step 
forward in the cause of peace. I think that perhaps the $550 
million we are giving to the Palestinians might be predicated 
on you might think about making this public commitment. 
Otherwise, we are not going to have another step forward like 
we have, like you are suggesting today.
    Mr. Walles. Thank you for those comments. We have, as I 
said, been very clear with the Palestinians on the need to 
return to direct negotiations. Those issues that you referred 
to are issues that have to be negotiated between Israel and the 
Palestinians. That is the only pathway to achieve the kind of 
peace which the sides both say they want.
    Mr. Rohrabacher. Let me put it this way. Once this idea of 
the right of return is--they acknowledge that this is no longer 
something that they believe in, at that point we are just 
discussing what are the borders going to be between the 
Palestinians and the Israelis, and whether or not there is 
going to be resources like water available for both entities.
    I would hope that our aid program is not letting people 
just maintain their current situation in a status quo that is 
unacceptable, when the course is very easy to see. Of course, 
it is easy to see that, but it is harder to get people to 
actually make the commitment that, yes, Israel has a right to 
exist, because at that point it does say, okay, we have given 
up this dream that the Palestinians are going to retake this 
entire area that perhaps most of it used to belong to them.
    Mr. Chabot. The gentleman's time has expired. Thank you 
very much. We will now recognize the gentleman from Virginia, 
Mr. Connolly, for 5 minutes.
    Mr. Connolly. Thank you, Mr. Chairman, and welcome to the 
panelists. Mr. Laudato, AID has a fairly extensive presence in 
the West Bank.
    Mr. Laudato. Yes, sir.
    Mr. Connolly. Cooperating with the Palestinian Authority, 
working with the Prime Minister, Mr. Fayyad. Do you have any 
programs in the Gaza?
    Mr. Laudato. Yes, we do, sir.
    Mr. Connolly. And what is the level of cooperation or how 
would you compare the level of oversight and cooperation with 
the Hamas authorities in charge there compared to the 
Palestinian Authority and the West Bank?
    Mr. Laudato. Oversight and cooperation are two separate 
issues. With regard to the cooperation, we do not work with the 
de facto Hamas government in Gaza. All of our assistance is 
coursed through international NGOs or international 
organizations, and we monitor it very closely to the extent 
that we can, utilizing the kinds of instruments and processes 
that you use when you can't have boots on the ground.
    Mr. Connolly. So the contrast is that we do work with the 
government--the functioning government of the West Bank.
    Mr. Laudato. Yes, we do, sir.
    Mr. Connolly. And you work through it sometimes.
    Mr. Laudato. And through it, and with it.
    Mr. Connolly. But in the Gaza we work through nonprofit or 
international NGO entities. Presumably, however, at some point 
they intersect with the Hamas authorities.
    Mr. Laudato. They operate with the tacit concurrence of the 
authorities, but we will not permit that the Hamas government 
organization to directly control or shape how this assistance 
is utilized. That is determined by the NGOs or by the 
international organizations, with our concurrence and with the 
concurrence of the Israelis.
    Mr. Connolly. What is your understanding about that modus 
operandi and how it would change under the new power sharing 
arrangement being proposed?
    Mr. Laudato. I can't imagine it would change under the new 
power sharing.
    Mr. Connolly. Why would you not imagine it would change? 
Now you would have a unified government.
    Mr. Laudato. Because we have U.S. law to contend with, and 
we must follow and we must implement U.S. law, which would not 
permit us to operate with a group, Hamas or controlled 
organization, as long as that organization was still considered 
by the U.S. Government to be a terrorist organization.
    Mr. Connolly. So conversely, it could change your 
operations in the West Bank.
    Mr. Laudato. Yes, it could, sir.
    Mr. Connolly. Because you could find yourself technically 
in violation of United States law.
    Mr. Laudato. We would not violate it. We would end it.
    Mr. Connolly. I understand. General Moeller, the same 
question for you. What are your operations, if any, in the 
Gaza? Presumably, none. Secondly, what is your understanding 
about how that would change, once this power sharing 
arrangement is underway, either in the Gaza or in the West Bank 
or both?
    General Moeller. Yes, sir. That is correct. We have no work 
in Gaza. We are focused exclusively with the Palestinian 
Authority and with the security forces that operate on the West 
Bank.
    As Mr. Walles said, it is impossible to predict the future, 
especially in the Middle East. So the different sequels and 
branches that could occur based on a power sharing type 
government on the West Bank, it is impossible for us to 
predict. But again, as all of us have said, if in fact, there 
is Hamas presence in a power sharing government, we will meet 
U.S. law, the requirements of U.S. law.
    Mr. Connolly. Which would include possibly cessation of the 
activities you described earlier in the West Bank?
    General Moeller. That is correct, sir.
    Mr. Connolly. Thank you. Mr. Walles, in the brief time I 
have left, one of the things I hear from the Palestinian 
community in my community is opposition to the two-state 
solution. They actually advocate for one state. Why can't we 
just make one state work? Have the authorities you are working 
with in the Palestinian Authority, in fact, publicly embraced 
the two-state solution, and are they committed to it?
    Mr. Walles. Yes, sir. President Abbas and Mr. Fayyad, all 
of the senior officials at Palestinian Authority have been very 
clear in public and also in our private conversations. They are 
seeking a two-state solution. They are seeking integration of 
the Palestinian state that would exist side by side in peace 
and security with Israel. That is the objective that we have 
been aiming at. That is also the position of the current Israel 
Government as well. They also support a two-state solution.
    I know there is discussion, both among your constituents 
but also in the West Bank and Gaza about a one-state solution. 
That is not something that we see makes any sense. It is also 
something that in the polling that we have looked at among 
Palestinians in the West Bank and Gaza, there is still a strong 
support for peace with Israel and for a two-state solution. It 
is not unanimously, obviously, but the strongest support is for 
a two-state solution.
    Mr. Connolly. Thank you, Mr. chair.
    Mr. Chabot. The gentleman's time has expired. The gentleman 
from Kentucky, Mr. Chandler, is recognized for 5 minutes.
    Mr. Chandler. Thank you, Mr. Chairman. Welcome, gentlemen. 
Nice to see you all, and thank you for all of your work on 
behalf of our country in, I guess, the most confusing, 
difficult, and complex region in the world, and I think we all 
understand how complex these issues are. There are no easy 
solutions, and I know you all are working and doing your best 
to get through them. There are, of course, a number of things 
that are troubling, though.
    We have got a request in the 2012--The 2012 request from 
the President is for $400 million or so in aid. That request 
assumes a certain level, as has previous aid, a certain level 
of cooperation on the part of the Palestinian Authority to move 
toward the two-state solution, and all the aid is geared toward 
that. Yet we see, in particular, two very, very troubling 
things occur.
    One is, of course, the Hamas Fatah agreement and where that 
seems to be leading, and we all know what trouble exists there. 
We also see an effort to move outside of direct negotiations, 
to try to go for the September vote in the United Nations. 
Surely, you all can understand how that is troubling to people 
in Congress and, frankly, I think, to the citizens of this 
country, that we continue to provide substantial aid, and we 
feel like we are not getting cooperation.
    That is the situation, I think, a lot of us feel cannot 
continue, and at some point we are going to have to just say, 
you know, if you guys are not going to cooperate, we are going 
to have to cut the aid off. There are times when that is all 
that people understand, and I think we are going to have to 
look toward that, and I think that is coming if we don't get a 
little bit more cooperation.
    Could you give me an assessment of the effectiveness of 
these projects, and you have talked about some of the security 
concerns that have been addressed, and I understand that you 
have some statistics on terrorism and how some of that has been 
reduced. But on the economic side, what economic projects have 
been effective, and which ones have not? Do you have projects 
where the money has been spent in the past that have not been 
effective?
    Secondly, what are we doing to move this issue forward, of 
seeing that these folks cooperate in exchange for this money? 
With budgets as difficult as they are now, performance is 
extremely important. We have got to get--Our money has got to 
get results.
    Mr. Walles. Thank you for those comments. I would agree 
completely that, particularly in this day and age and the 
budget environment that we face in this country, that all of 
our assistance, wherever it is used, has to be done 
effectively, has to be based upon a certain level of 
cooperation.
    Our entire aid program, whether it is security or economic, 
is based on the premise of a two-state solution, and therefore, 
we need to be sure that the Palestinian side remains committed 
to that two-state solution. Now they say they do, but just as 
you have concerns, we also have concerns about this 
reconciliation agreement. We have been clear about that with 
them, and we also strongly oppose any effort to go to the 
United Nations on a unilateral basis.
    Mr. Chandler. But they are clearly involved in that effort.
    Mr. Walles. Well, they are, but again we have to judge 
based upon what actually happens. As I said, the reconciliation 
agreement has not been implemented. We are not sure whether it 
will be, or not. So if there is a new government, we will react 
to that, but at this point, there is no new government, and 
similarly in New York. We have been very clear. We told the 
Palestinians that is not the pathway they should be moving 
down. They have an important choice to make, and it will have 
consequences in terms of our relationship, if they choose that 
path.
    In terms of your question on the economics, maybe I will 
ask my colleague to respond to that.
    Mr. Laudato. Thank you. Just briefly, three areas where 
cooperation is critical. Water, as Congressman Rohrabacher 
said. Water is an environmental issue, and it doesn't recognize 
political boundaries. So working on water, you are working with 
both the Israelis and the Palestinians, getting them to 
cooperate. You can't drill a well here and not expect the 
aquifer across the border to be impacted.
    So we are very careful about that. We have brought them 
together around these water issues, I think, very effectively. 
Roads: Building roads is another area where we tend to help 
these two entities work together because of the security 
implications of roads. Probably the most interesting is sort of 
working with the Palestinian private sector.
    These young people, these young entrepreneurs in Palestine 
recognize their natural partners are across that border in the 
Israeli private sector, and there is a tremendous desire to get 
together to make money, because that is what the private sector 
is all about, and helping to create the linkages, either 
utilizing U.S. firms that are there to stimulate or sometimes 
just directly between the two societies, it is helping to 
foster the kind of cooperation, and that cooperation is 
absolutely essential to the development of the region, I would 
say, on both sides of that border.
    Mr. Chabot. The gentleman's time has expired. We are going 
to do a second round here, and I will begin with myself. I 
recognize myself for 5 minutes.
    Mr. Walles, you stated in your testimony that--and I will 
quote you--``Our assistance gives us strong leverage.'' Given 
that statement, it is troubling that, after all these years, it 
is increasingly hard to believe that the Palestinian leadership 
is truly partners for peace with Israel. Eighteen years after 
Oslo, and despite having received billions in U.S. assistance, 
the Palestinian leadership continues to refuse to embrace the 
very vision of two states for two peoples that you cited in 
your statement, even as the Israeli Government accepts that 
vision.
    The Palestinian leadership also refuses to recognize 
Israel's right to exist as a Jewish state for the Jewish 
people, even as they seek a Palestinian state for the 
Palestinian people, and anti-Israel incitement continues to be 
propagated by PA control of institutions, including maps of the 
area that show no State of Israel, with a State of Palestine in 
its place that stretches from the Jordan River all the way to 
the Mediterranean Sea.
    So is it that our assistance given us--Excuse me. Is it 
that our assistance hasn't given us leverage in this regard or 
that we haven't really used it, and the Palestinian 
Antiterrorism Act requires the Palestinian Authority to stop 
incitement and recognize the Jewish State of Israel's right to 
exist, if it wants to keep receiving U.S. assistance.
    Given the PA's record and given U.S. law, how can we 
justify continued assistance?
    Mr. Walles. Thank you for that question. Our assistance 
gives us leverage, and we do work closely with the Palestinian 
Authority on this whole range of issues. We are speaking to 
them about reconciliation agreement. We are speaking to them 
about unilateral actions in New York. We speak to them about 
incitement, and we talk about problems and textbooks, a whole 
range of issues, and we have found over the years that our 
ability to discuss these issues has produced results.
    In addition, as I explained earlier, we feel that there are 
practical benefits that come out of the assistance we provide. 
We have seen over the years improvements in security. I alluded 
to that earlier. We have also seen how our assistance has 
helped the Palestinian Authority develop the institutions that 
they will need for a two-state solution.
    It is, obviously, not an easy process, and we have 
continued to have issues that we have to discuss with the 
Palestinians, and we do that, but I have dealt with the 
Palestinian leadership for a number of years. I was in 
Jerusalem for 4 years with our Consul General, and I have to 
say that, in terms of their commitment to peace, I am convinced 
that President Abbas, Prime Minister Fayyad are indeed 
committed to peace with Israel. They are committed to a two-
state solution. I have known both of them for a long, long 
time. So I think that commitment is there.
    Clearly, there are issues that we have with the Palestinian 
Authority, and there remain considerable gaps between Israel 
and the Palestinians on the issues between them, borders, 
refugees and so forth. So this is not an easy problem, but it 
is one where we believe it is in our national interest to 
achieve that two-state solution and to use all the tools that 
we have through our assistance and other means, to advance in 
that direction.
    Mr. Chabot. There are many of us that are getting more and 
more skeptical about that assistance. You mentioned Prime 
Minister Fayyad. Let me ask you this. He is a very well 
respected person by the western world. He has strengthened 
Palestinian institutions and, certainly, helped to turn the 
economy around there.
    There are questions as to whether Prime Minister Fayyad 
will retain his position, if a new unity government is formed. 
What, if any, are the implications for U.S. assistance if 
Fayyad is not the Prime Minister of the next Palestinian 
Government, and is replaced by a less reputable person?
    Mr. Walles. We have a great deal of confidence in Prime 
Minister Fayyad. We have worked with him. He has done 
tremendous things, as you have said, in terms of improving the 
institutions of the Palestinian Authority, improving the 
security situation, public finance, and so forth.
    I don't want to get in the position of helping the 
Palestinians choose who their prime minister is. We have, 
obviously, very good relations with Fayyad since 2007 when he 
has been the prime minister. I would say that, certainly in 
terms of our law, but also in terms of our policy, what is 
important are not the individuals.
    What is important are the institutions, and it is important 
that there be a Palestinian Authority Government, whoever heads 
it, that is committed to the principles, the Quartet, 
recognition of Israel, renunciation of violence, acceptance of 
all the previous agreements, and a two-state solution.
    That is what is important to us, the policies, the 
composition of that government. That is more important, in many 
ways, than an individual, but again everything Fayyad has done 
over the last 4 years as prime minister has been remarkable in 
terms of the achievements.
    Mr. Chabot. Thank you. I would ask unanimous consent for 
one additional minute to ask a question here, without 
objection.
    General Moeller, if I could, could you please describe the 
U.S., not the Israeli or the Palestinian but the U.S., vetting 
mechanisms that are in place or that are employed relative to 
the Palestinian Security Forces? How often is follow-up vetting 
performed? Is there any kind of biometric tools used to assure 
that there is no malfeasance and that sort of thing?
    General Moeller. Yes, sir. As you know, Palestinian 
recruits, before they can go to their training in Jordan, go 
through an extensive vetting program, and it really starts with 
the Palestinian Authority. They do a pre-vetting for all of the 
recruits before they are actually--They submit names to the 
United States and to Israeli Government.
    We comply with all of the legal requirements or Title XXII 
or I&L funding for Leahy vetting as well as for--and it, of 
course, uses all of the tools that we have at the disposal of 
the Department of State. So the Palestinian recruits go through 
a vetting process with a pre-vetting process by the 
Palestinians. The United States does our legally required 
vetting. The Israelis do an extensive vetting, and then before 
one trooper moves, the Jordanians have an opportunity to do 
vetting for each recruit.
    A good example is that we recently received vetting results 
from the Israelis for 650 Palestinian Security Force members 
that will move either next month or in early September for 
their basic training. Of those 650 recruits, the Israelis 
rejected five. So what you can see is that the Palestinians are 
doing a very good job in their pre-vetting, as well as the 
vetting that all of the services go through.
    We have also seen, of course, for every program that they 
go through that is provided through U.S. assistance, they go 
through--each of the members go through another additional 
vetting process as well.
    Mr. Chabot. Thank you very much. I thank the panel. I would 
now recognize the gentleman from New York for 5 minutes plus 1 
minute, to be fair. So the gentleman is recognized for 6 
minutes.
    Mr. Ackerman. There is this TV game show or whatever. You 
spin a wheel, and all the parties try to keep racking up points 
before they solve the puzzle, and sometimes they get a little 
bit too greedy. Instead of solving the puzzle, they wind up 
bankrupt. They try to keep building their score.
    Let us go right to trying to solve the puzzle. The goal 
here is to get both sides back to the bargaining table. There 
is great danger in that not happening. The results could be 
disastrous for both sides. How do you get them back to the 
bargaining table?
    The President had a proposal. I wasn't startled by it. I 
don't think anybody who has followed this was startled by it. 
It is something that has been discussed by a lot of people over 
a lot of years in a lot of different administrations. There is 
some face saving that has that has to take place as well 
between the Israelis and the Palestinians to get back to the 
table.
    The President threw out what he calls pre-'67 lines. The 
prime minister rejected that, because he said those lines were 
indefensible. Why don't we employ some Solomonic wisdom and cut 
this baby in half. Let us narrow the difference. If someone 
were to make a proposal that said get back to the table based 
on the following proposition with mutually acceptable swaps, 
but the impetus being, start with the fence that the Israelis 
picked out.
    Presumably, they could have put it down anyplace that they 
wanted. In some places, they have moved it to accommodate legal 
decisions of their court, but presumably if they put down a 
security fence, they defined a line that they thought was 
defensible. Otherwise, they would have put it, 
commonsensically, someplace else.
    If we said, let us take both sets of lines, the pre-'67 
lines and the fence, and used both lines as the basis to get 
back to the bargaining table with mutually agreed to swaps, 
which means the Israelis could have a veto if they think there 
is a problem, as would the Palestinians, and go back to square 
one, that would mean that the large settlement blocks remain on 
the Israeli side, which everybody seems to agree is going to 
happen in any deal that can possibly be reached, and narrow 
those differences to somewhere between the pre-'67 lines and 
the security fence, is there enough there to talk about?
    Is there enough face saving for both sides? Could you start 
with both sides lines that both sides have claimed that they 
want, and there is a lot fewer hectares, acres, inches to 
squabble about? Does that work, politically and from a security 
point of view?
    Mr. Walles. Mr. Ackerman, if you and I were negotiating 
this, I am sure we could work it out. The difficulty here, of 
course, is----
    Mr. Ackerman. And who is going to nominate me?
    Mr. Walles. The difficulty, of course, is reconciling the 
Israeli position and the Palestinian position, not just on the 
issue of territory but on many, many issues, and there are 
indeed some important gaps.
    What the President did in his speech on May 19th is to try 
to lay out what he thought was a balanced way in which we could 
resume negotiations, and he talked not just about the 
territorial aspects. He also talked about security, and that is 
an important part of that balance.
    The President also on the 22nd of May explained in a little 
bit of detail what he meant. I think it is worth just sort of 
reading that. He said that, when the two sides negotiate such a 
border, it will necessarily be different than the June 4, '67 
line. That is what the concept of mutually agreed swaps is. So, 
clearly, the parties are going to have to sit down in direct 
negotiation and work this out.
    The President's point in laying out these ideas on 
territory and security was not to lay out the outcome. It was 
to start to give a basis on which they could begin.
    Mr. Ackerman. But the premise I am putting before you is, 
yes, the prime minister didn't want to start there, because he 
said those were indefensible. So put out his defensible one--
presumably, the fence is defensible.
    Mr. Walles. I think it is an interesting idea. At the 
moment what we are trying to do is to get both sides to agree 
to come back to negotiate, based upon the totality of what the 
President said. We have conversations that are ongoing.
    Mr. Ackerman. But that incorporates what the President 
said. It incorporates what the prime minister did.
    Mr. Walles. I think it is an interesting idea.
    Mr. Ackerman. I don't want to endorse my own proposal, but 
I will, if nobody else does.
    Mr. Walles. I will take that back, and we will see what we 
can do with it.
    Mr. Ackerman. General, is that logical?
    General Moeller. Sir, heaven forbid that I would actually 
talk about Israeli security concerns from their perspective. It 
sounds like a proposal that we do need to take back and talk 
about. Certainly, I would be perfectly willing to talk with the 
IDF about how that fits in.
    Mr. Ackerman. Thank you. Mr. Chairman, I don't need the 
extra minute.
    Mr. Chabot. You already took it. We gave you six. 
Henceforth, we will have the Ackerman plan. The gentleman from 
California, Mr. Rohrabacher, is recognized for 5 minutes, or 6. 
He always takes six anyway.
    Mr. Rohrabacher. How much money are we providing in 
assistance, all assistance to the Palestinians?
    Mr. Walles. For the Fiscal Year 2011 budget, we requested 
in economic support funds $4,400,000. That is the same level 
that was requested in Fiscal Year 2010. That is money that is 
implemented by USAID. In addition to that, we have requested 
$150 million in INCLE money. That is International Narcotics 
Control and Law Enforcement. That is the program that funds 
General Moeller and his program. So those are the two 
components of the assistance.
    Mr. Rohrabacher. Where is the $77 million to Gaza? What 
account does that come out of?
    Mr. Walles. Well, those are projects that are ongoing now. 
So that comes out of previous appropriations.
    Mr. Rohrabacher. So we are spending--But that is not 
included. So it is not included in the $600 million that you 
just described, or it is?
    Mr. Walles. The projects that I described in Gaza have been 
funded out of previous year money. Those are ongoing projects. 
Now the money we are requesting for 2011, the total of those 
two, is roughly $550 million.
    Mr. Rohrabacher. That includes the $77 million going to 
Gaza or is it $77 million more than that?
    Mr. Walles. No. All of what we are doing is included in 
those two appropriations.s
    Mr. Rohrabacher. Thank you very much. How much are we 
giving to Israel?
    Mr. Walles. Our assistance to Israel is all foreign 
military financing. It is in the neighborhood of $3 billion a 
year.
    Mr. Rohrabacher. $3 billion, and no other assistance to 
Israel?
    Mr. Walles. There is no economic assistance at the moment 
to Israel.
    Mr. Rohrabacher. It seems to me, again as we look at what 
is going on, the status quo we find ourselves in, is that the 
solution, really--the idea of just getting themselves talking 
to each other is--They could talk about whatever and get 
nowhere. It seems to me, the stumbling block is whether or not 
the Palestinians will agree that the right to return, meaning 
to swarm into an Israel that would exist and thus change its 
basic nature. That is the issue at hand, is it not?
    They can always come to an understanding about borders, but 
until they understand that, that is the essence of what the 
disagreement is.
    Mr. Walles. I appreciate your perspective on this. The 
issues that the Israelis and the Palestinians have agreed form 
the permanent status negotiations include the borders, 
security, refugees, Jerusalem, water. Those are the ones that 
they will have to decide in the course of those negotiations, 
which includes refugees, as you put it, on the right of return. 
So that is an issue that they are going to have to deal with.
    Mr. Rohrabacher. But, obviously, until the right of return 
is dealt with, nothing else matters, because Israel, obviously, 
isn't going to say, oh, yes, 3 million people or 2 million 
people can come right back into Israel, which changes the very 
nature of what they have been fighting for their entire time.
    Let me ask you this. It seems to me from what I am hearing 
here today, that we have been treating this rather then as an 
impasse on policy, which I see it as, as instead as some kind 
of a development program. We spent so much money in doing this 
and preparing this, and even to the point of we are 
micromanaging the vetting of their troops or their constables 
or whatever you want to call them.
    Just for the record, Mr. Chairman, I don't think that 
looking at the peace process as a development program is going 
to bring peace. However, offering some incentives, as I 
mentioned earlier, to both sides to come to grips with those 
specific issues is a totally different approach. Frankly, I 
think the approach we have been using, shoveling out dollars to 
the back of a truck has not worked, and I think we need to take 
a different approach in one last segment here. So I got 25 
seconds left.
    Back to water: Where does the Red Sea and the Dead Sea 
project, which is one of their huge potential water projects 
for that area--Where does that stand, and could that possibly 
be something that we would say, you guys agree to the final 
solution here, and we will move forward and work with you to 
develop this water project?
    Mr. Laudato. Thank you, Congressman. With regard to the 
Dead/Red project, most of our discussions have been regionally 
on that project, because, obviously, it impacts on the 
Palestinians, on the Jordanians, and on the Israelis. I believe 
that the current status is that there is still some substantial 
environmental assessment work that is ongoing. That is, I 
believe, being financed by the Jordanian Government itself, but 
this issue does appear on agendas when we talk to each of the 
governments in the region on a regular basis, but we have 
treated it up to this point as a technical issue, because we 
are trying to figure out what the engineering is, what the 
environmental impact is, and those issues.
    Mr. Rohrabacher. That assessment has been going on for 10-
20 years now.
    Mr. Laudato. Yes, absolutely.
    Mr. Rohrabacher. Let me just note, it could be a great 
symbol of freedom and progress and prosperity and peace to that 
region, but I don't think it is going to happen as a 
development project. It will happen as a promise to those 
people if they can find peace with each other, and peace will 
come when the fundamental issues are agreed upon.
    Thank you very much.
    Mr. Chabot. The gentleman's time has expired. The final 
questioner today will be the gentleman from Florida, Mr. 
Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it 
very much.
    What can you tell me for the panel--or what can you tell me 
about Hamas' direct involvement of the so called Gaza Flotilla 
efforts, whether the one launched from Turkey last year or the 
most recent attempt that was supported by the Greek Government 
last week. Let me just take a moment to publicly thank the 
Government of Greece for preventing the illegal launch of these 
boats, which were embarked on a campaign to render aid and 
comfort to a terrorist organization violation of a lawful 
blockade.
    Having said that, if a direct or indirect Hamas role can be 
established, what does that say about the seriousness of Fatah 
to negotiate peaceably with Israel, and also would you agree 
these types of flotillas are unnecessary as legal mechanisms 
already exist to provide assistance to the people of Gaza?
    Mr. Walles. Thank you, sir, for raising that question. Due 
to the combined efforts of many parties, and you mentioned the 
Greek Government--they played an important role in this--we 
have been able so far this year to head off a repeat of a 
flotilla to Gaza.
    I would agree with you completely that such flotillas are 
unnecessary. They exist to establish mechanisms to allow 
humanitarian assistance and development projects to occur in 
Gaza. We fund our own projects in Gaza that we have talked 
about earlier. All of these projects are done with the approval 
of the Israeli Government.
    There are also established mechanisms in place to provide 
humanitarian support. If other private organizations or other 
international donors want to provide humanitarian or other 
assistance to Gaza, there are ways to do that. So these 
flotillas are not necessary, and we are pleased that, so far 
this year, we haven't seen a repeat of the kind of incident 
that we had last year.
    In terms of any Hamas involvement in these flotillas, we 
haven't seen that. These flotillas seem to be organized by 
private groups, many of them in Europe. There was one 
organization in Turkey that played an important role last year, 
but we haven't seen any direct Hamas involvement. If there 
were, of course, that would be another matter of concern, but 
we have a great deal of concerns already about Hamas. They are 
a foreign terrorist organization.
    Mr. Bilirakis. Thank you. Anyone else on the panel? Thank 
you very much, Mr. Chairman. Appreciate it. I yield back.
    Mr. Chabot. Thank you very much. The gentleman yields back.
    We want to thank the very distinguished panel here this 
morning for their testimony. It has been very helpful.
    I would note that all members will have 5 days, 5 
legislative days, in which to insert statements or revisions to 
the record.
    If there is no further business to come before the 
committee, we are adjourned. Thank you.
    [Whereupon, at 11:51 a.m., the subcommittee was adjourned.]
                                     

                                     

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