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





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

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON FOREIGN AFFAIRS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 14, 2011

                               __________

                           Serial No. 112-68

                               __________

        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









                            C O N T E N T S

                              ----------                              
                                                                   Page

                               WITNESSES

The Honorable Elliott Abrams, senior fellow for Middle Eastern 
  sudies, Council on Foreign Relations...........................    10
Jonathan Schanzer, Ph.D., vice president of research, Foundation 
  for Defense of Democracies.....................................    15
Mr. James Phillips, senior research fellow for Middle Eastern 
  affairs, The Heritage Foundation...............................    25
Mr. David Makovsky, Ziegler distinguished fellow, director of 
  Project on the Middle East Peace Process, The Washington 
  Institute......................................................    32

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

The Honorable Elliott Abrams: Prepared statement.................    12
Jonathan Schanzer, Ph.D.: Prepared statement.....................    17
Mr. James Phillips: Prepared statement...........................    27
Mr. David Makovsky: Prepared statement...........................    34

                                APPENDIX

Hearing notice...................................................    80
Hearing minutes..................................................    81
The Honorable Gary L. Ackerman, a Representative in Congress from 
  the State of New York: Prepared statement......................    83
The Honorable Gerald E. Connolly, a Representative in Congress 
  from the Commonwealth of Virginia: Prepared statement..........    85
The Honorable William Keating, a Representative in Congress from 
  the Commonwealth of Massachusetts: Questions for the record....    87

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

                              ----------                              


                     WEDNESDAY, SEPTEMBER 14, 2011

                  House of Representatives,
                              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. Ileana Ros-
Lehtinen (chairman of the committee) presiding.
    Chairman Ros-Lehtinen. The committee will come to order. I 
would like to remind audience members that disruption of 
committee proceedings is against the law and will not be 
tolerated. Although wearing themed shirts while seated in the 
hearing room is permissible, holding up signs during the 
proceedings is not. Any disruptions will result in a suspension 
of the proceedings until the Capitol Police can come and 
restore order.
    After recognizing myself and the ranking member, Mr. 
Berman, for 7 minutes each for our opening statements, I will 
recognize the chairman and the ranking member of the 
Subcommittee on the Middle East and South Asia for 3 minutes 
each for their opening statements. I will then recognize 
members for a 1-minute opening statement from each.
    We will then hear from our witnesses. Thank you, panelists. 
And I would ask that you summarize your prepared statements 
within 5 minutes each before we move to the question and answer 
period with members under the 5 minute rule.
    Without objection, the witnesses' prepared statements will 
be made part of the record, and members may have 5 days to 
insert statements and questions for the record, subject to the 
length limitation of the rules. The Chair now recognizes 
herself for 7 minutes.
    Today's hearing is a part of a broader oversight by the 
committee to examine U.S. assistance to the Palestinian 
Authority and U.S. policy options to address the troubling turn 
of events regarding the PA's activities.
    First, I would like to thank my friend and colleague Mr. 
Chabot, the chairman of the Subcommittee on the Middle East and 
South Asia, for assisting us in elevating this hearing to the 
full committee. We stand at a critical juncture with respect to 
the Israeli-Palestinian conflict, which will inevitably have a 
major impact throughout the region. Events appear to be heading 
increasingly in a negative direction, and regrettably the 
administration has been slow to take action.
    The most recent challenge to the peace process is the 
Palestinians' intention to seek membership in the United 
Nations as the State of Palestine, but without having made any 
effort to seriously negotiate with Israel. After weeks of 
uncertainty and drift, the administration has finally pledged 
that if the Palestinians go to the U.N. Security Council and 
ask for U.N. membership for a State of Palestine, the U.S. will 
veto that resolution.
    But the administration's waiting until the 11th hour to 
make this announcement wasted a critical opportunity to prevent 
the problem from building. This sits a stark contrast to the 
decisiveness that the Truman administration displayed with 
respect to Israel.
    As Clark Clifford reportedly remarked to President Truman 
on the eve of Israel's independence, when much of the cabinet 
was arrayed against the decision to recognize the State of 
Israel, and I quote:

        ``In an area as unstable as the Middle East, where 
        there is not now and never has been any tradition of 
        democratic government, it is important for the long-
        range security of our country, and indeed the world, 
        that a nation committed to the democratic system be 
        established there on which we can rely. The new Jewish 
        state can be such a place. We should strengthen it in 
        its infancy by prompt recognition.''

    The United States was indeed the first country to recognize 
the State of Israel, and Israel today is such a government and 
ally. Strong U.S. leadership in this tradition would have drawn 
a bright line that other responsible nations could have rallied 
behind.
    Now, however, because the Palestinians have been allowed to 
mobilize support, they will probably go to the General 
Assembly, where the U.S. does not have a veto, and ask for 
explicit recognition of a Palestinian state, or implicit 
recognition through an upgrade in their status at the U.N. This 
tactic would enable the Palestinians to seek full membership in 
other U.N. agencies.
    Given that we know that this is likely to happen, we have 
time to take action to minimize the damage. In 1989, Yasser 
Arafat's PLO tried to do the same thing that Abu Mazen's PLO is 
doing, seeking the de facto recognition of a Palestinian state 
from the U.N. through agencies like the World Health 
Organization.
    The PLO seemed assured of victory, and Israel seemed bound 
for international isolation. But then George Herbert Walker 
Bush--which is highly regarded, his administration, to this 
day, for its success in multilateral diplomacy--made a bold 
pledge: The U.S. would withhold funding to any U.N. entity that 
granted membership, or any upgraded status, to the PLO.
    The PLO's scheme was stopped dead in its tracks. The 
administration should use the same funding conditions that 
worked two decades ago to stop Abu Mazen's dangerous unilateral 
scheme today.
    This controversy regarding unilateral statehood reflects a 
broader failure by the Palestinian to meet their obligations. 
They continue to engage in anti-Israel incitement and to 
glorify violent extremism. They refuse to negotiate directly 
with Israel, and refuse to recognize Israel's right to exist as 
a Jewish state. Most troubling of all, they have aligned 
themselves with Hamas, a designated foreign terrorist 
organization whose stated objective is the elimination of the 
State of Israel and all of its Jewish citizens.
    Despite decades of assistance totaling billions of dollars, 
if a Palestinian state were declared today it would be neither 
democratic, nor peaceful, nor willing to negotiate with Israel.
    By providing the Palestinians with $2.5 billion over the 
last 5 years, the U.S. has only rewarded and reinforced their 
bad behavior. It raises tough questions as to just what are the 
tangible benefits for the U.S., or for lasting peace and 
security between Israel and the Palestinians, or derived for 
decades from assistance provided by United States taxpayers.
    Palestinian leaders are not going to make the tough 
decisions and change their ways unless compelled to. If 
progress is to be made, the administration must stop looking 
for ways to circumvent requirements that the PA must meet 
certain criteria before they can receive U.S. aid. These 
conditions call for the Palestinians to completely abandon 
their unilateral efforts to secure recognition as an 
independent state, tear up their agreements with Hamas, return 
to direct negotiations with Israel, stop anti-Israel 
incitement, and begin preparing the Palestinian people for 
peace with Israel and recognize Israel's right to exist as a 
democratic Jewish state.
    We hope that those conditions are there. We hope that they 
will be met. I would appreciate our witnesses addressing the 
most effective course of action to achieve those desired 
objectives. I thank my good friend, the ranking member Mr. 
Berman, for the time, and now I am pleased to recognize him for 
7 minutes for his opening statement.
    Mr. Berman. Well, thank you very much, Madam Chairman. And 
I thank the witnesses. You have put together an excellent group 
of people for a very important subject.
    Madam Chairman, the Palestinian Authority president, 
Mahmoud Abbas, has apparently chosen to scorn the negotiation 
table in favor of unilateral action at the U.N., action that he 
says will bring his people closer to statehood. This step, 
which runs counter both to repeated U.S. requests and to prior 
Palestinian commitments, is likely to have disastrous 
consequences, and almost certainly it will make the prospect of 
a Palestinian state ever more distant.
    Exactly what the Palestinians intend to do, what their 
resolution will say, and what process they will pursue at the 
U.N. are unknown at this time. Perhaps there is still time for 
good sense and effective diplomacy to prevail. Should the 
Palestinians follow through with their U.N. initiative, 
however, they will be reneging on their past commitment, 
enshrined in the 1993 Oslo Agreement and elsewhere, to resolve 
their problems with Israel through direct, bilateral 
negotiations.
    One thing is clear: There will be no recognition of 
Palestinian statehood by the Security Council, where I am 
certain the Obama administration would use its veto, just as it 
has in the past, to prevent the passage of an unbalanced, anti-
Israel resolution.
    That means that the Palestinians will likely take their 
case to the U.N. General Assembly. And what exactly would the 
General Assembly recognition of a Palestinian state do for the 
Palestinian people? Absolutely nothing. It would not help the 
Palestinians achieve a state that lives in peace alongside 
Israel. It would not solve the Palestinians' need for 
recognized borders, nor would it solve sensitive issues like 
the status of Jerusalem, water rights, or Palestinian refugees. 
Nor would it improve the economy or the security of the West 
Bank or Gaza.
    In fact, Abbas' strategy would leave the core issues of 
this conflict unresolved and festering. Yet, while a U.N. 
General Assembly resolution will have absolutely no impact on 
the ground, it could have a major impact in international 
courts of law, as so many experts assert.
    If the General Assembly enhances the Palestinians' current 
status as a non-state observer to that of a state, the 
Palestinians would have standing to bring cases against Israel 
at the International Criminal Court and the International Court 
of Justice. And that is exactly what President Abbas has 
indicated he will do.
    Of course, that would merely waste more time and further 
poison relations with Israel, making statehood and peace 
further away than ever. I would appeal to our European friends, 
and to all nations, not to support a resolution with such 
calamitous potential.
    Many analysts have suggested that the U.N. initiative 
reflects the fact that Abbas is a prisoner of domestic 
politics, that he must burnish his nationalist credentials if 
he is to be a credible leader. According to a poll 3 months 
ago, Palestinians favored the initiative by 65 percent to 31 
percent.
    But those views may be evolving. According to another 
Palestinian poll released just last week, only 35 percent of 
the Palestinians now believe that the Palestinian Authority 
should go ahead with their U.N. strategy, while a clear 
majority, 59 percent, said that the PA should go back to the 
negotiation table with the Israelis for the sake of a permanent 
peace.
    I don't want to put too much stock in Palestinian polling, 
but it just may be the case that Abbas is misjudging his own 
people. I would be interested in the views of our panelists on 
the quality of those polls.
    Madam Chairman, Congress has been very generous in its 
support of the Palestinian Authority's worthy efforts to build 
institutions and the economy in the West Bank. There is at 
least one person at that table who played a major role in that. 
In fact, we are the most generous nation in the world in that 
regard.
    Therefore, I believe it is appropriate to point out that, 
should the Palestinians pursue their unilateralist course, the 
hundreds of millions of dollars in annual assistance that we 
have given them in recent years will likely be terminated, and 
that could well result in the collapse of the Palestinian 
Authority.
    And it pains me to say that. U.S. aid has contributed 
significantly to many positive developments in the West Bank: 
Economic growth, institution-building, progress in governance 
and improved security for the Palestinians and Israel. But all 
of that is just a Band-Aid. It will not last. It is not 
enduring if there is no political solution, and for that we 
need negotiations, not U.N. unilateralism.
    We will be prudent in our actions, but one thing is clear: 
President Abbas' Palestinian Authority should not be rewarded 
with American taxpayer dollars for actions that defy 
Palestinian commitments, threaten to destabilize the region, or 
run counter to U.S. interests. These dollars can better be 
spent elsewhere.
    Just 2 months ago, this body passed H. Resolution 268, 
which said that the House ``affirms that Palestinian efforts to 
circumvent direct negotiations and pursue recognition of 
statehood prior to agreement with Israel will harm U.S.-
Palestinian relations and will have serious implications for 
U.S. assistance programs for the Palestinians and the 
Palestinian Authority.''
    The Palestinians have been forewarned. We should not shrink 
from this pledge of just 2 months ago. In closing, I want to 
reiterate my conviction: Negotiations are the only path to a 
lasting two-state solution to the Israeli-Palestinian conflict. 
President Abbas likes to tell people he wouldn't get anything 
in negotiations with Prime Minister Netanyahu, but the fact is, 
he hasn't even tested the proposition, even though Netanyahu 
has repeatedly made clear his desire to commence talks 
unconditionally.
    It is not too late for President Abbas to abandon his 
flawed U.N. strategy and engage directly with the Israelis. For 
the sake of peace, and for the sake of his relations with the 
Palestinians' most important benefactor, the United States of 
America, I urge him to do so.
    And I yield back, Madam Chairman.
    Chairman Ros-Lehtinen. Thank you very much. My good friend 
Mr. Berman, the ranking member. I am pleased to yield 3 minutes 
to Congressman Steve Chabot, the chairman of the Middle East 
and South Asia Subcommittee.
    Mr. Chabot. Thank you, Madam Chair. Since taking office, 
President Obama has reiterated numerous times his belief that 
the resolution of the Israeli-Palestinian conflict is one of 
America's core interests in the Middle East. Over the past 2 
years, however, even as the Palestinian Leadership has 
repeatedly retreated from a meaningful peace process, American 
assistance has remained unchanged.
    Plainly speaking, a fundamental disconnect has formed 
between our aid policy and our policy objectives. I recently 
traveled to Israel and the West Bank, where I was able to 
witness firsthand the tremendous gains that have been made on 
the ground. Indeed, the two most prominent features of the 
Ramallah landscape are construction cranes and unfinished 
business and buildings.
    Unfortunately, the current Palestinian leadership appears 
all-too-willing to sacrifice the achievements of Prime Minister 
Fayyad's state-building effort in the name of political 
theatrics. Instead of capitalizing on these gains through 
honest negotiations with Israel, the Palestinian leadership 
seems to be dead set on pursuing a path of unilateralism before 
the U.N. Security Council and/or the General Assembly this 
September.
    True Israeli-Palestinian peace can only be made between two 
peoples, Israelis and Palestinians, and not the 191 other 
members of the General Assembly. If decades of frustration have 
taught us nothing else, it is that the road to Palestinian 
statehood does not start in New York, and it is not the place 
of the United States, the United Nations, or any other country 
or institution to short circuit the requisite negotiations 
between the two parties. Indeed, a unilateralism is simply 
rejectionism by another name.
    For years, we have invested heavily both money and effort 
to help the Palestinians build a state for themselves, and it 
is irrefutable that our work has yielded results. The security 
gains on the ground in the West Bank have enabled unprecedented 
economic growth. Israelis have felt comfortable making security 
concessions that would have been unthinkable even a few years 
ago.
    But just because our current aid policy has yielded 
results, that does not mean that it is currently, or that it 
will in the future. Under the best economic conditions, U.S. 
aid should not be an ever-flowing stream of taxpayer money. 
Under the current economic conditions, it simply cannot be.
    The fact of the matter is that we are rapidly approaching a 
watershed moment in U.S.-Palestinian relations. Both the 
potential reconciliation government that Hamas and the 
unilateral campaign at the U.N. could not be more contrary to 
U.S. interests in the region. Rejectionist elements within the 
Palestinian leadership still refuse to sit and negotiate in 
good faith, even as Israel reiterates its commitment to have 
the establishment of a Palestinian state.
    Time and again, Israel has demonstrated its commitment to a 
Palestinian state living as its neighbor in peace and security. 
But there are no short-cuts on the path to that 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. If the Palestinians 
continue on their current path, the question before this 
Congress will not be ``What portion of our aid will be cut?'' 
but rather ``What, if any, portion will remain?''
    I yield back, Madam Chair.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Chabot, the 
chairman of the appropriate subcommittee. My good friend from 
New Jersey, Mr. Sires, is recognized for 1 minute.
    [No response.]
    Chairman Ros-Lehtinen. Thank you for passing that up. Mr. 
Cicilline, my mayor?
    [No response.]
    Chairman Ros-Lehtinen. Thank you. Ms. Bass?
    [No response.]
    Chairman Ros-Lehtinen. I tell you, this is wonderful. Mr. 
Carnahan? Is recognized for 1 minute.
    Mr. Carnahan. Thank you, Madam Chair. I want to thank you 
and Ranking Member Berman for convening this hearing on this 
subject, especially now. This is a critical time. Like many of 
my colleagues, I have serious concerns about the Palestinian 
leaders and their plans to take to the U.N. this month a 
unilateral push for statehood, an end run around the necessary 
peace process.
    I strongly oppose any and all of these efforts, and believe 
that it is in the best interests of the Palestinian people, the 
Israeli people, and the peace process that this resolution as 
conceived not be offered. It is incumbent upon Congress and the 
administration to send the strongest possible message to 
President Abbas that his efforts are in no one's interests, 
including his own people.
    We should reexamine how and whether we continue to offer 
assistance to the PA in the course of this conversation. I want 
to thank the panel for being here today, and really getting us 
focused on the path through this process, over the next few 
weeks in New York.
    Thank you, and I yield back.
    Chairman Ros-Lehtinen. Thank you, Sir. Mr. Rohrabacher is 
recognized, the chairman of the Subcommittee on Oversight and 
Investigations, for 1 minute.
    Mr. Rohrabacher. Thank you very much, Madam Chairwoman. The 
testimony that most concerned me in the first of these hearings 
was the admission by Jacob Wallace, our Deputy Assistant 
Secretary of Near-Eastern Affairs, which--he was testifying 
right there. He said that we were not using our various 
programs and our aid as leverage to push the Palestinian 
Authority back to the peace table, and for talks with Israel.
    What are we using--or what are we spending all this money 
for, if it is not to promote peace? I mean, this is not anti-
Palestinian or pro-Israeli, this is pro-peace. I mean, if we 
are not using our money for that, what are we using it for?
    I am very interested to hear the opinions of our witnesses 
today as to how much money we are giving, and whether we are 
actually achieving anything by the aid that we are giving to 
the Palestinians, if we are not going to push for peace.
    Thank you very much.
    Chairman Ros-Lehtinen. Thank you, sir. My Florida 
colleague, Mr. Deutch, is recognized for 1 minute.
    Mr. Deutch. Thank you, Madam Chair and Ranking Member 
Berman. Thank you to the witnesses for appearing today. We are 
just days away from possible unilateral action at the U.N. by 
the Palestinians. The decisions by Mr. Abbas to use the United 
Nations to bypass face-to-face negotiations with Israel is not 
only unwise, it is utterly unacceptable. The United States has 
made our position clear: The only way to lasting peace is 
through direct negotiations.
    Madam Chair, this week marks the 18th anniversary of the 
Oslo Peace Accords. In just days, nearly two decades of peace 
could be undone by the Palestinians' actions at the United 
Nations. The Palestinians must know there will be consequences 
for their actions in New York. If these actions jeopardize 
stability in the region, Israeli security, and our own U.S. 
interests in the greater Middle East, there must be serious 
diplomatic and punitive consequences.
    If Mr. Abbas is serious about creating lasting peace and 
establishing a state for the Palestinian people, he would 
abandon this foolish plan, he would abandon partnership with 
Hamas, and he would return to the negotiating table where Prime 
Minister Netanyahu has been waiting without conditions for the 
past year.
    Thank you, Madam Chair.
    Chairman Ros-Lehtinen. Thank you very much. Ms. Schmidt is 
recognized, who will be running her 90th marathon this weekend. 
Good luck.
    Ms. Schmidt. Thank you. Thank you, Madam Chair, and thank 
you to the witnesses for being here today. This is a very 
important subject, and I will be succinct.
    Madam Chair, allow me to be clear about my position on the 
Israeli-Palestinian conflict: I support a free, secure, and 
independent Palestine state, but never--and I mean never--at 
the expense of a free, secure, and independent Israel. Period, 
case closed.
    Israel is the only democracy in the Middle East, and is a 
dear friend and a great ally. While I understand the argument 
in favor of providing foreign aid to the Palestinians, I have 
to ask this question: What are we getting in return for our 
money? Since the 1990s, the United States has provided over $4 
billion in aid. But what is the benefit?
    On May 4th of this year, President Abbas and his Fatah-led 
Palestinian Authority signed a power-sharing agreement with 
Hamas, an organization that has been designated as a foreign 
terrorist organization by the U.S. President Abbas signed this 
agreement with Hamas, even though Hamas refuses to accept 
Israel's right to exist.
    Now, we are faced with the prospect of the Palestinian 
Authority unilaterally pursuing a resolution in the U.N., with 
the objective to garner international support for Palestinian 
statehood. That being said, I have to wonder, why are we still 
providing U.S. assistance to the Palestinian Authority?
    Thank you, Madam Chair. I look forward to this panel, and I 
yield back my time.
    Chairman Ros-Lehtinen. Thank you, Ma'am. Mr. Keating is 
recognized.
    Mr. Keating. Madam Chair, I am going to--since I just came 
in--pass and yield my time.
    Chairman Ros-Lehtinen. Thank you so much. Mr. Kelly of 
Pennsylvania?
    [No response.]
    Chairman Ros-Lehtinen. Mr. Connolly of Virginia? Thank you, 
I apologize. I had not seen you there.
    Mr. Connolly. No problem, Madam Chairman. I want to thank 
you for holding this hearing, and I look forward to the 
testimony.
    Chairman Ros-Lehtinen. Thank you very much, sir. Mr. 
Gallegly is recognized.
    Mr. Gallegly. I thank the chairman, and I just want to be 
very brief. I think this hearing is very timely, and with all 
of the things that we see on the evening news about the 
rancorous side of Congress, and all of the hostility and lack 
of bipartisanship, I think this is a classic example of how we 
stand together, not as Republicans or Democrats, but as 
Americans who truly believe in peace, and how vitally important 
it is, not only to that region of the world, but the rest of 
the world, that we address this issue together, as Republicans 
and Democrats, in a very strong, bipartisan way.
    And your leadership, along with my good friend Howard 
Berman from my home state of California, I want to thank both 
of you, and I yield back.
    Chairman Ros-Lehtinen. Thank you, sir. Mr. Murphy is 
recognized.
    [No response.]
    Chairman Ros-Lehtinen. He was just here a second ago. They 
move fast. Mr. Manzullo, who is the chairman of the 
Subcommittee on Asia and the Pacific, is recognized.
    Mr. Manzullo. Thank you, Madam Chair, for having this 
hearing. Americans are--at least my constituents are upset over 
the $4 billion that the United States has put into bilateral 
assistance to the Palestinians in the past 15 years or so. And 
we are very concerned that the Palestinians are playing a very 
dangerous game at the United Nations by trying to bypass the 
direct talks with Prime Minister Netanyahu.
    The administration must stand with Congress to send a clear 
and unmistakable message that declaring statehood via the U.N. 
is not only counterproductive, but endangers Israel's security. 
I've had the opportunity to meet with five Prime Ministers from 
Israel, sat in the joint session of Congress to hear the great 
speech of Prime Minister Netanyahu. And we as a Congress, I 
believe, are united that the United Nations action cannot 
supplant the direct talks that must take place between the 
Palestinians and Israel itself.
    Chairman Ros-Lehtinen. Thank you very much. Thank you to 
all of the members for their excellent opening statements. And 
now the Chair is pleased to welcome our witnesses.
    The Honorable Elliott Abrams is certainly no stranger to 
our committee. He is a senior fellow for Middle Eastern studies 
at the Council on Foreign Relations. He has served in a number 
of senior positions in the executive branch, as Deputy 
Assistant to the President and Deputy National Security Advisor 
for Global Democracy Strategy from 2005 to 2009. From December 
2002 to February 2005, he served as Special Assistant to the 
President, and as a Senior Director for Near East and North 
African Affairs at the National Security Council.
    From June 2001 to December 2002, he served as Special 
Assistant to the President, and a Senior Director for 
Democracy, Human Rights, and International Organizations at the 
National Security Council. Welcome, Mr. Abrams.
    Next, we will hear from Dr. Jonathan Schanzer. He is the 
vice president of research at the Foundation for Defense of 
Democracies. Dr. Schanzer has worked as a terrorism finance 
analyst at the U.S. Department of Treasury, where he played an 
important role in the designation of numerous terrorist 
financiers.
    Dr. Schanzer has also worked for several other U.S.-based 
think tanks: The Washington Institute for Near East Studies, 
the Jewish Policy Center, and the Middle East Forum. Thank you, 
Dr. Schanzer. It is a pleasure.
    Mr. Phillips is the senior research fellow for Middle 
Eastern affairs at the Heritage Foundation. Mr. Phillips is a 
veteran international security specialist who has written 
extensively on Middle Eastern affairs and international 
terrorism since 1978. He is a former research fellow at the 
Congressional Research Service of the Library of Congress, and 
a former joint doctoral research fellow at the East-West 
Center. Welcome, Mr. Phillips.
    And lastly, we will hear from David Makovsky, who is the 
Ziegler distinguished fellow and director of the Project on 
Middle East Peace. Mr. Makovsky is a member of the Council on 
Foreign Relations and the London-based International Institute 
for Strategic Studies.
    Before joining the Washington Institute, he was an award-
winning journalist who covered the peace process from 1989 to 
the year 2000. He is the former executive editor of the 
Jerusalem Post, was diplomatic correspondent for Israel's 
leading daily, and is a former contributing editor to the U.S. 
News and World Report. He has served for 11 years as that 
magazine's special Jerusalem correspondent.
    A wonderful array of panelists. We will begin with you, Mr. 
Abrams. And as I said at the onset, all of your prepared 
statements will be made a part of the record. Mr. Abrams is 
recognized for 5 minutes.

 STATEMENT OF THE HONORABLE ELLIOTT ABRAMS, SENIOR FELLOW FOR 
      MIDDLE EASTERN SUDIES, COUNCIL ON FOREIGN RELATIONS

    Mr. Abrams. Thank you, Madam Chairman, for inviting me 
here. Thank you to all the members of the committee. It is an 
honor and privilege to return to the committee again. Thank you 
for holding this hearing, which sends, I think, a very tough 
message to the Palestinian Leadership.
    The maneuver in New York by the PLO leadership suggests, as 
many members have said, that they are turning away, both from 
direct negotiations with Israel and from state-building at 
home, and toward a confrontational melodrama in New York. This 
faces you with a difficult problem: What is to be done about 
our aid program?
    If the Palestinian leadership--the PLO leadership, which is 
also the Fatah leadership--insists on going forward against all 
American advice, what should change if the PLO insists on this?
    Personally, I say something has to change. You have warned 
against this step in New York, and you have said there would be 
consequences, and you should be as good as your word. Second, I 
would say, as Mr. Berman said, we don't know quite what is 
going to happen yet. I think this is not a September event; I 
think it is an October event.
    Some of the programs that are up for cutting are actually 
in our interest, and the interest of Israel, such as the 
security programs that Mr. Chabot mentioned. Generally cutting 
off the PA is a very difficult thing to do. For one thing, we 
should distinguish between the PA and the PLO. The PA, the 
Palestinian Authority, is an administrative body, essentially 
under Prime Minister Fayyad and a bunch of other ministers.
    They are not going to New York. They are not recognized in 
the U.N. They are not in the U.N. That is the PLO. The entire 
Palestinian Authority is not to blame for what the PLO Fatah 
crew is planning in New York. I think the collapse of the PA 
would not be in our interest, or for that matter Israel's or 
Jordan's. It might actually benefit Hamas and other terrorist 
groups.
    So the first thing I would say is, give this a few weeks 
and wait and see what President Abbas, in his capacity as 
Chairman of the PLO, does. Does he go to the Security Council 
to force an American veto? That is very harmful for the United 
States. What language does he put forth in his resolution? How 
bad is it, exactly? Does he try to get the General Assembly to 
pronounce on Jerusalem? On refugees? On borders? Does he go 
forward the next day to say ``I am for negotiations,'' or is he 
to go forward the next day in the International Criminal Court? 
So you should keep some powder dry, I think.
    Second, I think you ought to move to close the PLO office 
in Washington. It is the PLO that is doing this. It is the PLO 
whose Ambassador yesterday, in a speech that I would describe 
as disgusting, said that in the new State of Palestine, there 
should not be one Jew. He didn't say ``Israeli.'' He said 
``Jew.'' So Palestine has to be Judenrein, in his view.
    That is the kind of thing that ought to get somebody PNGed 
from the United States. That office is open because you 
provided a Presidential wavier in 1987, and every President has 
exercised it every 6 months. Eliminate the waiver, close the 
PLO office in Washington.
    Third, start looking again at our aid to UNRWA, which is 
hundreds of millions of dollars. We are the most generous 
donor. And what UNRWA does is perpetuate this refugee problem. 
It started at $750,000. Now it is $5 million. Every other post-
World War II refugee problem is gone. This one keeps getting 
larger, thanks to UNRWA.
    Finally, I would say, take a far harder line on PLO and PA 
corruption. This is not a criticism of Prime Minister Fayyad, 
for whom I have the highest regard, but he is surrounded by the 
old Fatah/PLO corrupt crew. For example, since 2006, the 
Palestine Investment Fund, which is worth about $1 billion, has 
been taken away from him, from his authority.
    And there are plenty of allegations about things like self-
dealing by the members of that board. So I think, given the 
amounts of money that have been mentioned here, $5 billion the 
United States has given, you have every right to demand 
investigations into and the elimination of corruption.
    This is a difficult set of issues, but the PLO leadership 
should know that if they turned from the work of building a 
decent, democratic state from the ground up, and from genuine 
negotiations with Israel, you are determined that they will pay 
the price. And in that determination, you are right.
    Thank you for this opportunity to appear before the 
committee.
    [The prepared statement of Mr. Abrams follows:]
    
    
    
                              ----------                              

    Chairman Ros-Lehtinen. Thank you very much.
    Dr. Schanzer?

   STATEMENT OF JONATHAN SCHANZER, PH.D., VICE PRESIDENT OF 
        RESEARCH, FOUNDATION FOR DEFENSE OF DEMOCRACIES

    Mr. Schanzer. Chairman Ros-Lehtinen, Ranking Member Berman, 
and distinguished members of the committee, on behalf of the 
Foundation for the Defense of Democracies, I thank you for the 
opportunity to discuss today some of the challenges associated 
with our country's annual $600 million aid package to the 
Palestinians.
    I testify today having conducted interviews last week with 
Palestinian Authority figures, Fatah party representatives, and 
Israeli officials in both Ramallah and Jerusalem. These 
interviews confirm that our aid package needs an overhaul. 
While my written testimony is more expansive, in the interest 
of time I will focus today only on the problems of Palestinian 
Authority corruption and support for terrorism.
    In recent years, the PA has been lauded for its 
transparency and accountability, thanks to PA Prime Minister 
Salam Fayyad. Recently, however, Fayyad has been sidelined by 
President Mahmoud Abbas. Abbas has consolidated power, and he 
is now abusing it. One egregious example is the Palestine 
Investment Fund.
    The PIF was created in 2002 to function as a transparent 
sovereign wealth fund, to benefit the Palestinian people. In 
recent years, however, Abbas has changed the charter, installed 
his own choices for board members, placed the PIF under his 
full control, and neglected to have it properly audited. As the 
largest donor to the PA, the U.S. has a right to oversee the 
fund.
    The PIF contributes dividends to the PA every year. The PA 
also borrows from this fund, currently worth at least $1 
billion, when it cannot pay salaries. In return for the money 
borrowed, Abbas has been repaying the PIF with land slated for 
businesses that enrich his own inner circle.
    Oversight of the PIF is long overdue. One former official 
charges that $1.3 billion has gone missing from the fund. 
Another claims that exposing the PIF would reveal corruption at 
the highest levels of the PA. And the fact that Hamas recently 
took full control over the PIF's assets in Gaza now adds to the 
concern.
    Another example of corruption is the way in which Abbas' 
sons, Yasser and Tarek, have reportedly accumulated wealth 
since their father took office in 2005. Yasser, the oldest son, 
owns Falcon Tobacco, which has a lucrative monopoly over the 
marketing of U.S.-made cigarettes, such as Kent and Lucky, in 
the West Bank and Gaza. Yasser also owns a company that 
reportedly received $1.89 million from USAID in 2005 to build a 
sewage system in the West Bank town of Hebron. Another company 
owned by Yasser Abbas received some $300,000 in USAID funds.
    The younger, Tarek, is the general manager of Sky 
Advertising, which receives hundreds of thousands of dollars 
from USAID to bolster opinion of the U.S. in Palestinian 
territories. His ad agency also won a lucrative contract from 
the controversial Wataniya cell phone company, where his 
brother Yasser sits on the board. Wataniya was created with 
international donor funds, including U.S. assistance.
    Finally, there is the PA's troubling financial relationship 
with Hamas. Despite its ongoing feud with Hamas, the PA has 
secretly allowed the Jihadist group to raise funds through an 
electricity scam. Electricity in Gaza is produced by a power 
plant that is guaranteed by the Palestinian Authority, but the 
bills are collected by Hamas. As one former Palestinian 
Authority official confided to me, the Hamas authorities 
collect the bills from customers in Gaza, but never sends the 
money back to the West Bank, and the PA continues to foot the 
bill.
    It should also be noted that Hamas government institutions 
and prominent Hamas members simply don't pay their bills, and 
the PA covers them as well. Thus, the PA allows Hamas to raise 
funds by billing Gazans for electricity that they don't 
generate. And because the PA is funded by U.S. taxpayer money, 
we are all enabling Hamas to raise those funds. This is a 
violation of U.S. law, and must be addressed immediately.
    In my written testimony, I describe some of my misgivings 
about cutting off aid entirely. Among other things, we could 
effectively relinquish all of our leverage with the 
Palestinians, leaving the door open for Iran or other bad 
actors to influence the PA in ways that could further threaten 
regional stability.
    But this does not mean that Congress should maintain the 
status quo. Congress should challenge the corrupt system 
created by Mahmoud Abbas. This includes: One, stricter 
oversight of the Presidential waiver process that releases 
Palestinian funds each year. Two, oversight of the Palestine 
Investment Fund, including a full audit. Three, conduct an 
inquiry into the wealth of Mahmoud Abbas and his sons Yasser 
and Tarek, to determine whether U.S. funds have contributed to 
their holdings. Four, demand an immediate resolution to the 
matter of the electric power plant in Gaza. U.S. taxpayers 
should not be indirectly financing Hamas. Number five, 
scrutinize the Presidential budget of PA President Mahmoud 
Abbas. And finally, find ways to increase the role of Prime 
Minister Salam Fayyad, who has been marginalized by Abbas in 
recent years.
    On behalf of the Foundation for the Defense of Democracies, 
I thank you again for inviting me to testify here today, and I 
look forward to your questions.
    [The prepared statement of Mr. Schanzer follows:]
    
    
    
                              ----------                              

    Chairman Ros-Lehtinen. Thank you, Doctor.
    Mr. Phillips?

  STATEMENT OF MR. JAMES PHILLIPS, SENIOR RESEARCH FELLOW FOR 
        MIDDLE EASTERN AFFAIRS, THE HERITAGE FOUNDATION

    Mr. Phillips. Well, Madam Chairman, thank you for this 
opportunity to testify before the committee. I am the Senior 
Fellow for Middle Eastern Affairs at the Heritage Foundation, 
and the views I express in this testimony are my own and should 
not be construed as representing any official position at the 
Heritage Foundation.
    And with that, I would like to summarize my prepared 
statement. U.S. aid to the Palestinians is aimed at supporting 
Israeli-Palestinian peace negotiations, strengthening and 
reforming the Palestinian Authority, which was created through 
those negotiations, and improving the living standards of 
Palestinians to demonstrate the benefits of peaceful 
coexistence with Israel.
    These are laudable goals. But unfortunately, peace 
negotiations have bogged down. Even worse, the Palestinian 
Authority has reached a rapprochement with Hamas, the Islamic 
extremist organization with a long record of terrorism, which 
is not only opposed to peace negotiations with Israel, but is 
implacably committed to Israel's destruction.
    The Palestinian Authority's relationship with Hamas and its 
ongoing efforts to include Hamas in a ruling coalition under a 
May 2011 power-sharing agreement raise disturbing questions 
about the long-term intentions of the Palestinian Authority, 
and cast doubt on its commitment to negotiate a genuine peace 
with Israel.
    By consorting with Hamas terrorists, the Palestinians are 
violating the Oslo Accords and destroying the rationale for 
continued American aid. Palestinian leader Mahmoud Abbas also 
has chosen to pursue a dubious dead-end path to Palestinian 
statehood through the United Nations, rather than through the 
negotiations with Israel. This U.N. diplomatic gambit could 
derail any hope of resuming Israeli-Palestinian peace 
negotiations in the near future, and could destabilize the 
region by exacerbating the already tense atmosphere between 
Israelis and Palestinians, provoking widespread anti-Israeli 
demonstrations that could easily spin out of control.
    The unilateral Palestinian push for statehood not only 
violates previous Palestinian agreements with Israel, but also 
those with the United States, which was a co-signatory of the 
Oslo Accords. Yet the Obama administration has bent over 
backwards to avoid criticizing the Palestinians. This low key, 
reticent approach has failed to halt the Palestinian U.N. drive 
for unilateral statehood.
    It is long past time for the Obama administration to become 
actively engaged on this issue at the highest levels. Secretary 
of State Clinton and the President himself should explicitly 
and forcefully state American opposition to Palestinian plans 
for unilateral statehood. They should explicitly state that the 
U.S. will veto any Security Council resolution recognizing 
statehood or calling for full membership in the U.N. before an 
Israeli-Palestinian peace agreement is concluded.
    The United States should also declare that it will withhold 
voluntary or assessed funds to any U.N. organization that 
admits Palestine as a state or grants it non-member state 
observer status. As the chairman mentioned, in 1989 when the 
PLO issued its first declaration of statehood, the first Bush 
administration blocked this effort by threatening to withhold 
U.S. funding for the United Nations.
    While the Obama administration's deference to the U.N. 
makes such a strong stand unlikely, Congress can step into the 
breach and pass legislation prohibiting funding to any U.N. 
organization that endorses unilateral statehood, admits 
Palestine as a member state, or grants it non-member state 
observer status.
    Congress should also cut U.S. economic aid to the 
Palestinian Authority if it continues to shun negotiations with 
Israel and ignore its commitments under previous agreements. 
U.S. aid is not an entitlement, and should be closely tied to 
the Palestinian performance in demonstrating its commitment to 
peace.
    If the Palestinians persist in their efforts to sidestep 
direct negotiations in favor of some form of illusory 
statehood, then they should expect to look elsewhere for funds 
to build that pseudo-state. The bottom line is that the United 
States must block any effort to create a Palestinian state that 
sponsors terrorism or seeks to make an end run around bilateral 
negotiations with Israel by exploiting the anti-Israeli bias of 
the U.N General Assembly.
    U.S. aid to the Palestinian Authority must be closely tied 
to its compliance with previous agreements to fight terrorism, 
halt incitement against Israel, and negotiate a final peace 
settlement. The U.S. should leverage its aid to convince 
Palestinians that the only realistic path to statehood lies 
through negotiations with Israel. Thank you.
    [The prepared statement of Mr. Phillips follows:]
    
    
    
                              ----------                              

    Chairman Ros-Lehtinen. Thank you, sir.
    Mr. Makovsky

STATEMENT OF MR. DAVID MAKOVSKY, ZIEGLER DISTINGUISHED FELLOW, 
   DIRECTOR OF PROJECT ON THE MIDDLE EAST PEACE PROCESS, THE 
                      WASHINGTON INSTITUTE

    Mr. Makovsky. Thank you, Madam Chairman, Ranking Member 
Berman, and distinguished members of the committee. Thank you 
for this opportunity.
    From the start, I would like to emphatically state that I 
do not support the Palestinian appeal to the United Nations. 
This measure would only be appropriate if Israel was unwilling 
to directly negotiate an end to this ongoing tragic conflict. 
Israel, however, has repeatedly called for such direct talks. 
Therefore, I strongly believe that the Palestinian leadership's 
U.N. approach is wrongheaded and contrary to long-standing 
Palestinian commitments.
    At the same time, I am not convinced that a decision to cut 
off assistance to the PA is the best response, since I fear it 
would lead to the collapse of the Palestinian Authority. 
Congressional aid since Fiscal Year '08 has produced 
unprecedented levels of West Bank stability, prosperity, 
improved governance, and previously unimaginable levels of 
Israeli-Palestinian security cooperation that have benefitted 
Palestinians and Israelis alike.
    Any changes to U.S. aid should therefore be carefully 
calibrated so as not to undermine the benefits that accrue 
beyond the Palestinian arena. We should also see how the drama 
at the U.N. plays out. As Elliott Abrams just stated, if the 
Palestinians opt for their current maximalist course, then we 
should consider imposing non-financial measures, measures such 
as against the PLO offices in Washington and the suspension of 
senior-level meetings between U.S. and Palestinian officials.
    Of course, in any event, I agree with Dr. Schanzer that 
abuses of the Palestinian Investment Fund should be 
investigated regardless.
    A total suspension of assistance would certainly be 
warranted if the PA took a premeditated turn toward a third 
intifada, a third uprising. But President Abbas' record 
strongly suggests that this is not his intent. Policymakers 
must always ask themselves the question: Who benefits from 
these actions? I think the group that stands to gain the most 
from a cut-off of U.S. aid to the PA would be Hamas, which does 
not recognize Israel's existence at all. In stark contrast, the 
PA's cooperation and security relationship with Israel over the 
last 4 years has produced real and favorable change.
    Even Israeli security officials insist--many of them have 
said this to me--that security cooperation is vital and must 
continue. For example, in 2002, 410 Israelis were killed by 
suicide bombings and other attacks emanating from the West 
Bank. From 2007 to 2010, a period of 3\1/2\ years, Israel 
suffered only one fatality from a suicide attack. Imams calling 
for suicide attacks against Israel have been removed from 
around 1,300 mosques in the West Bank. New teachers in the West 
Bank are now vetted to ensure that none purvey the ideals of 
Hamas. Gone is the revolving door of the Arafat era, when 
terrorists would be jailed only to be released when others were 
not looking.
    There has also been a real professionalization of the 
security services, and I thank here the congressionally-
supported U.S. Security Coordinators program that has played a 
large role in strengthening the Palestinian-Israeli security 
cooperation. If congressional aid is suspended and Palestinian 
security officials engaged in this cooperation go unpaid, the 
risk of terror attacks Israel will grow exponentially.
    So who pays the price for this cut-off? Let us not kid 
ourselves. Thanks to American financial support, Palestinian 
security cooperation with Israel has gone hand in hand with 
Prime Minister Fayyad's success in institution-building, 
improved law and order in the West Bank, and Israel's lifting 
of almost all its major manned checkpoints, have been key 
contributions to the 9.3 percent growth enjoyed by the West 
Bank in 2010.
    However, without U.S. aid, the odds are greater that 
Fayyad, who has been the greatest obstacle to Fatah-Hamas 
reconciliation, will resign, imperiling both security 
cooperation and institution-building efforts. He is the goose 
who lays the golden eggs. Without eggs, I think he will resign. 
In other words, withholding U.S. aid will undermine the people 
we want to help, and help the people we want to undermine.
    Although the PA may pay a price in its relations to the 
U.S. for its misguided venture at the U.N., regardless it is 
worth waiting to see if their bid for full membership is scaled 
back to a less maximalist resolution that is more aspirational 
in nature. I think what is clear, that the three poison pills 
of this resolution for Israel is that they would demarcate 
borders that make peacemaking impossible, that it will 
encourage, by giving the Palestinians status that they could go 
after Israeli officials and prosecute them at the International 
Criminal Court, this is a very serious issue. And it means, 
also, the possibility of assertion of Palestinian sovereignty, 
and an attempt to trigger sanctions by accusing that Israel is 
occupying another state's sovereign territory.
    In the meantime, we shouldn't just look about what goes on 
at the U.N. We should look out the day after, and we should 
take very specific steps to avoid violence on the ground. And 
this means making sure that any demonstrations are confined to 
urban areas, and away from Israeli settlements and the like.
    To summarize in a sentence, we should focus on the U.N., 
but we should also look at what happens the day afterwards. I 
look forward to the discussion. Thank you very much.
    [The prepared statement of Mr. Makovsky follows:]
    
    
    
                              ----------                              

    Chairman Ros-Lehtinen. Thank you very much, to you, sir, 
and to all of our panelists. We will begin now the question and 
answer period, and the Chair recognizes herself for 5 minutes.
    Dr. Schanzer, you elaborate on the PA's ambiguous 
relationship with Hamas, and I quote:

        ``Despite its ongoing feud with Hamas, the PA has 
        secretly allowed the jihadist group to raise funds 
        through an electricity scam. Electricity in Gaza is 
        produced by a power plant that is guaranteed by the 
        Palestinian Authority, but the bills are collected by 
        Hamas. As one former advisor to the PA confides, `The 
        Hamas authorities collect their bills from customers in 
        Gaza, but never send the funds back to the West Bank, 
        and the PA continues to foot the bill.' It should also 
        be noted that the Hamas government institutions and 
        prominent Hamas members simply don't pay their bills: 
        The PA covers them as well. In other words, Abbas 
        allows Hamas to raise funds by billing Gazans for 
        electricity that they don't generate. And because the 
        PA is funded by U.S. taxpayer money, we are all 
        enabling Hamas to raise those funds. This is a 
        violation of U.S. law, and it must be addressed 
        immediately.''

    So I would like to ask the panelists about the conditioning 
of U.S. assistance to the PA. Successive administrations have 
failed to adequately condition this U.S. taxpayer aid, which 
has led to a sense of entitlement by the PA, and a dependence 
by the PA on U.S. and international assistance. This has 
enabled the PA, then, to avoid taking responsibility for its 
actions or its own people. If you could elaborate on the 
recommendations for long-term strategy to wean the PA off of 
U.S. assistance, and how do we leverage our assistance to 
achieve our national objectives? Mr. Abrams?
    Mr. Abrams. I think it is Prime Minister Fayyad's goal to 
eliminate the reliance on all foreign assistance, and he has 
talked about how much they needed 2 years ago, last year, this 
year. It is actually down from about $1.5 billion to $900 
million, and it is his goal to eliminate it, as it should be 
our goal, so they can finance themselves.
    I think you are right about the lack of conditionality. 
Even on a question like incitement in textbooks, we have talked 
about it, but we haven't conditioned anything on it. I think it 
probably goes back to the beginnings of this, after the death 
of Arafat. We were so pleased to see a Presidential election 
there, and to see some new faces replacing Arafat, and to see a 
reduction of the unbelievable corruption that had surrounded 
him, that it didn't seem like it was as critical as it does 
now.
    But I think the idea of doing these investigations of 
things like the electricity company in Gaza, PIF, the personal 
finances of President Abbas and his family, should be part of 
any aid program.
    Chairman Ros-Lehtinen. Thank you so much.
    Mr. Phillips. Well, I think, like many other programs that 
were created in Washington, once things are established they 
tend to just float onward. And I think this impending crisis at 
the U.N. is an opportunity to take a harder look, to step back 
and attach more conditions, not only to bilateral aid but also 
to aid through the U.N.
    The UNRWA, I think, is a very costly, dysfunctional 
anachronism that has been around since 1949. I think that we 
should look very hard at disbanding that in the future, and 
turning the responsibility for aiding the Palestinians over to 
the U.N. High Commissioner for Refugees, which is much more 
efficient at helping refugees.
    Chairman Ros-Lehtinen. Thank you, sir. I am just going to 
cut you off, and if I could hold off on you two gentlemen. I 
know you have a lot to say, but Mr. Abrams, if you could 
elaborate on how closing the PLO office--which is what you were 
talking about in your testimony--here in DC could alter the 
PA's strategic calculus?
    Mr. Abrams. The thought would be that, first of all, 
candidly, it is meeting the pledge that Members of Congress 
have made, that there would be a reaction to their going 
forward in the U.N. What they are basically saying, if they go 
forward in the U.N., is, ``The status we have, which is we work 
through the PLO internationally--and the PLO has offices all 
around. The PLO is a U.N. observer--that is not good enough. We 
want a different status.''
    So my argument is that you would be responding, ``Okay. If 
the PLO doesn't work anymore for you, why do we need to have a 
PLO office in Washington? If you guys don't want to work it 
that way, fine. We will close it off.'' And the ability to 
conduct propaganda activities, some of which, as I mentioned, 
are pretty disgusting, would be diminished greatly.
    Chairman Ros-Lehtinen. Thank you very much. I thank the 
panelists. I am sorry I didn't get a chance to get to all of 
you. My friend from California, Mr. Berman, is recognized for 5 
minutes.
    Mr. Berman. Well, thank you very much, Madam Chair. Part of 
what we are talking about is not--Dr. Schanzer makes some very 
interesting suggestions regarding restructuring, examining, 
investigating, oversight on the aspects of parts of our aid. A 
lot of the Palestinian Investment Fund has nothing to do with 
our aid, but you are pointing out, in some ways it has 
facilitated some bad stuff and we ought to be looking at it.
    But that wasn't really about the U.N. resolution, that was 
sort of on its own, and it had its own merits as suggestions. 
On the issue of the reaction to pursuing the U.N., Mr. Makovsky 
has--what is the resolution they go forward with? And the Obama 
administration is in a full court press to try and stop them 
from going forward. And all other things aside, that ought to 
be recognized.
    But if they decide to go ahead, what do they go ahead with? 
And you mentioned several different aspects of--is this just 
another one of the troublesome, bothersome U.N. resolutions 
that are going before bodies all the time, or is this something 
more serious? And you have raised what makes it more serious, 
more dangerous, and bad.
    But if that, in the end, is what the resolution is, I have 
a hard time thinking that closing the PLO office, in and of 
itself, is the significant consequence to doing something which 
is such a fundamental breach of Oslo, and so contrary to what 
is needed to get there, that that's enough.
    And I guess I would like to hear you speak a little more to 
the whole question of meaningful consequences for a really 
dangerous action, initiated by the--it may be the PLO, but he 
is President of the PA. And that is one aspect of it I would 
like you to address.
    The second one is, to the extent that you folks have talked 
about the U.N.--and the chairman mentioned some effective 
strategy that Bush 41 took with respect to not funding 
organizations that recognize the Authority as a state. If this 
is a General Assembly resolution--that is what I am talking 
about. I am not talking about the Security Council issue right 
now. I am talking about the General Assembly resolution.
    What is it? If one wants not to fund agencies of the U.N. 
that accept the Palestinian state, when the General Assembly 
takes that action, is that--are you guys calling for an end to 
all funding of the United Nations?
    Mr. Makovsky. I think that there are a couple things in 
your question. On the first issue, in terms of meaningful 
consequences, Elliott was explaining how the PLO is not the 
lead actor anymore. And they always say, ``Well, the PLO is the 
body that is to negotiate with Israel,'' but the PLO is going 
in the opposite way, here. So I think I share the skepticism of 
the role of the PLO. If the Palestinians are sidelining itself, 
they say ``We will be a Government of Palestine. We won't even 
be PLO observer status.'' So I think that has merit.
    Another suggestion I mentioned is, frankly, a suspension of 
high-level meetings with the United States. I mean, this 
administration from day two named a Middle East envoy, George 
Mitchell. It has devoted a lot of efforts in focusing on this 
issue, and if the Palestinians, in that 2\1/2\ years, have only 
come to the table for 2\1/2\ weeks, then I think the United 
States--we are well within our rights to say, ``Well, the 
President has a lot of foreign policy issues to attend to, and 
if you don't value this effort there might not be a need for 
meetings. We have got a lot of other meetings to hold.''
    So I think that is something that would send a clear 
message, while averting what we really care about, which is, we 
don't want a collapse. We don't want a collapse of the security 
cooperation on the ground that----
    Mr. Berman. Is there a U.N. resolution that could be taken 
up----
    Mr. Makovsky. Yes, look----
    Mr. Berman. That should not--doesn't--should reduce our 
concern?
    Mr. Makovsky. Yes. In my full testimony--I just didn't--I 
couldn't get to it in the verbal testimony, given the time 
constraints. But the European Union is working behind the 
scenes to put forward, to take these--what I would call these 
three poison pills that I mentioned in my remarks--out.
    And if they are successful--and I am not saying they will--
they have a lot of leverage. They are 27 countries. The 
Palestinians are desperate to get European support, because 
they were not the ones that supported the 1988 upgrade at the 
General Assembly. So they have a lot of leverage. There are 
also a lot of countries that vote with Europe at the United 
Nations, that could get them up to 50 votes.
    They could say, ``You want our support? Fine. But this is 
what it will take. You have got to remove the three poison 
pills and make the declaration more aspirational for two 
states, which is predicated on a bilateral negotiation and 
reaching the end of conflict.''
    Mr. Berman. All right. My time has expired. I am sorry I 
didn't get to hear Mr. Abrams' answer, but that is because I 
talked too much in the beginning.
    Chairman Ros-Lehtinen. Thank you, Mr. Berman. And now Mr. 
Rohrabacher is recognized, the chair of the Subcommittee on 
Oversight.
    Mr. Rohrabacher. Yes, Mr. Berman, there are some of us who 
would like to cut funds to the United Nations when those funds 
are not used to promote peace. Just for the record.
    Five billion dollars. We have spent $5 billion, and what 
have we gotten for it? I think it is a fair question that the 
American people can ask, at a time when we are in a financial 
crisis. We haven't gotten peace. There are still rockets being 
shot from Gaza into Israel. And we haven't gotten goodwill. So 
if we are giving people billions of dollars, and we are not 
getting peace, and we are not getting goodwill, what the Hell 
are we getting?
    We are getting a feel-good position for people in the 
United States who really do believe in peace, but feeling good 
doesn't mean that you are going to have any progress. Let us 
just note that there has been some progress made, but I don't 
think you can draw that to the $5 billion that we have given to 
the Palestinians.
    I remember when Israel was not accepting the two-state 
solution. In fact, I advocated the two-state solution, and a 
lot of my Israeli friends were upset with me for doing that. 
Well, now we realize that in order to have peace, there has to 
be two parties that you are respecting and trying to get them 
together.
    Unfortunately, Israel has accepted the two-state solution, 
has given up territory, but I don't recognize anything that the 
Palestinians have given up. I know what we have done: We have 
given them $5 billion. But what have they given up? They 
haven't even given up, even the principle that they cannot 
return to Israel, pre-'67 Israel, and envelop it. Meaning, to 
destroy Israel. They haven't even given up that concept.
    Why are we giving money to people who have not even given 
up the concept that they are going to destroy Israel as it 
exists? I mean, this is absurd. Have we bought any goodwill 
with this $5 billion? That is the first question. Is there 
someone you can point to now, who is our buddy now because we 
have been giving this money? Anyone want to defend that? Go 
right ahead.
    Mr. Schanzer. Congressman Rohrabacher, I very much 
appreciate the sentiment. And I think, if I were to 
characterize the way that we have given aid, it has really been 
about a transaction, and not transformation. And I think that 
cuts to the heart of what you have just said.
    Mr. Rohrabacher. Yes.
    Mr. Schanzer. We have just been furnishing aid. In the same 
way we furnished aid to Egypt, we haven't changed the sentiment 
on the ground, so the Palestinian people still largely hate 
Israel and are anti-peace. And we have allowed this to 
continue.
    And so what I have suggested here today, and what I think 
my colleagues here have suggested as well, is that we really 
need to start to squeeze the system that has been created. I 
think part of the problem is that we began to do that under 
President George W. Bush in the aftermath of the intifada. But 
after the Hamas electoral victory in 2006, and then the 
takeover of Gaza in 2007, we began to look at the Fatah/PLO/PA 
apparatus as the moderates, and we gave them a free pass. And 
we stopped squeezing them in the way that we should have, to 
reform. And this is, I think, how we have gotten to where we 
are today.
    Mr. Rohrabacher. Well, I think this is the best example of 
the phrase ``Being taken for granted.'' Here we are, providing 
the--I mean, $5 billion is a lot of money. I mean, this is a 
lot of money for the American people.
    You know what else we could have done in this country with 
$5 billion? But now, that is--I mean, we are totally taken for 
granted, because we have not predicated that on specific 
actions by these--by the people who are receiving the money.
    Let me just note this: I believe the real peace will come, 
if it ever does--and if it does, it will be predicated on 
Israel giving up all of the settlements in the West Bank, and 
it will be predicated on the Palestinians giving up all their 
notions of ever going back to pre-'67 Israel, and the 
settlement, perhaps, of some property claims that, perhaps, can 
be paid for by those Arab countries that took all the Jewish 
property when the Jews left and went back to Israel, and their 
land was confiscated.
    So hopefully, we have got to get serious about this. And we 
are not serious. We simply keep doling out money to people 
without any preconditions. Thank you very much, Madam Chair.
    Chairman Ros-Lehtinen. Thank you, Mr. Rohrabacher. Mr. 
Sires of New Jersey is recognized for 5 minutes.
    Mr. Sires. Thank you, Madam Chair. Thank you for holding 
this hearing today. I sit here. Different people come before 
us. And I keep hearing the same thing all the time about this 
part of the world: That we give money, and most of the people 
we deal with are corrupt. Somehow, the money disappears, 
especially in this region.
    Are there any honest actors in the region that we could 
deal with, that would put forward the money? I mean, I am sure 
we could stand here and go back and forth. But the real 
question that I have is this: Let's say the Palestinians are 
successful in getting this through the U.N., and nothing 
changes. Whatever the resolution is, nothing changes for the 
Palestinian people.
    What does that say about the Palestinian Authority's 
leadership? Are they going to hang in there? I mean, nothing is 
going to change. Because the corruption is the same, the 
sentiment is the same. Nothing moves forward. There is no 
treaty. There is no future. So what happens? We go through 
another something else.
    Mr. Abrams. If I could, Mr. Sires, I think you have put 
your finger on something critical here, which is the failure of 
leadership. This is a curse the Palestinians have had for 100 
years. I mean, their leadership all along, even before Arafat, 
during Arafat, has been marked by corruption and not by any 
real desire to build, from the bottom up, a Palestinian state.
    And that is what we are seeing now. President Abbas seems 
to be concerned--he is the guy who lost Gaza, and he seems to 
be concerned now with trying to get some kind of unity with 
Hamas, to reunite everybody, get this resolution in the U.N., 
and then maybe call it quits and retire, and retire with--we 
will investigate this, I guess, but a fair amount of money that 
the family has gotten.
    So I think this is a huge problem for us, and of course it 
is a greater problem for the Palestinians, that they have never 
had--with I think the sole exception of Prime Minister Fayyad--
a leader who is really trying to build from the bottom up.
    Mr. Sires. Mr. Phillips?
    Mr. Phillips. If I could just add, I think one of the 
tragedies of this situation is that there was an opportunity 
for a possible peace settlement, but under the leadership of 
Yasser Arafat, I think the PLO squandered that opportunity, and 
I think he played fast and loose with his agreements, and never 
fully delivered on his promise to halt terrorism, and other 
things.
    And now, in his stead, we have President Abbas, who as a 
protege of Arafat, has only limited ability to break with 
Arafat's legacy. And although I think he gives some commitments 
to a two-state solution, it looks more like a two-stage 
disemboweling of Israel. If there is going to be a Palestinian 
state, then refugees should be returning to that state, not to 
Israel. And there is a fundamental inconsistency there.
    Mr. Schanzer. In answer to your question, sir, I think one 
of the problems is just the ideology of Palestinian 
nationalism, over the last 100 years, has unfortunately been 
more about the destruction of something rather than the 
creation of something--i.e. the destruction of the State of 
Israel, and not the creation of a viable Palestinian state. And 
there have been fits and starts in this regard, but they have 
never really undertaken a serious effort to build a state that 
is viable.
    In terms of what we are looking at right now, I would liken 
what Abbas has done at the U.N. to having thought through the 
first 10 or 15 games of a chess match, but without having any 
idea how to end it in a victory. And so what I heard from 
people in Ramallah last week was that there is a great fear 
that, after this political theater has passed in New York this 
month, Palestinians will wake up and look outside their homes 
and see that nothing has changed, as you mentioned.
    And that could actually lead to, not an intifada against 
Israel, but what we might call an ``intra-fada,'' where we 
would see something like the Arab Spring come to visit the West 
Bank. And this could obviously have a very serious impact on 
U.S. interests there, because a weakened Palestinian Authority/
PLO apparatus would certainly give rise to Hamas. So this is 
something that we are watching now. We could be watching the 
self-destruction of Abbas' PLO.
    Mr. Makovsky. I would just like to say, I would like to 
respectfully disagree with what you have suggested, that if 
Congressman Rohrabacher--I think this is not a long-term view 
of what has been going on there. Under the Yasser Arafat era, 
corruption was rampant. All the Palestinian polling said that 
even the Palestinians knew this.
    What Fayyad has done is fundamentally different. He has got 
it all audited. The U.S. Government looks at this. You have a 
situation that the Israeli military, everyone says that the 
effort against corruption is 100 times better today than it was 
during the Arafat era.
    This doesn't mean we shouldn't be vigilant. We should 
investigate if there is the PIF, which is not a U.S. aid 
issue--we should be vigilant about that and try to improve it, 
but let us not pretend that things are the same as they have 
always been.
    We have seen a marked change for the better, and we should 
make it even better. And we should also talk about the lack of 
Arab support for the Palestinian Authority. That deserves a 
hearing in and of itself.
    Chairman Ros-Lehtinen. Thank you, sir. Thank you, Mr. 
Sires----
    Mr. Sires. Thank you, Madam Chairman.
    Chairman Ros-Lehtinen [continuing]. For your questions. Ms. 
Schmidt is recognized for 5 minutes.
    Ms. Schmidt. Thank you. Mr. Abrams, public reports indicate 
that Tony Blair, the former British Prime Minister, who 
represents the Quartet, a diplomatic group focused on the 
Middle East that is made up of the U.S., European Union, United 
Nations, and Russia, is looking for a new basis for Israeli-
Palestinian negotiations. He hopes that the Quartet's statement 
will cushion or shift the Palestinians membership bid toward 
talks. What do you believe are the essential components of any 
Quartet statement? Could you elaborate?
    Mr. Abrams. Yes, I think your description of what Blair is 
trying to do is quite accurate. And I think, basically, what he 
is trying to do and what the Quartet is trying to do is get 
Prime Minister Netanyahu to agree to some version of ``We will 
start negotiating from '67 lines,'' and get the Palestinians to 
agree to some version of the term ``Jewish state.''
    And he figures if he can get that balance, he can get them 
back to the negotiating table. And then, with that agreement in 
hand, in the next week or two, Abbas does not go to the U.N. It 
is a valiant effort. I just think it is probably not going to 
work.
    Ms. Schmidt. Thank you. And what do you believe are the red 
lines for Palestinian activities, as it pertains to their 
efforts in the United Nations? Could you elaborate?
    Mr. Abrams. Well, as has been said here, I think they 
should not be doing this at all. If they are going to do it, 
then the question becomes, what is the content of the 
resolution?
    The worst thing could be if it has in it anything about 
borders, refugees, or Jerusalem. I say that because if you have 
a U.N. resolution that says, for example, ``There is a 
Palestinian state exactly on the '67 borders,'' that kills 
negotiations. Because in the future, no Palestinian negotiator 
is going to be able to take less than the U.N. has already 
given him. So I think those are the three things that have to 
be out of any resolution.
    Ms. Schmidt. Thank you. Mr. Phillips, what are the so-
called--the Arab Spring was just mentioned. What do you see 
would happen in the region if the Arab Spring occurs in 
Palestine?
    Mr. Phillips. Well, I think one of the drivers in terms of 
Palestinian domestic politics behind this rapprochement between 
Hamas and the PLO is a fear that both could be threatened by a 
Palestinian Spring. I think there is a lot of pent-up 
dissatisfaction in Gaza, with Hamas, much more than is 
generally reported in the West, and that Hamas is seeking 
protection from such popular repudiation by going along with 
this political theater at the U.N. General Assembly, and trying 
to get out ahead of it and refocus popular discontent against 
Israel. I think it is part of the same old scapegoat strategy.
    Ms. Schmidt. And I have a couple more things. As we see it 
played out in the polls of the administration regarding the 
potential showdown are not working at present. What could we 
have done to have avoided this situation, and what should the 
administration do to correct it? And I will open that up to all 
four of you in the 1\1/2\ minutes I have left.
    Mr. Schanzer. If I may, I think that the administration, 
respectfully, has handled this rather poorly. We have known 
about this UDI, Unilateral Declaration of Independence, for 
more than 2 years. Salam Fayyad laid this out in 2009, with a 
deadline of September 2011.
    There have been moments along the way where, admittedly, 
the President has come out very squarely and said that this 
runs counter to peace. But at the same time, this 
administration has taken steps to encourage this action. The 
vilification of Israel for building in the West Bank, and this 
campaign against Israel over the last year or 2, I think, has 
certainly encouraged the Palestinians to believe that this was 
all being done in the name of their national project.
    When the President announced his peace process last year 
around this time, he indicated that he hoped to see an 
independent Palestinian state by September 2011, certainly 
giving a nod to, again, Fayyad's plans. And then, earlier this 
year, the President upgraded the PLO offices to the equivalent 
of an Embassy, allowing the Palestinian flag to fly over 
Washington. These were all indications that the President 
supported this maneuver in some way or another, and now is 
asking for this to end.
    Ms. Schmidt. Thank you. I yield back.
    Chairman Ros-Lehtinen. Thank you so much, Ms. Schmidt. Mr. 
Deutch of Florida is recognized.
    Mr. Deutch. Thank you, Madam Chairman. Mr. Makovsky, can 
you respond to Dr. Schanzer's suggestion that the 
administration has waged a campaign against Israel over the 
past year?
    Mr. Makovsky. I have been critical over the over focus on 
settlements for the first 2 years of the administration. I feel 
time was wasted. We ended up boxing in Abbas no less than we 
boxed in Israel. And we focused too much on the symptoms, when 
we should be going for the cure. I wish the administration 
would have been giving its speech in May, they would have done 
it 2 years earlier.
    But I wish, before the administration would have given that 
speech, it would have gone to Brussels, and London, and Paris, 
and said, ``Look. We are about to take a big speech. What are 
you going to do? We are willing to administer tough love. Are 
you willing to administer tough love to the Palestinians? You 
never have.''
    And when Elliott correctly mentioned the valiant effort by 
Tony Blair, I think we would have been in a much better 
leverage position if we would have gone before the speech to 
the Europeans, saying, ``We are about to do something big here 
in Washington, but we are not going to do it unless we know the 
Europeans are going to do something comparable, that they are 
going to give a corollary speech, given either by Lady Ashton, 
or Sarkozy, or Merkel, or whoever.''
    That would have strengthened our bargaining position. I 
fear that the Europeans have basically taken our concession, so 
to speak, and put it in their pockets. And therefore Tony Blair 
doesn't have many bullets this summer, and that is sad. So I 
think those, to my mind, are the two major--the major mistakes. 
The over focus on settlements for the first 2 years, instead of 
trying to actually solve the problem, and not using the moves 
we did make to leverage European concessions, which really 
would have changed the landscape as we would have approached 
the whole U.N. business.
    Mr. Deutch. Could you speak to the administration's 
actions, the past--starting, perhaps, at the United Nations, 
with the veto of the Security Council resolution, and forward? 
I understand you are looking back to the start of the 
administration. Could you talk about the efforts at the United 
Nations, starting then and proceeding through the current 
efforts with the Quartet?
    Mr. Makovsky. Are you talking about the February veto on 
settlements, or the speech of Obama last year?
    Mr. Deutch. The veto of settlements.
    Mr. Makovsky. You know, the administration did veto it, but 
a lot of the buzz around the veto, the way it was done, 
frankly, basically dissipated it. It was a time when the Arabs 
were focused on the Arab Spring, and the administration feared 
this would be a huge distraction and lead to demonstrations 
against the United States, which it didn't lead to it, because 
the Arabs were more focused--they were more preoccupied with 
their own problems.
    So I think the administration--I understand their concerns, 
and they were thinking worst case scenario. It didn't 
materialize. Again, this summer the administration wanted to do 
the Quartet. That was the main strategy. And the administration 
actually has not aligned behind--when Congressman Berman asked 
me about an alternative resolution idea, the administration has 
not come out in support of that.
    Basically, the administration wants to be aligned with 
Israel, and is not offering its support. And that is why the 
Europeans are actually the key actors. The U.S. main bid was 
the Quartet. That was the main focal point to get us off this 
issue at the U.N. in September. But it is a little too little 
too late, because the Europeans have not found the incentive to 
cooperate sufficiently with the United States.
    They always have their reasons, of course, but I think that 
that was--we didn't maximize our leverage, and so ostensibly 
that wasn't a U.N. move per se, but that was our main bid, was 
earlier this summer. And I think when we didn't get that thing 
nailed down on July 11th in the Secretary of State's office 
with the Quartet members, frankly the closer we get to the 
U.N., it dwindles. U.S. leverage dwindles. Everyone is staking 
out their own positions, and isn't stopping Abbas. So I think 
things could have been done differently.
    Mr. Deutch. At this point, though, as you point out, Mr. 
Makovsky, the criticism--your criticism seems to be that the 
administration's position is, in supporting Israel at this 
point, rather than looking for some other alternative and 
leaving that to the Europeans. Are you questioning that?
    Mr. Makovsky. No, I am not questioning at all. I think 
President Obama said, ``This is a principal position for this 
administration, that this issue of the Palestinians is not 
settled at the U.N., it is settled at the table.'' And I think 
the President is 100 percent right.
    Mr. Deutch. All right. Does anyone--do any of the other 
witnesses doubt that that has been the administration's 
commitment?
    Chairman Ros-Lehtinen. We will have to wait for that 
response.
    Mr. Deutch. Thank you, Madam Chair.
    Chairman Ros-Lehtinen. Thank you, Mr. Deutch. Mr. Chabot, 
the chairman of the Subcommittee on the Middle East and South 
Asia, is recognized.
    Mr. Chabot. Thank you, Madam Chair. And I will direct this 
to any of the panel members that might be interested. As I had 
mentioned in my opening statement, I had recently returned from 
a trip to Israel and the West Bank.
    I was actually in Ramallah, discussing with Prime Minister 
Fayyad his tremendously important state-building effort, when 
the reconciliation agreement between Hamas and Fatah was being 
signed, without his blessing and probably without even his 
knowledge. At the meeting that we had with him--we happened to 
hear about the reconciliation later on that evening, and he 
certainly didn't seem to know anything about it. I can't vouch 
for that, but that was the impression that I had.
    Since then, several potential cabinet formulations have 
been discussed which would result in his replacement as prime 
minister. That is Prime Minister Fayyad. As we all know, 
Fayyad's integrity and competence has been essential in 
building the credibility of Palestinian institutions, which for 
a very long time were bottomless pits of corruption.
    One question that comes to mind is how we can ensure Fayyad 
does not get forced out of office. As I ask that, though, it 
occurs to me that if the gains achieved under his leadership 
are dependent on his leadership, perhaps we have already lost. 
How should U.S. aid policy be adjusted if Fayyad is no longer 
the Palestinian Prime Minister, and are any gains in the West 
Bank sustainable after he is gone, taking into consideration 
what we have seen Palestinian leadership in the past, and other 
than Fayyad in the present, be?
    And whoever would like to take it--maybe we will start with 
Mr. Abrams.
    Mr. Abrams. I would be very pessimistic about how much of 
the gains will stick. On security and on financial probity, he 
is not a one-man band, but he is a leader. And without that 
leadership at the top, I think it will start to crumble. How 
should we respond to it? I think we should talk to the other 
aid donors who are significant, which is primarily the 
Europeans, the EU and the individual countries, and a couple of 
others, like the Saudis.
    And so that we are all sending the same message to the 
Palestinians, including to President Abbas, saying, ``Don't do 
it, because we don't trust where the money is going to go after 
he is gone.'' I think that is actually one of the reasons he is 
still there. The Saudis, among others, told Abbas, ``Don't do 
it.''
    Mr. Chabot. Thank you. Anybody else like to take a stab? 
Yes, Mr. Makovsky?
    Mr. Makovsky. No. I mean, I am very happy with your 
question, because, I mean, my point is, there has been this 
huge improvement because of his leadership. And it is not about 
supporting one man and tying yourself to a man. It is tying 
yourself to a set of principles that he has represented. If he 
goes, and his successor is more like the Arafat era, then I 
would be more of the view of Mr. Rohrabacher and the gentleman 
we heard from before, that the U.S. should reexamine it.
    But I think, when he is making all these gains for 
transparency, and trying to create an ethos of accountability, 
which is not easy, because Yasser Arafat--let us be honest--
left a very toxic legacy. But he is building schools. He is 
paving roads. He is opening health clinics. He is reforming the 
security services, making it professional. He is getting the 
preachers out of the mosques who are calling for Jihad. He is 
doing everything that any person, not just the United States, 
would want a Palestinian Authority to be like. If his ethos of 
accountability is somehow returned to the past, then I would be 
for a reexamination myself.
    Mr. Chabot. Okay. Yes, sir?
    Mr. Schanzer. I will add just one thought to that, and that 
is that, as much as I agree with David about how much Prime 
Minister Fayyad has accomplished, I would say that in recent 
years, that progress has been undercut significantly by Abbas 
and his cronies. In other words, Mahmoud Abbas has been taking 
away some of the power that Fayyad had, and so the impact that 
Fayyad has been making--and admittedly, it was good progress--
you get the sense now that some of that transparency is being 
wiped away.
    Mr. Chabot. Thank you.
    Mr. Schanzer. And so we need to do everything that we can 
to ensure that we empower Fayyad, and to take power back out of 
the hands of Abbas and put it into the hands of Fayyad. If we 
don't do that, I do fear that ultimately we are headed toward 
disaster.
    Mr. Chabot. Thank you. Let me just follow up, and I have 
only got a short period of time here, but Prime Minister Fayyad 
has made it clear that he does not support this campaign at the 
U.N., and yet they are apparently going to go forward with it 
without him. What does this tell us about his political--not 
his economic--influence or lack thereof? And I guess the panel 
would agree that that tells us that he doesn't have a heck of a 
lot of political influence. Is that correct? I think everyone 
is nodding. Madam Chair, I have exhausted my time. I yield 
back.
    Chairman Ros-Lehtinen. Thank you for noting the nod. Mr. 
Connolly is recognized.
    Mr. Connolly. Thank you, Madam Chairwoman. Mr. Abrams, good 
to see you again. I listened with great interest to your 
understandable disgust with certain statements attributed to--
or that most certainly came out of the mouth of the PLO 
representative. But your prescription was, ``So let us close 
the PLO office in Washington,'' which every President has used 
the waiver authority for, Democratic and Republican, since we 
granted it, and make him PNG.
    What would be the consequences of doing that, though, in 
terms of U.S. leverage, our ability to try to continue to urge 
the two parties to the table, and so forth?
    Mr. Abrams. In my view, it is a symbolic step that would 
show the people running the PLO how angry you are in Congress, 
and the United States is. It doesn't foreclose the possibility, 
if they ever really want to negotiate peace, to do it.
    I can tell you that when we started looking at the after-
Arafat period, in 2002 and 2003, in the Bush administration, we 
had people fly in from Ramallah, and we talked to them. People 
who were close to the then-Prime Minister Abbas. You could 
continue to have those conversations. But they would lose their 
perch here in Washington, and it would, in a sense, be the 
price they paid for defying the President and the Congress and 
going ahead in New York.
    Mr. Connolly. What about Mr. Makovsky's suggestion, if I 
heard his testimony correctly, that unwittingly, certainly, 
that could play into the hands of Hamas, which is the last 
thing in the world we want to do?
    Mr. Abrams. Well, the collapse of the PA institutions, and 
particularly security institutions, could, I think, play into 
the hands of Hamas. Closing the PLO office, though, I think 
would not.
    Mr. Connolly. You would agree, would you not, though, that 
as we look at our options, we do need to take cognizance, 
however frustrated and upset we may be--we do need to take 
cognizance of unintended consequences that strengthen the hands 
of forces we would prefer be weakened, not strengthened?
    Mr. Abrams. Absolutely. And unintended consequences that 
end up hurting Israel or Jordan.
    Mr. Connolly. Mr. Schanzer, I saw you shaking your head. 
Did you want to comment?
    Mr. Schanzer. Absolutely. I agree with Elliott that I think 
closing down the PLO offices, given the fact that this is an 
Abbas initiative, is something that should be considered by 
Members of Congress. I think it is also worth noting here that 
there may be some unintended consequences for the Palestinians 
as a result of this UDI.
    According to some of the legal opinions that I have heard, 
first of all, the PLO could be relegated to some sort of a 
secondary authority, if and when a Palestinian state is 
declared, so that the road may be paved for us to really 
downgrade relations with the PLO nevertheless.
    And then also, we heard earlier about UNRWA, this U.N. 
agency. If, in fact, a state is declared, to a certain extent 
the Palestinians living inside the West Bank who claim refugee 
status would have to relinquish those claims. So there are 
unintended consequences that we could play to, in terms of how 
it might impact the Palestinians, as well.
    Mr. Connolly. Thank you. Mr. Makovsky, okay. Despite our 
best efforts, despite a veto at the U.N. Security Council, the 
UNGA, sort of eerily reminiscent of the whole China vote many 
years ago--I am old enough to remember--votes Palestinian 
statehood. It is the day after. What are our real options, 
besides expressing frustration?
    Mr. Makovsky. Like I said in my testimony, I am very 
concerned about what happens on the ground. And to be blunt, 
neither the Israel Defense Forces nor the Palestinian 
Authority's Security Services have vast experience in crowd 
control. And if there is going to be a lot of demonstrations 
going on, my--even though I don't think Abbas, given what he 
says and his record, is at all interested in spearheading 
violence--nobody accuses him of--his biggest critics, anywhere, 
would not say that he plays a double game with violence.
    So I don't think that is really something to be concerned 
about. But you know, when you gather all these people, you 
don't know if you are unleashing dynamics you cannot control. 
That is why I think there needs to be strong security 
cooperation on the ground. I think the U.S. Security 
Coordinator who is there now, General Moeller, needs to play a 
role before the U.N. vote, during, after. This may go on for 
weeks. This is an asset of the United States.
    Mr. Connolly. But if I could interrupt you for just 1 
second, because we are running out of time. But is it the 
posture of the United States, the day after, to take a hard 
line position that we are not going to recognize this act, and 
therefore in no way, shape, or form, even inferentially, will 
we in any way recognize the statehood outside of the 
multilateral----
    Chairman Ros-Lehtinen. Another very good question whose 
time will await the answer.
    Mr. Connolly. Oh, cheap. Just say yes or no.
    Chairman Ros-Lehtinen. Go ahead, Mr. Makovsky.
    Mr. Makovsky. Look, we will only recognize--the United 
States will only recognize a state that is a result of 
bilateral negotiations between Israel and the Palestinian 
Authority. Any administration, Democrat or Republican, I am 
confident will be of that view.
    Mr. Connolly. Thank you, Madam Chairwoman.
    Chairman Ros-Lehtinen. Thank you. Thank you, Mr. Connolly. 
Mr. Poe of Texas is recognized. He is the vice chair of the 
Subcommittee on Oversight and Investigations.
    Mr. Poe. Thank you, Madam Chair. Thank you for being here, 
gentlemen. I see this playing out maybe not so good for Israel 
and the United States. One dynamic that I believe is taking 
place is the unfortunate commitment of the United States toward 
the Nation of Israel. It seems to me in the last few years 
mixed signals have been going to the Israelis. Mr. Netanyahu 
said as much when he spoke before a joint session of Congress.
    And personally, I think that little family rift, if we can 
use that, is being noticed by people all over the world. And 
maybe this is coming to the U.N. with that in the background. 
That is unfortunate. I think the United States--Congress 
obviously has shown a strong support, bipartisan support for 
the Nation of Israel, and I think we should continue to send 
that message.
    To get to the U.N., I agree with Ambassador Dore Gold, 
Israel's former U.N. Ambassador, when he said, ``If there was a 
resolution whose first clause was anti-Israel and whose second 
clause was that the earth was flat, it would pass the United 
Nations.'' I think it is true. There is such a bigotry against 
Israel in the United Nations as a whole. This is what we are 
faced with under this Palestinian issue.
    Mr. Phillips, why do you think withholding funds to any 
U.N. organization that admits Palestinians as a state, or 
grants it a non-member state observer status, is a good move?
    Mr. Phillips. I think it is a good move because it would 
help minimize the damage to possible future peace negotiations. 
And I think one of the great dangers of this kind of a U.N. 
unilateral strategy is that it could lead the Palestinians to 
conclude that they don't have to negotiate with Israel, that 
they can sit back and wait for further Israeli concessions.
    And I think one of the mistakes of the Obama administration 
was not only to, I think, set a very unrealistic deadline for 
coming to some kind of framework agreement by September 2011, 
which tremendously raised expectations, but also their very 
public friction with Israel, which led the Palestinians and 
other Arabs to believe that the U.S. was going to deliver 
concessions, and they didn't need to negotiate, which is one 
reason why President Abbas has only agreed to about 2 weeks of 
negotiations since Prime Minister Netanyahu came to power.
    And I think that, unfortunately, the impact was raising 
expectations so high that when the U.S. wasn't able to deliver 
and Abbas felt that we had lured him out on a limb and then cut 
off the limb by stepping back and failing to deliver on the 
settlement issue, that part of the bitter fruit of that policy 
is coming to fruition now.
    Mr. Poe. So you think that the U.S. should just withhold 
funds to states that support the statehood of Palestinians?
    Mr. Phillips. I think that we should be cutting back our 
funds for U.N. organizations that contribute to this very----
    Mr. Poe. Specifically, what U.N. organizations? That is my 
question.
    Mr. Phillips. I would say all organizations that take those 
actions.
    Mr. Poe. I believe this resolution has to be resolved 
between the Palestinians and the Israelis. They have to solve 
this issue, not the U.N. They have to solve it. Of course, the 
Palestinians aren't motivated to talk to Israel when they have 
got the U.N. on their side, going to do the deed for them. You 
know, you made a comment about Israel's concessions. You know, 
that's always been, ``Well, let us give land for peace.'' Well, 
Israel has continued to give up land, and they still have no 
peace. Pretty soon, they are going to be out of land.
    All right. One more question, Mr. Abrams. You suggest 
Congress should wait and see how the U.N. votes. Well, we know 
how they are going to vote. Is there something we can do to be 
proactive, rather than be reactive about this situation? The 
United States of America, what should we do now?
    Mr. Abrams. I think this hearing is important, because they 
are listening. They are listening to this, and they are hearing 
all of you say if they go ahead with the resolution, and 
particularly with a resolution that has terrible content, that 
you are going to cut them off.
    Mr. Poe. Maybe they will have that ``Earth is flat'' part 
in the resolution. Maybe they will put ``The earth is flat'' in 
that resolution.
    Mr. Abrams. It will still pass. They do have an automatic 
majority, that is true. As the Israelis say, anything the 
Palestinians put forward, they get the automatic vote of every 
Muslim State, and Israel gets the automatic support of every 
Jewish state.
    Mr. Poe. Thank you, Madam Chair.
    Chairman Ros-Lehtinen. That is a small group, there. Thank 
you so much, Mr. Poe. Mr. Ackerman is recognized for 5 minutes. 
He is the ranking member on the Subcommittee on the Middle East 
and South Asia.
    Mr. Ackerman. Two questions just raised, of what we can do 
now. I wish someone would have thought before of what we should 
have done then, before we got this far down the road with this 
idiotic pursuit of the Palestinians, to raise the bar so high 
of the expectations of its people that it is going to be a 
total disaster for them when they do not get, from the U.N., 
what they think they are going to get, and aren't prepared to 
handle the consequences.
    I wish somebody, before this thing went so far down the 
road, understood that in life, we don't get to pick our choices 
and then choose among them, but we have the choice only of 
picking between the realistic choices that are presented to us. 
I wish somebody was a chess player, among all the people 
playing the piddling game of checkers, and could play chess on 
a three dimensional basis, and offered up a solution or a 
choice that was much better than we are looking at presented to 
the U.N. right now, and in that choice said, ``Why don't we 
embark on a process of negotiation between the two sides, 
starting almost anywhere?'' Any line, as long as it included a 
proposal that there would be exchanges or swaps between the 
parties, that they would have to mutually agree to before they 
decided. But it had to be negotiated between the parties.
    I wish somebody would have thought of that, because I think 
that is a much better choice that we would have had at that 
moment, rather than the choice that is facing the U.N. right 
now. At least there would have been an alternative that offered 
a degree of hope of the parties getting back to the negotiating 
table. But alas, I guess that was not to be.
    I guess there was nobody around on the whole planet who 
thought of offering the choice as an alternative, preemptively, 
to the parties sitting down, using a line to start with that 
was really inconsequential, because you were going to arrive at 
a different situation once you did the swaps.
    But here we are. My question, first, is, should not there 
be a clause, if we could affect the resolution that the 
Palestinians are going to bring forth, a clause that said, 
``Once this resolution is voted on, immediately the parties, in 
order for this to be effective, must sit down and negotiate 
face to face?'' What is wrong with that? Dr. Schanzer?
    Mr. Schanzer. You raise an excellent point. And one of the 
things that the Foundation for Defense of Democracies has been 
doing over the last several months is advocating for just that. 
Unfortunately, what we have seen over the last several months 
is that this is seen as a binary choice for members of the 
U.N.: Either you support a Palestinian state or you don't.
    And what we think is the right move, and I think what you 
have just expressed here really dovetails with that, is that 
there should be some language in this resolution that says that 
the U.N. member states view with favor the creation of a 
Palestinian state, but that that state needs to be negotiated 
with Israel, and the borders need to be ultimately decided by 
the two parties, and that there needs to be recognition of 
Israel as a Jewish state.
    In this way, the Palestinians can have their moment at the 
U.N., which is I think what they seek here, but ultimately some 
of the impact of this, the legal impact that David mentioned 
earlier, could be diluted. And why that was not forwarded by 
official channels up until very recently is something that is 
very troubling. And it is even more troubling to think that, 
ultimately, what is going to happen--and this is, by the way, 
part of the Palestinian plan right now--is that when this UDI 
goes through and the United States vetoes this, the impact will 
be that the Arab world, where we have gone to great pains to 
support their revolutions, whether in Egypt or Tunisia or Syria 
or elsewhere, will look at the United States as if it is an 
anti-Arab initiative.
    Mr. Ackerman. I don't have a lot of time left. Let me just 
add, because I do want this on the record, I just want it to be 
known that there are those of us who have been in the vanguard 
of supporting a two-state solution and promoting the just 
solution that the Palestinians are entitled to, with safeguards 
for the security of Israel, and trying to get our European 
friends on board.
    That there are some of us who strongly believe that people 
have to live with the consequences of their actions, and that 
there are those of us who are thinking that maybe a total 
cutoff of all aid to a group that is pursuing this course of 
action, which is very ill-advised, is willing to consider 
cutting off everything.
    And if they are willing to consider putting their future in 
the hands of the United Nations, perhaps they should look to 
try to find the kind of aid that would come with whatever U.N. 
resolution there might be, from their friends in the United 
Nations. Thank you, Madam Chair.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Ackerman. 
Mr. Fortenberry is recognized. He is the vice chair of the 
Subcommittee on Africa, Global Health, and Human Rights.
    Mr. Fortenberry. Thank you, Madam Chair, and thank you, 
gentlemen, for coming today to this important hearing. I had a 
question that Mr. Connolly asked, but I think it is an 
important question and it deserves a little bit more 
consideration, because he was only able to ask it late and you, 
Mr. Makovsky answered it in terms of what the day after looks 
like.
    Sadly, here we are in a reactionary position, as Mr. 
Ackerman alluded to, without many options. The reality is, 
after a General Assembly passage of some sort of recognition 
here, what is our next hearing going to look like? But instead 
of just focusing on the morning after, with the possibility of 
things looking the same, or people in the streets, project out 
in terms of the geopolitics, into the future, as to how this 
shifts things significantly, or not. Please start.
    Mr. Makovsky. Look, the issue of what are the geopolitical 
implications of this--if it goes through as the Security 
Council--they go to the Security Council, which they know they 
are going to hit a U.S. veto, and the only way to do that is to 
poke the U.S. in the eye, because they know the result, and 
because they want a negative result for the U.S. in the Arab 
World.
    That could be serious. If they avoid going to the U.N. 
Security Council and try something else at the General 
Assembly, where they don't face that hand going up on Aljazeera 
and al-Arabiya around the world, then it could look 
differently.
    The Arabs are preoccupied with their own problems right 
now. But this issue is evocative. So I think it depends a lot 
on how the Palestinians play it. Are they out to embarrass the 
United States by going deliberately to the Security Council, 
while we have all been focused on the General Assembly?
    That could aggravate the response in the region. And 
getting to Congressman Ackerman's point of where was the 
forward thinking in all of this, I think in a certain way, the 
U.S. has been--the administration has been betwixt and between, 
because what happened is, is that the United States did not 
want to be seen--the administration--as favoring an alternative 
resolution that would take out the three poison pills that I 
keep referring to from my testimony, because it would be 
viewed, in the Congress and other parts, as stepping away from 
Israel, that by trying to reshape the resolution, that would be 
deemed as, ``Well, you say you are against the U.N., but you 
are really trying to reshape something at the U.N.''
    So the administration put all its eggs, so to speak, on the 
Quartet's statement this summer, in trying to keep the 
Europeans and have some trans-Atlantic unity, even if we 
thought it couldn't stop Abbas.
    So I think in the administration, and how they have been 
trying to think about this, is they have been focused about 
trans-Atlantic unity, and they have been concerned that the 
perception that they are working behind the scenes to reshape 
the resolution would be interpreted, I think, as weakness by 
the Republicans. And so that actually has led them from 
stepping back and maybe not having the influence that they 
could in reshaping the resolution, and putting all their effort 
on the Quartet.
    Mr. Fortenberry. So it is my fault?
    Mr. Makovsky. I did not say that it is your fault, at all. 
I did not say that it is your fault at all. But maybe there are 
some efforts that have been kept Top Secret, and we will find 
out afterwards that the U.S. was doing things behind the 
scenes, but it was so worried about the way it would be 
perceived outwardly that it didn't maximize its efforts.
    So I think those were always the two strategies to avoid 
the full thrust of what we are dealing with now: Either a 
Quartet statement or an alternative resolution that would take 
out the poison pills.
    Mr. Fortenberry. Thank you.
    Mr. Makovsky. But how the Arabs deal with it--I think if 
the Palestinians want to poke America in the eye, the U.S. will 
have to see that accordingly. Because that will be done just to 
stir up Arab reaction.
    Mr. Fortenberry. Thank you. Mr. Abrams?
    Mr. Abrams. Very briefly, sir. I think this does stem, in 
part, from a gigantic mistake the administration made at the 
very beginning. It believed that by distancing us from Israel, 
it would increase our influence on the Palestinians and the 
Israelis. In fact, it has diminished our influence with the 
Palestinians and the Israelis, and we now see a situation where 
we are more distanced from Israel, and your position, the 
position of the President on this resolution is crystal clear, 
and they are just not listening. They are not paying attention.
    Mr. Phillips. If I could just add, I think that the 
administration's efforts to distance itself, even, has greatly 
disappointed the Palestinians in the long run. Because they 
interpreted that as the administration coming around to their 
position. And today, the Palestinian Authority is running radio 
ads that are replaying the words of President Obama about 
having a Palestinian member state in the U.N. And they are 
trumpeting that as the Obama promise.
    And I think part of the problem here is a tremendous 
disconnect----
    Mr. Fortenberry. I once--I am sorry to cut you off. I once 
saw an editorial cartoon in which someone from the region, with 
an arm in his hand, was standing on a pile of skulls and said, 
``I won.'' We have got to move beyond what appears to be 
irrationality.
    Chairman Ros-Lehtinen. Thank you very much, Mr. 
Fortenberry. Mr. Rivera, my Florida colleague, is recognized.
    Mr. Rivera. Thank you, Madam Chair. My question is for Mr. 
Abrams to start off. The Palestinian Authority, instead of 
returning to talks with Israel, is engaging in diplomatic 
warfare against Israel. They have launched a campaign outside 
of direct negotiations in order to win admission as a full 
member to the United Nations, and are setting preconditions on 
final status which are supposed to be resolved through direct 
negotiations.
    What has this administration done to prevent the 
Palestinian Authority from following through with their 
diplomatic warfare against Israel and their campaign? And is 
there more the U.S. could or should be doing to dissuade the 
Palestinians from proceeding at the U.N.?
    Mr. Abrams. Well, sir, I think the administration has tried 
jawboning. That is, it has talked, publicly and privately, to 
the Palestinians and asked them not to do this, and probably 
used you in Congress as an argument that there would be a 
penalty to pay.
    But it has been too little, too late, I think. And I do 
think the Palestinians received a wrong message early on, that 
they didn't have to negotiate with the Israelis because the 
administration would distance itself from the Israelis and then 
deliver the Israelis.
    So they have not been interested in negotiations, really 
almost from the very beginning. It is very late at this point, 
and I think the only thing you can do is to make it clear to 
them, as you are doing today, that there will be a serious 
price to pay.
    Mr. Rivera. Well, speaking of that, and a serious price to 
pay, specifically on foreign aid, what should the implications 
for U.S. assistance be if the Palestinians continue with their 
efforts? And do any of you think that the Palestinians realize 
that their efforts could jeopardize U.S. assistance? I will 
start with Mr. Abrams, but anybody on the panel that wants to 
chime in.
    Mr. Abrams. I think they do realize it, but maybe they 
figure you won't go through with it. And maybe they figure they 
can get it made up by the Qataris, or some other donor who will 
step in. But the utility of this hearing, I think, is driving 
home ``This is a serious business.''
    Mr. Rivera. Mr. Makovsky, I saw you nodding.
    Mr. Makovsky. I think I would just like to put forward the 
suggestion that I feel that it is not getting enough focus. And 
you are powerful people. Imagine if you had part three of this 
hearing, and would start inviting some Arab Ambassadors to 
here. And you would start asking, ``How is it Mr. Turki al-
Faisal writes to the New York Times that they are giving $2.5 
billion, when Salam Fayyad says they have only received $347 
million?''
    It is a little over a tenth of what Turki al-Faisal says 
that they have given to the Palestinians. The United States has 
been far more generous than any Arab state, and the U.S. 
Congress should put some focus on that. Why does Qatar get away 
with murder in this country by funding Hamas? Is it because of 
a U.S. Air Force Base in Qatar, and the U.S. Congress isn't 
focusing on the fact that Qatar is supporting Hamas?
    Why isn't there more attention to this? This, I think, 
would be a very strong signal. ``We want to help the 
Palestinians, but we are astonished that you Arabs don't do 
more to help the very people that you claim are your brothers, 
and yet when it comes to the money, the United States is the 
single biggest donor to the Palestinian cause.''
    I think that repositioning for the U.S. Congress would be 
fantastic. It would draw attention in the Arab media, around 
the world, to the lack of Arab support. It would embarrass 
them, and they should be embarrassed.
    Mr. Rivera. Mr. Schanzer?
    Mr. Schanzer. Well, I agree with everything that David has 
just said, and I think it would draw attention to an issue that 
has not been covered enough. But I also have to mention this, 
that if you invite the Qataris, and you invite the Saudis, or 
perhaps the Iranians, to backfill some of the aid that is not 
given to the Palestinians, what you are doing is inviting bad 
actors to influence the Palestinians in ways that could further 
upset the balance of power in the region.
    We already know that Qatar has been financing Hamas. We 
know that Iran covers a great deal of the budget of Hamas. In 
other words, these countries have been fomenting violence in 
the region, and I have deep concerns about inviting them to 
begin to backfill some of the aid that might go unfulfilled by 
the United States.
    Mr. Rivera. And Mr. Phillips?
    Mr. Phillips. I think, unfortunately, one of the long-term 
problems in this conflict is that many Arab states use the 
Palestinian issue only as a club to attack and undermine 
Israel. They are not so much interested in building a 
Palestinian state as they are in destroying an Israeli state.
    And this really becomes clear when you look at the 
disconnect between Arab promises and delivery of aid. I think 
according to the New York Times, of $971 million pledged for 
this year, the Palestinian Authority has received only about 
$330 million as of midyear, with many Arab states in large 
default.
    And this has led the Palestinian Authority to cut its wages 
this month to half wages for the Palestinian bureaucrats, and I 
think one of the good impacts of this kind of a hearing, I 
think, is to possibly lead the Palestinian Authority leaders to 
reconsider what is going to happen when their----
    Chairman Ros-Lehtinen. Thank you. Oh, finish that sentence.
    Mr. Phillips. Just that they are not going to be able to 
count on the financial assistance of their friends to the 
degree that, perhaps, they expect.
    Chairman Ros-Lehtinen. Thank you so much, Mr. Phillips. 
Thank you, Mr. Rivera. Another dear Florida Colleague, Mr. Gus 
Bilirakis, a.k.a. Just Ray. Inside joke.
    Mr. Bilirakis. Thank you, Madam Chair. I appreciate it very 
much. I would like to ask a question for the entire panel. It 
is offensive to me that the U.N. Relief and Work Agency, or 
UNRWA's, stated goal since its inception in 1950 is essentially 
to keep the Palestinian people in a refugee status.
    Mr. Abrams, as you noted in your testimony, it seems that 
UNRWA has done nothing but perpetuate refugee status for the 
Palestinians forever. Would the panel agree with me that we 
should finally end the nearly $4 billion of aid that we have 
already wasted on UNRWA? I would like to hear from the entire 
panel, please.
    Mr. Schanzer. I can start. I will say this, that UNRWA 
needs to end now. It is an absolute waste of money. Rather than 
solving the problem, it perpetuates it. UNRWA sees the 
Palestinian refugees as clients, rather than refugees that need 
to be settled. Every other refugee problem has been addressed 
appropriately in history since World War II. The Palestinians 
remain a dagger in the back of Israel, and it is a political 
issue, it is no longer a humanitarian one.
    One thing that has been suggested, that I think is a very 
good idea to consider, is the U.N. High Commissioner for 
Refugees. That is the body that handles every other refugee 
problem. I think that this portfolio should be given back to 
the UNHCR, and to leave UNRWA to its own devices. It is 
interesting that UNRWA understands right now that it is under 
pressure. They recently opened an office here to try to lobby 
for more funds and influence here in Washington. This is a 
corrupt organization that must be shut down.
    Mr. Bilirakis. Thank you.
    Mr. Makovsky. The UNRWA issue is--I share a lot of the 
sentiments, but here is the problem: Ask the Israelis if they 
want UNRWA shut down. I think their answer will be no, because 
they will end up feeling they have to pay for all these 
Palestinian citizens, for their schooling and the like, and 
this has been their view for a while now. And we can't ignore 
it.
    There are a lot of problems with UNRWA, although I would 
still rather have people go to their summer camps than to the 
Hamas summer camps in Gaza. But let me just say, we did a study 
at The Washington Institute by someone who actually once worked 
at UNRWA called Fix UNRWA, and I would urge people to go to our 
Web site, to look at James Lindsay's study.
    And he made a couple of very practical moves. Remove from 
the UNRWA rolls citizens who have this oxymoronic status of 
citizen-refugees. That doesn't exist in any other relief 
agency. Second, make the focus more on needs-based assistance, 
and not on an entitlement for refugees who don't need the 
assistance. And also, depoliticize the institution in terms of 
its political statements.
    There are a lot of things that could be done to fix UNRWA 
if you can't end it now. We all would look forward to the day 
where you phase out UNRWA and it is no longer needed, but at 
least it has to be trimmed down and focused on its original 
mission. And the mission has really changed in a very, I think, 
disastrous way coming forward. But we should just be careful 
that the remedy is the right remedy for today.
    Mr. Bilirakis. Thank you. Mr. Abrams?
    Mr. Abrams. Well, in a sense, I think they are both right. 
That is, I think you should demand the reforms of UNRWA 
starting immediately, and should start the process of shutting 
it down and turning all of these responsibilities over to the 
U.N. High Commissioner for Refugees.
    Mr. Bilirakis. Thank you. Mr. Phillips?
    Mr. Phillips. I would agree with Mr. Schanzer. I think it 
should be folded into UNHCR. And I wish it could be fixed, but 
I don't think it can. And if there is a silver lining in the 
cloud, if this Palestinian pseudo-state comes into being, then 
it should bear the responsibility of acting like a government 
and supporting these refugees, since it claims that it is 
capable of fulfilling all the responsibilities of a state.
    Mr. Bilirakis. Thank you very much. Appreciate it. I yield 
back, Madam Chair.
    Chairman Ros-Lehtinen. Thank you very much, Mr. Bilirakis. 
I am pleased to yield to Mr. Sherman of California, the ranking 
member on the Subcommittee on Terrorism, Nonproliferation, and 
Trade. Five minutes.
    Mr. Sherman. Thank you, Madam Chairman. Instead of talking 
with Israel, the Palestinian Authority has launched a campaign 
outside the negotiating process to win recognition this 
September at the United Nations General Assembly. Palestinian 
statehood efforts at the United Nations undermine efforts at 
peace, and reject the principle of solving the conflict in 
terms of direct negotiations between the parties. The Obama 
administration, I hope and I am confident, will make it clear 
to the Palestinians that we will veto any resolution creating a 
Palestinian state in the U.N. Security Council.
    I think that is a given. And at the same time, the 
administration needs to press the PA to return to the 
negotiating table. Does the PLO fear the collapse of its 
governing body if U.S. funding were to end? Mr. Abrams, or any 
other witness that indicates an interest?
    Mr. Abrams. I think they probably worry about it, but not 
very much. I think they probably feel, in the end, you won't do 
it. And if you cut them back, they will make it up from some 
other donor, maybe Europeans or the Arabs.
    Mr. Sherman. Does anyone else have a comment?
    Mr. Phillips. I would just say, I don't think they are 
worried enough. But they should be worried, because the U.S. is 
one of the--in fact, it is the leading bilateral aid provider 
to the Palestinian Authority. And these Arab states aren't 
going to be willing to, in the long term, on a reliable basis, 
make up the funding, I don't think.
    Mr. Makovsky. I would just add that I think this issue has 
been controversial within the Palestinian circles. Salam Fayyad 
gave an interview, I believe to the Financial Times in June, 
making clear that this was not the way to go. He is not the 
only one among the Palestinians who has criticized the move. 
This has been viewed often as a legacy issue for Abbas.
    Someone asked, ``Does that mean he has no influence?'' 
Well, they have always had a demarcation of responsibilities. 
He deals with more domestic governance and improving 
institutions and economic life, and Abbas deals with foreign 
policy. So I don't think it speaks to Fayyad's weakness, as it 
really does to the way there's a division of labor between 
them.
    But I think many among Abbas' even inner circle question 
the wisdom of this move, but he has basically, I think, staked 
himself on this because he--there was an issue called the 
Goldstone report, which I think you are familiar with.
    Mr. Sherman. You mean the one that Mr. Goldstone withdrew, 
in effect?
    Mr. Makovsky. Right.
    Mr. Sherman. Yes.
    Mr. Makovsky. The one he withdrew and retracted. But there 
was a time that Abbas felt that this was not good for him, 
because he was seen as a cheerleader, actually, behind the 
scenes, urging Israel to attack Hamas. And he just wanted to 
shelve this whole idea of an investigation in Geneva. The Arab 
Ambassadors said, ``We are with you, we are with you,'' and 
then he said he would withdraw it, and then he was attacked for 
being a traitor by Khaled Mashaal, and Aljazeera played it 
every hour, and his grandson said, ``I hear in school, they say 
you are a traitor, grandpa.''
    So I think his response is, ``I am never going to be out-
Goldstoned again, and no one is ever going to be able to do 
this to me, that I am not seen as pressing the interests of the 
Palestinians to the max.'' But I think in those circles, there 
is a lot of questioning whether this is wise, for the reasons 
we have been saying here.
    Mr. Sherman. And I think that the Palestinian Authority is 
probably more familiar with our foreign policy experts and our 
State Department than our Congress and our people. And if they 
really understood this democracy, they would recognize that the 
possibility of a cutoff is far greater than anyone would know 
from a foundation conference on this issue.
    What would be Israel's likely reaction to an action taken 
at the General Assembly that recognizes so-called Palestinian 
statehood? Doctor?
    Mr. Schanzer. Yes, Congressman Sherman. Having chatted with 
a few people in Israel last week, the sort of nuclear option 
that the Israelis would consider, should this UDI go through, 
is something that the Israelis have done before, and that is to 
withhold the value added tax, that is the VAT. And that is 
about $100 million a month that contributes to roughly half of 
the Palestinian budget each year.
    And so the Israelis have indicated that, if the UDI 
language is disagreeable enough to them, that they would 
consider doing that while the U.S. Government considers its own 
cutoff. There, you are looking at somewhere in the vicinity of 
$1.5 billion, or close to three quarters of the total budget of 
the PA. So you are looking at, perhaps, an imminent collapse.
    Mr. Sherman. Well, if Aljazeera covered our town halls, the 
Palestinians would understand just how popular aid to the 
Palestinians is in this democracy. And I yield back.
    Chairman Ros-Lehtinen. Thank you so much, Mr. Sherman. Mr. 
Duncan of South Carolina is recognized for 5 minutes.
    Mr. Duncan. We are just about finished, guys. Thank you for 
your patience, and thank you for being here today. And I am 
going to direct my question--is it Dr. Schanzer, is that how 
you pronounce it? Okay.
    First off, let me just say how saddened I was this weekend 
to recall the scenes of the Palestinians celebrating after the 
9/11 attacks. This is a group, the Palestinians, that we give a 
tremendous amount of U.S. aid to annually. Along that line, I 
am deeply concerned about the Palestinian Authority's relations 
with the terrorist organization Hamas. And that is going to, I 
guess, permeate everything that I think about with regard to 
Palestinian statehood and U.S. taxpayer dollars going to assist 
with the Palestinian Authority's mission going forward.
    We were over in Israel back in August, and had an 
opportunity during that time to travel over into the West Bank. 
And I remember some good things that I saw going on in the West 
Bank. In the city of Bethlehem as an example, we saw a USAID 
sign over a construction project that was going on right there, 
and so I do know that some good things are going on.
    So don't think that I think all USAID projects and money we 
give to the Palestinian Authority is being wrongly spent. But I 
did see some past projects in the city of Jericho that Yasser 
Arafat built, that I think my constituents would raise their 
eyebrows on, and say, ``Was that a good use of U.S. taxpayer 
dollars being spent, the aid that we give to the 
Palestinians?''
    And so while we were there, we met with the Prime Minister, 
Fayyad, and I applauded him at that time for the transparency 
efforts, bringing in a world-renowned CPA firm to audit the 
money going to the Palestinian Authority. So I applauded him, 
and I thanked him. But I am concerned that his lessening or 
diminished role going forward is going to allow that 
transparency to continue.
    And then I read in your comments about the Palestine 
Investment Fund, and some moneys that may be missing from that. 
Continued oversight of USAID, or U.S. aid, period, to the PA 
and the PIF, the possibility of an accounting audit of that 
fund, I think we have got to be good stewards of taxpayer 
dollars, and we have got to have an accounting, whether it is 
U.N. money or whether it is money given directly to the 
Palestinian Authority or projects through USAID.
    What do you think the prospects are, going forward, that we 
are going to have transparency, auditability, so that I as a 
congressman can tell my constituents that the aid that we do 
give to countries all over the world, particularly the PA, is 
going to be accounted for?
    Mr. Schanzer. Thank you for that question. And I think the 
answer is, right now, given this hearing and the urgency, I 
think, expressed by the American people, that is something that 
we must demand if aid is to continue. And I think that is not a 
foregone conclusion, but if aid is to continue, then we need to 
have strictures on those funds, and we need to have a better 
accounting of exactly how they are spent.
    Some of the other things that I didn't include in my 
testimony today is, there could be a bleed of PA and PLO funds. 
So we could be seeing, for example, this unilateral declaration 
of independence, and all the diplomacy that went behind it, 
President Abbas may have been flying around and spending a 
great deal of U.S. taxpayer funds in order to pursue this.
    And so what we need to have is a greater accounting of 
Abbas' office specifically, because I believe that he is the 
problem. And if you can do that while continuing to work with 
Fayyad, I think you have got a fair shot at getting better 
oversight over the PA.
    Mr. Duncan. Do you think that the lessening role of the 
Prime Minister going forward is going to hamper those efforts? 
And what do you see? Are they trying to keep him down, to keep 
the transparency out?
    Mr. Schanzer. Well, absolutely. I mean, his role has been 
diminished. And I think you can sense some frustration with 
some of the public statements that Fayyad has made. And again, 
we need to do our best.
    We saw a good bit of this during the George W. Bush 
administration, where there was an attempt to really elevate 
his stature. That has stopped, and we have relied almost 
entirely on Abbas' efforts. And now we have seen that Abbas is 
actively undermining U.S. interests. And so what we really need 
to do is squeeze Abbas more than we have in the past.
    Mr. Duncan. Thank you. Madam Chairman, I will yield back.
    Chairman Ros-Lehtinen. Thank you so much, Mr. Duncan. And 
we have a wonderful wrap-up questioner, my good friend, Mr. 
Eliot Engel from New York, ranking member on the Subcommittee 
on the Western Hemisphere.
    Mr. Engel. Well, thank you. Thank you very much, Madam 
Chair. And thank you for those kind words. I listened to your 
testimony, gentlemen, with interest, even before I came to the 
room. And you all seem to--what struck me is that there is a 
lot of agreement in what you are saying. And I agree with what 
you are saying.
    Let me first say that when the President of the United 
States talks about settlements or '67 lines, it is not helpful 
at all. I know he said '67 lines with swaps, but it is just, to 
me, giving the Palestinians one more excuse, one more 
precondition to refuse to talk to Israel. And I think that that 
is the bottom line, here.
    I think that the Palestinians going to the U.N., the way I 
see it, sets back the cause of peace or a two-state solution 
for years and years, maybe even decades. Because what 
Palestinian leadership down the road can ever accept, in a 
negotiated treaty with Israel, less than what the United 
Nations has given them? And what Israeli Prime Minister--I 
don't care left, right, center, or whatever--can ever accept 
anything near what the U.N. is apparently going to say?
    So to me, this dooms peace. Yesterday was the 18th 
anniversary of the signing of the Declaration of Principles on 
the White House lawn. I was there when Rabin and Arafat were 
there. My wife was 8 months pregnant with our youngest child. I 
remember, it was very, very hot. And we all had some great 
hope.
    How the times have changed. It seems to me, and I would 
like your comment on it, that by going to the U.N., the 
Palestinians are in the process of tossing aside the Oslo 
process, and the process underlying Oslo. Because Oslo was two 
states working together and negotiating. Going to the U.N. 
unilaterally, to me, tosses out Oslo.
    And I would take it one step further, and I would like your 
comments on that as well. I think it tosses out Resolution 242. 
I said this to Bibi Netanyahu. I was in Israel last week, came 
back. You know, land for peace. Land for negotiated peace. That 
was 242. Well, this is not land for peace.
    This is totally--it is land for nothing. Where is Israel's 
peace in all of this? So I just think that it is part and 
parcel, again, of the hypocrisy of the Palestinian Authority, 
the hypocrisy of the United Nations, and the nonsense--and 
quite frankly, I think that Congress and I, at least speaking 
for myself, are fed up. I don't think I am prepared to send one 
red cent more to the Palestinian Authority unless they prove to 
me that they are serious about peace with Israel.
    So I would like Mr. Abrams.
    Mr. Abrams. I would just say, Congressman, that President 
Abbas could address this if he wanted to. If he goes ahead with 
this vote, the day after the vote he could say, ``Okay, I have 
got my symbolic vote. Now, without preconditions, I want to sit 
down and negotiate.'' I suspect, unfortunately, he won't do 
that. And by refusing to do it, by insisting on the kind of 
preconditions he has had for 2 years, he will, I am afraid, be 
proving your worst fears are perhaps right.
    Mr. Phillips. Yes, I share your concerns. I think one of 
the problems we are facing now is the Israeli withdrawal from 
Gaza opened up space for a terrorist organization to infest, 
and that has become an even greater threat. I think Oslo 
essentially boiled down to land for the promise of peace, and 
that promise was never kept.
    Mr. Engel. And you know what is interesting? The terrorist 
organization that is there, down the line, even if there is a 
rapprochement between the Palestinian Authority and Hamas, it 
is very interesting about how Israel is then supposed to 
negotiate with an entity who denies its very right to exist.
    I mean, people can criticize Israeli policy, but one thing 
you can't criticize the Israelis for: They are not stupid. And 
I think it is an absolute insult to ask any country to 
negotiate with a terrorist entity that denies their very right 
to exist, their whole reason for being is to destroy you, and 
somehow or other Israel is supposed to negotiate peace with 
them. It just makes me scratch my head. Yes?
    Mr. Schanzer. Just one quick thought on the legal status of 
Oslo. I mean, I know we spoke earlier about the question of 
refugees and where that leaves them, the question of the PLO. 
Certainly, Oslo has always been the framework for our aid here 
in this country, and it was always based on bilateral 
negotiations to end the conflict.
    This is certainly circumventing that, and it is certainly a 
very valid legal predicate for cutting aid, should Congress 
wish to do so.
    Mr. Engel. And by the way, we also--I also met with Fayyad, 
who said to me that he thinks the Palestinians going to the 
U.N. is the stupidest thing that they could possibly do.
    Mr. Makovsky. We all agree that we all think it is negative 
that they are going to the U.N. I keep referring--I don't know 
if you were here for my testimony. I talked about the three 
poison pills, components, why Israel will not react so benignly 
to such a declaration.
    But I also feel that an aid cutoff that will lead, in my 
view, to Fayyad's resignation, is going to help Hamas. And so I 
just think we have to be mindful that we don't help the people 
we want to hurt, and we don't hurt the people we want to help.
    Mr. Engel. I think they are exing Fayyad out anyway. I 
don't think he is long for this world, and I think he thinks he 
is not long for this government.
    Mr. Makovsky. Well, I think--I disagree with the idea that 
he is ineffective, or his role has been phased out. He has 
built much more in the last 4 years than any of us could have 
dreamed, and it is the success of the U.S. Congress, actually, 
that has been supportive of him. And I just think we have to be 
careful, not pulling the plug on him. But clearly, without him 
we are in a different position.
    Mr. Engel. He is the best they have, and that is why they 
are exing him out, in my estimation. Thank you.
    Chairman Ros-Lehtinen. Thank you very much to all of our 
colleagues. And thank you for excellent presentations by our 
panelists. The committee is now adjourned. Thank you.
    [Whereupon, the committee was adjourned at 12:19 p.m.]
                                     

                                     

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