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CHRONIC KLEPTOCRACY: CORRUPTION WITHIN

THE PALESTINIAN POLITICAL ESTABLISHMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON 

THE MIDDLE EAST AND SOUTH ASIA

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED TWELFTH CONGRESS

SECOND SESSION

JULY 10, 2012

Serial No. 112–167

Printed for the use of the Committee on Foreign Affairs

(

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

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

ILEANA ROS-LEHTINEN, Florida, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

DAN BURTON, Indiana 

ELTON GALLEGLY, California 

DANA ROHRABACHER, California 

DONALD A. MANZULLO, Illinois 

EDWARD R. ROYCE, California 

STEVE CHABOT, Ohio 

RON PAUL, Texas 

MIKE PENCE, Indiana 

JOE WILSON, South Carolina 

CONNIE MACK, Florida 

JEFF FORTENBERRY, Nebraska 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

GUS M. BILIRAKIS, Florida 

JEAN SCHMIDT, Ohio 

BILL JOHNSON, Ohio 

DAVID RIVERA, Florida 

MIKE KELLY, Pennsylvania 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

ANN MARIE BUERKLE, New York 

RENEE ELLMERS, North Carolina 

ROBERT TURNER, New York 

HOWARD L. BERMAN, California 

GARY L. ACKERMAN, New York 

ENI F.H. FALEOMAVAEGA, American 

Samoa 

BRAD SHERMAN, California 

ELIOT L. ENGEL, New York 

GREGORY W. MEEKS, New York 

RUSS CARNAHAN, Missouri 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

DENNIS CARDOZA, California 

BEN CHANDLER, Kentucky 

BRIAN HIGGINS, New York 

ALLYSON SCHWARTZ, Pennsylvania 

CHRISTOPHER S. MURPHY, Connecticut 

FREDERICA WILSON, Florida 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

YLEEM D.S. POBLETE, Staff Director 

RICHARD J. KESSLER, Democratic Staff Director 

SUBCOMMITTEE ON THE MIDDLE EAST AND SOUTH ASIA

STEVE CHABOT, Ohio, Chairman 

MIKE PENCE, Indiana 

JOE WILSON, South Carolina 

JEFF FORTENBERRY, Nebraska 

ANN MARIE BUERKLE, New York 

RENEE ELLMERS, North Carolina 

DANA ROHRABACHER, California 

DONALD A. MANZULLO, Illinois 

CONNIE MACK, Florida 

MICHAEL T. MCCAUL, Texas 

GUS M. BILIRAKIS, Florida 

TOM MARINO, Pennsylvania 

ROBERT TURNER, New York 

GARY L. ACKERMAN, New York 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

DENNIS CARDOZA, California 

BEN CHANDLER, Kentucky 

BRIAN HIGGINS, New York 

ALLYSON SCHWARTZ, Pennsylvania 

CHRISTOPHER S. MURPHY, Connecticut 

WILLIAM KEATING, Massachusetts 

(III)

C O N T E N T S 

Page

WITNESSES 

The Honorable Elliott Abrams, senior fellow, Council on Foreign Relations ..... 7

Jonathan Schanzer, Ph.D., vice president for research, Foundation for Defense of Democracies ............................................................................................ 13

Mr. Jim Zanotti, specialist in Middle Eastern affairs, Congressional Research 

Service ................................................................................................................... 30

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

The Honorable Elliott Abrams: Prepared statement ............................................ 9

Jonathan Schanzer, Ph.D.: Prepared statement ................................................... 15

Mr. Jim Zanotti: Prepared statement .................................................................... 32

APPENDIX 

Hearing notice .......................................................................................................... 52

Hearing minutes ...................................................................................................... 53

The Honorable Gus Bilirakis, a Representative in Congress from the State 

of Florida: Questions for the record .................................................................... 54

The Honorable Gerald E. Connolly, a Representative in Congress from the 

Commonwealth of Virginia: Prepared statement .............................................. 55

(1)

CHRONIC KLEPTOCRACY: CORRUPTION WITHIN THE PALESTINIAN POLITICAL ESTABLISHMENT 

TUESDAY, JULY 10, 2012

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON THE MIDDLE EAST

AND SOUTH ASIA,

COMMITTEE ON FOREIGN AFFAIRS, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:03 p.m., in room 

2172, Rayburn House Office Building, Hon. Steve Chabot (chairman of the subcommittee) presiding. 

Mr. CHABOT. The committee will come to order. 

Good afternoon. This is the Foreign Affairs Subcommittee on the 

Middle East and South Asia. We appreciate everyone being here 

this afternoon, and I will begin by making an opening statement. 

We are going to have votes relatively soon, so we will try to 

squeeze in as much as we can before we have to run over to make 

votes. 

Since taking office, President Obama has repeatedly emphasized 

his belief that a resolution of the Israeli-Palestinian conflict is one 

of America’s core interests in the Middle East. Throughout these 

31⁄2 years, aid to the Palestinian Authority to assist its state-building effort has consistently remained a central pillar of the administration’s policy toward the Israeli-Palestinian conflict. 

For years, however, concerns have mounted about deep and widespread corruption within the Palestinian political establishment, 

including potential fraudulent use of U.S. financial assistance. This 

hearing has been called to offer members an opportunity to hear 

testimony on the extent of the corruption, who within the Palestinian political leadership can be trusted and who cannot, how the 

Palestinian political environment and the state-building effort are 

affected by corruption, and how the U.S. should respond. 

Reading the papers and listening to television news reports, however, one would have the sense that the only barrier to prosperity 

for Palestinians living in the West Bank and Gaza is Israeli intransigence. We are shown the plight of the Palestinians in Gaza, but 

instead of highlighting the ways that the Hamas terrorist leadership mismanages the local economy or gives Israel justifiable cause 

for concern, we are told that an Israeli blockade is to blame. Similarly, instead of calling attention to the omnipresent and insidious 

corruption within the PLO and Fatah leadership in the West Bank, 

we are told that Israeli settlements, many of which will surely not 

2

be a part of any future Palestinian state are the true problem, despite the fact that many of these locales employ Palestinian laborers. 

Well, I disagree with those points that I just made. If the Arab 

Spring has taught us nothing else, it has shown us that we must 

be concerned not just with how governments interact with each 

other but also with how they treat their own populations. For 

years, our top priority vis-a`-vis Egypt was the regional stability 

that Mubarak helped to provide, and in exchange for his cooperation, we far too often turned a blind eye to the plight of average 

Egyptians. 

Similarly, our grossly exaggerated emphasis on a final resolution 

to the Arab-Israeli conflict warped our policy toward countries like 

Syria. Instead of going after Syria for malign actions like ushering 

jihadis into Iraq, we allowed our policy to be hostage to the ill-conceived notion that Syrian cooperation in the peace process, no matter how slight, might just break decades of stalemate. 

Instead of doing everything possible to promote good governance 

within Palestinian political parties and institutions, we propped up 

whoever would go through the negotiating motions, even if time 

and again he proved unwilling or unable to make peace. We expended all of our influence getting these countries to the negotiating table, and, in exchange for their real or imaginary cooperation, we looked the other way on issues like corruption and bad 

governance that have proved far more consequential. No longer. 

As our witnesses will testify to today, the corruption within the 

Palestinian political establishment has been endemic for decades. 

Reports suggest that Palestinian President Mahmoud Abbas, like 

his predecessor, Yasser Arafat, has used his position of power to 

line his own pockets as well as those of his cohort of cronies, including his sons, Yasser and Tareq. 

The Palestinian Investment Fund, for example, was intended to 

serve the interests of the Palestinian population and was supposed 

to be transparent, accountable, and independent of the Palestinian 

political leadership. Instead, it is surrounded by allegations of favoritism and fraud. President Abbas is reported to have asserted 

complete control over the fund, filled its board with his own allies, 

and has rejected all attempts to audit its operations. 

Even more disturbingly, Yasser and Tareq Abbas, who have 

amassed a great deal of wealth and economic power, have enriched 

themselves with U.S. taxpayer money. They have allegedly received 

hundreds of thousands of dollars in USAID contracts. This is not 

to say that they do not have a legitimate right to compete for these 

contracts, but it does raise questions as to whether they received 

preferential treatment of any kind as well as if and to what extent 

they are involved in corrupt practices within their own government. 

In addition to strengthening maligned actors, this corruption 

short circuits any progress that credible leaders, like Prime Minister Fayyad, have been able to achieve. A lack of accountability 

and transparency undermines the trust of the Palestinian people in 

their political institutions and renders them ineffective. How can 

democratic institutions be established or the economic wellbeing of 

the Palestinian people be advanced if their own leadership is raidVerDate 0ct 09 2002 14:37 Sep 13, 2012 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\WORK\MESA\071012\74960 HFA PsN: SHIRL
3

ing the common coffers? And if one of these leaders, against all empirical evidence, were to be willing to make peace with Israel, 

which will surely require unpopular even if necessary concessions, 

how can we expect the Palestinian people to respect an agreement 

negotiated by a hollow leader devoid of legitimacy among his own 

people? 

The endemic corruption within the Palestinian political establishment must go ignored no longer. Questions must be asked and answers must be demanded, including about our own assistance programs. Our objective cannot and must not be to strengthen whoever recites the same prescribed lines about negotiations. Rather, 

our policy must aim to empower those leaders who genuinely seek 

to establish the transparent and accountable institutions of government that will be necessary for any future Palestinian state to be 

viable and to live side-by-side with Israel in peace, security, and 

prosperity. 

Our policy must aim to empower those who seek to serve the Palestinian people instead of themselves. Peace with Israel is objectively in the interest of the Palestinian people, but only a leader 

who is willing to put the wellbeing of the Palestinian people ahead 

of his or her own pocketbook will be willing or able to make the 

requisite sacrifices. I fear much of the current Palestinian leadership is not up to the task. 

And I would now yield to the gentleman from New York, the 

ranking member of this committee, the very distinguished Mr. 

Gary Ackerman. 

Mr. ACKERMAN. Thank you, Mr. Chairman. 

There was a moment in the recent past when corruption may 

have actually prevented a breakthrough moment in the Israeli-Palestinian peace process. At that moment, but for the fact that one 

of the leaders of the two peoples was compromised by his own alleged misdeeds catching up to him, things could have turned out 

very differently. Unfortunately, that leader was Ehud Olmert, 

Israel’s then-Prime Minister, who because of impending corruption 

charges had announced his intention not to seek reelection only 2 

months before putting Israel’s third comprehensive peace plan on 

the table for the Palestinians. The other two peace plans were both 

offered by current Defense Minister and once Prime Minister Ehud 

Barak. 

And the problem in all three cases is that the Israeli Prime Minister was, politically speaking, a very lame duck. Thus, for the Palestinians, saying ‘‘yes’’ or even ‘‘yes, but’’ would have meant accepting in principle all the downsides a compromise would entail but 

without having secured any of the benefits, as that would then depend on the outlook of the next Israeli Prime Minister. 

The decision not to accept is based on an understandable political 

calculus, but for the Palestinians it has been a very losing strategy. 

Avoiding domestic political risk, the consistent choice of Palestinian 

President Mahmoud Abbas has been a path which has kept him in 

office but has not achieved any of the Palestinian people’s legitimate goals. 

And let’s be very clear: It is the failure of the Palestinians to say 

‘‘yes’’ that has prevented them from having a state of their own—

not settlements, not defense, not the Israeli Defense Forces, not the 

4

Israeli right, not Prime Minister Netanyahu, and not anything else. 

With a bit more courage from their leaders, Palestinians could well 

be getting ready to celebrate their 10th independence day. 

Corruption in the Palestinian Authority is unquestionably serious and in some areas debilitating. But for the Palestinians, it has 

not been the deciding factor between the ongoing conflict or peace, 

or at least not in the way that people might expect. 

I am reminded of a funny story about an important negotiating 

session with all the Israeli and Palestinian principals attending. 

One of the Palestinians in the room, who I will not name—I will 

just refer to him as ‘‘Abu A’’—launched into a furious diatribe 

about Israeli settlement activity and construction of the security 

barrier, particularly in and around Jerusalem. After a moment, in 

response, the Israeli Prime Minister simply and with a mysterious 

smile asked, ‘‘Are you sure you want to stop all the construction?’’ 

The room was filled with laughter, hardly suppressed, and a lot of 

snickers. It was well known among all of the principals in the room 

that the Palestinian advocate, who had just been holding forth so 

vehemently about the construction being the deterrent to peace, 

had a major financial interest in the Palestinian cement company 

that had a monopoly in the cement that was being used for the settlements and the security barrier that the Israelis were constructing in the Jerusalem area. 

For ordinary Palestinians, the situation is rather more serious, 

in that he or she realistically has only two viable political options: 

Radical, violent Islamic Hamas or feckless, corrupt Fatah. It is not 

much of a choice and, thus, no surprise that so many Palestinians 

have given up on their own political system altogether. 

But for us, as an interested outside party and as a friend of both 

sides in the conflict, our interests in the question of corruption are 

limited to three. 

One, in so much as one of the two political factions that favors 

peace and claims to be willing to accept negotiated settlement of 

the conflict is compromised—that means corrupt—in the eyes of 

the Palestinian people, we should be concerned about the possibility that the political option for peace they favor will be likewise 

undermined. Happily, polling results for nearly a decade show little 

change in the Palestinian preference for a two-state solution. Less 

happily, at the same time, an overwhelming number of Palestinians have also concluded that that outcome is also extremely unlikely. 

Two, as a major political donor to the Palestinians, we need to 

be concerned that our aid will be construed as supportive for a corrupt regime. I will say that again. As a major political donor, we 

need to be extremely concerned that our aid will be construed as 

support for a corrupt regime. This is a problem not just with Palestinians but, likewise, in many other places of much greater strategic import, like Egypt, Pakistan, Afghanistan, and Iraq. 

The fact is, there is no easy answer for this question. We deal 

with corrupt governments out of necessity, because we need a partner with which to work on problems that reflect our national interests and our national security. Inevitably, dealing with rotten governments taints our reputation and, in the long term, jeopardizes 

our interests. Unfortunately, the only thing worse than dealing 

5

with rotten governments is trying to preserve and advance our interests should we ignore them. 

Three, we need to ensure that our assistance programs are 

achieving the goals that we set. If it is our intention to improve 

school attendance or decrease infant mortality or provide potable 

water and sanitation, then that is what the programs have to do. 

If they unintentionally wind up enriching loathsome regime figures 

and boosting the power of people we dislike, then we have a hard 

choice to make. Is our support for the people outweighed by the unintended, undesirable consequences of that flow? 

Obviously, I am not talking about outright corruption, waste, or 

fraud in our own aid programs. Such outcomes are always unacceptable and never to be tolerated. I am referring to the undesirable consequences of, say, buying concrete from the wrong Palestinian bigwig. 

Finally, we need to keep our eyes on the big picture, on where 

our strategic interests lie. Corruption is bad. Corruption here is 

bad. Corruption is bad in the P.A. Corruption is bad everywhere. 

We could all stipulate to that. It is agreed; we don’t like it. Once 

that question is settled, then what? How do we move forward toward a peace that enables Israel to remain secure both as a democratic and Jewish state and for the Palestinians to have a national 

homeland of their own that poses no threat to others? That is the 

central question and the point from which our assessments about 

the seriousness of corruption must begin. 

Mr. CHABOT. Thank you very much. 

It is the practice of the committee to recognize committee members if they would like to make a 1-minute opening statement. 

Mr. Connolly, were you interested in doing such? 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

And welcome, to our panel. 

Mr. Chairman, I would hope that here in the House Foreign Affairs Committee we maintain a tradition of straightforward intellectual pursuit. The title of this subject presupposes an answer. We 

don’t ask about the magnitude of corruption or its impact. We actually say, ‘‘Chronic Kleptocracy: Corruption within the Palestinian 

Political Establishment.’’ That virtually says to anyone reading the 

title that it is chronic, it is a kleptocracy, not a government, and 

it permeates Palestinian political establishment. 

Now, it seems to me if that proposition were true, that is the 

purpose of hearing from the panel of expert witnesses. But for us 

to prejudge the case I think somewhat—more than somewhat—affects the whole tone and tenor of this hearing. And I would hope 

as we move forward in the future we would be a little more neutral 

in the wording so we can actually get at the facts. 

I certainly want to hear today from our witnesses about to what 

extent is there corruption, to what extent does that corruption 

prove an impediment to self-governance, to the prospect of a twostate solution anytime soon, to the fact that we, as Mr. Ackerman 

indicated, don’t yet have Palestinian Government assent to participate in Middle East negotiations, and to what extent this is a barrier for any prospect of efficient service delivery. 

6

And so I would just hope that we try our best to resist the temptation to put the conclusion to a hearing in the title itself as we 

move forward. 

Thank you, Mr. Chairman. 

Mr. CHABOT. Thank you. 

The gentleman’s time has expired. 

The gentleman from Florida is recognized for 1 minute. 

Mr. DEUTCH. Thank you, Chairman Chabot, Ranking Member 

Ackerman, for holding today’s hearing on corruption within the 

Palestinian political establishment. It is an issue I have been concerned with for sometime now. I believe it warrants our continued 

attention. 

And while there is no doubt that, under the leadership of Prime 

Minister Fayyad, the P.A. has made great strides in routing out 

corruption and reforming and restricting its financial system, I remain concerned about aspects of the P.A. that are not under Mr. 

Fayyad’s control and remnants of those who for years profited 

under the corrupt system of Yassir Arafat. 

Reformers like Prime Minister Fayyad have come a long way in 

building the institutions necessary for a viable Palestinian state, 

but it is well known that the P.A. faces a massive budget shortfall. 

Unfortunately, allegations of corruption among those in power continue to be a source of serious concern for the U.S. and other donor 

states. 

Earlier this year, I, along with my colleagues Congresswoman 

Nita Lowey and Congressman Steve Israel, requested an investigation into U.S. contributions to the Palestine Investment Fund. We 

are hopeful that an investigation will not only provide a mechanism for accountability of U.S. dollars but provide additional transparency and clarity as to the functions of the PIF. I know that 

these are issues which our witnesses have investigated, and I look 

forward to their testimony here today. 

Mr. CHABOT. Thank you very much. We appreciate that. 

We have been called for votes on the floor. I am told that we are 

looking at about 40 minutes’ worth of votes, so we will be in recess 

in that period of time. But we will come back promptly and begin 

with Mr. Abrams’ testimony. 

Thank you. We are in recess. 

[Recess.] 

Mr. CHABOT. The committee will come back to order. 

We will now have the introduction of our panel here this afternoon. And we will begin with Elliott Abrams, who is the senior fellow for Middle Eastern studies at the Council on Foreign Relations; 

served as Deputy Assistant to the President and Deputy National 

Security Advisor in the administration of President George W. 

Bush, where he supervised U.S. policy in the Middle East for the 

White House. Prior to this position, Mr. Abrams spent 4 years 

working for the United States Senate and served in the State Department during the Reagan administration. In 1988, Mr. Abrams 

received the Secretary of State’s Distinguished Service Award from 

Secretary George P. Shultz for his work in the State Department. 

Mr. Abrams was educated at Harvard College, the London School 

of Economics, and Harvard Law School. 

And we welcome you here this afternoon. 

7

And our second witness will be Dr. Jonathan Schanzer, who is 

vice president for research at the Foundation for Defense of Democracies. Previously he worked as terrorism finance analyst at the 

U.S. Department of the Treasury. He has worked for several think 

tanks, including the Washington Institute for Near East Policy, the 

Jewish Policy Center, and the Middle East Forum. Dr. Schanzer 

earned his Ph.D. from Kings College London, where he wrote his 

dissertation on the U.S. Congress and its efforts to combat terrorism in the 20th century. 

And we welcome you here, as well, Doctor. 

And our final witness will be Jim Zanotti, who is a specialist in 

Middle Eastern affairs at the Congressional Research Service. 

Since joining CRS in 2008, Mr. Zanotti has provided objective and 

nonpartisan research and analysis on the Middle East to Members, 

committees, and staff of both houses of Congress. He specialized in 

Palestinian, Israeli, and Turkish affairs. In 2010, he was detailed 

to the Pentagon as a Turkey and Romania policy desk officer for 

the Office of Secretary of Defense. From 2007 to 2008, Mr. Zanotti 

was a Bosch Transatlantic Fellow in Berlin, which included time 

working on Middle East issues for a leading member of the German Bundestag. Mr. Zanotti holds a B.A. In history from the University of Southern California, a J.D. From Harvard Law School, 

and an M.A. In international peace and conflict resolution from 

American University. 

And we welcome you here, as well, Mr. Zanotti. 

And we will have 5 minutes for each witness. I am sure you are 

familiar with the lighting system here. A yellow light will come on 

when you have 1 minute to wrap up. When the red light comes on, 

we would appreciate if you would wrap up. We usually give a little 

leeway, but if you could stay within that, we would appreciate it. 

And without further ado, Mr. Abrams, you are recognized for 5 

minutes. 

STATEMENT OF THE HONORABLE ELLIOTT ABRAMS, SENIOR 

FELLOW, COUNCIL ON FOREIGN RELATIONS 

Mr. ABRAMS. Thank you, Mr. Chairman, for the invitation to appear before the subcommittee. Thank you, Mr. Ackerman. I apologize for this cold. I am counting on 4 minutes of testimony and a 

minute of coughing. It should even out at the end. 

I wanted to say that I guess I don’t agree with Mr. Connolly, in 

the sense that we all know the magnitude of this problem. In my 

written testimony, I mentioned the famous cement issue that Mr. 

Ackerman mentioned and which has been—it was actually 20,000 

tons of cement that was bought from Egypt, and the purpose was 

to rebuild buildings in Gaza, but it ended up in Ashkelon and then 

on to build what the Palestinians were then calling the Apartheid 

Wall. And I won’t identify ‘‘Abu A’’ any more than the ranking 

member did. 

But this is a serious problem. Polls have shown recently that 

more than 80 percent of Palestinians think it is a serious problem. 

And it matters politically, too, because if you have a government 

that is not elected—and, as you know, they haven’t had elections 

since 2006, so everybody’s term is up—and it is viewed as corrupt, 

8

the legitimacy necessary to rule and the legitimacy necessary to 

compromise in any negotiation simply are not there. 

Nor are we allowed to talk about corruption. Just an example of 

this: In 2008, there was a Web site covering corruption matters. It 

was simply blocked by the Palestinian Authority. President Abbas 

issued an order to block the site after dozens of articles about corruption had appeared. And the Web site did an article about this 

called, ‘‘The Ramallah Banana Republic.’’

There have been efforts against corruption by Prime Minister 

Fayyad since he became Prime Minister in 2007 and even before 

that when he was Finance Minister. But I think you would have 

to say, in the last year, maybe 2 years, his efforts have been circumscribed, and his powers are not as great as they were a couple 

of years ago. 

People point to two things that have happened recently as signs 

that, oh, it is getting better. The anticorruption court convicted Mohammed Rashid, who had been a financial advisor to Yassir Arafat, 

but he hasn’t really been a figure of importance in Ramallah since 

Arafat died in 2004. He is on the outs. So convicting him really is 

more like vengeance against an unpopular figure than it is really 

taking on corruption on the inside. 

This month, there were 150 arrests made in the West Bank, a 

kind of police sweep. And The Jerusalem Post reported, this is a 

crackdown on crime and corruption in the West Bank. I am not so 

sure about that. Maybe it is a crackdown on crime. I don’t see it 

as a crackdown on corruption in the Fatah Party. And, again, it 

seems more like one faction against another. 

You have mentioned in your opening statement, Mr. Chairman, 

the sons of President Abbas, and you mentioned the Palestine Investment Fund. And I think it is really important that that investigation of the PIF go forward. It was removed from Fayyad’s oversight, from the oversight of the finance ministry a couple of years 

ago. I can’t believe that the reason for that removal is anything 

positive. 

Final point: What are we doing about this in our aid programs? 

I took a look at our AID programs and our MEPI programs, and 

on their Web sites they list all the things they are involved in, all 

of which are, I think, quite beneficial. But the word ‘‘corruption’’ 

does not appear. And if you ask, people will say, well, some of the 

governance programs deal with corruption, help deal with corruption. But what are Palestinians to conclude if we don’t have what 

we call an anticorruption program, what is labeled and named an 

anticorruption program? 

If the suggestion is, in their minds, that we don’t really want to 

talk about this, we don’t think it is all that important, we don’t 

want to have any visible AID or MEPI or other U.S. Government 

programs against it, that suggests that we are uninterested or at 

least we are minimizing it, which I think is a huge mistake for us 

for the reasons that all of you have already mentioned. 

So I think you are zeroing in, in this hearing, on a very serious 

issue, a key one for you as authorizers of assistance and key for 

anybody who wants to see the development of a responsible, transparent, democratic government in the West Bank. 

Thank you. 

9

Mr. CHABOT. Thank you very much. 

[The prepared statement of Mr. Abrams follows:]


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Mr. CHABOT. And, Dr. Schanzer, you are recognized for 5 minutes. 

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

Mr. SCHANZER. Chairman Chabot, Ranking Member Ackerman, 

members of the subcommittee, on behalf of the Foundation for Defense of Democracies, I thank you for holding this important hearing. 

I have recently devoted months of research to this problem of 

Palestinian corruption. I believe the problem is pervasive, and I 

also believe that it is, to some extent, one of our own making. After 

the Palestinian civil war of 2007, during which Hamas overran the 

P.A. and seized control of Gaza, Washington panicked. We threw 

all of the resources at our disposal at Mahmoud Abbas in the belief 

he was the moderate alternative to a terrorist organization. Yet, in 

providing him with the cash, intelligence, military assistance, and 

other valuable services to shore up his rule, we convinced Abbas 

there was virtually nothing he could do to shake our support. And 

over the last 5 years, he has consolidated both economic and political power. 

In recent months, however, Abbas has come under fire for corruption from within. A recent poll indicates that no less than 71 

percent of West Bankers believe the Abbas government is corrupt. 

This is for good reason. Abbas silences political opponents. His 

forces crush protests and arrest writers who criticize him. His government shuts down Web sites that make allegations against him. 

Meanwhile, his allies and family members have benefited handsomely from his rule. I summarize these problems in my written 

testimony. 

Mr. Chairman, I would like to speak for a moment about 

Mahmoud Abbas’ sons, Yasser and Tareq. On June 5, I wrote an 

article for Foreign Policy that identified some of the business holdings, based on online sources, of these two individuals. Since then, 

someone has removed some of the Web sites that I cited. 

But there is more to uncover. I recently spoke with a current foreign intelligence official and two former U.S. intelligence officials 

who confirmed and shared additional information relevant to this 

testimony. According to these officials, in 2009 the P.A. granted 

diplomatic passports to two business partners of the Abbas brothers, Issam and Devincci—also known as Assem—Hourani. 

The Israeli press covered aspects of the story in 2011, but according to these intelligence officials, it did not report that Yasser 

Abbas worked with Devincci Hourani to pursue an oil business in 

Sudan called Caratube International Oil Company, otherwise 

known as CIOC. Devincci Hourani and Yasser Abbas, according to 

these officials, received ‘‘help from the Palestinian Authority Ambassador to Sudan to win three oil blocks on behalf of CIOC.’’

The intelligence officials suggest that the Sudan operation may 

be a violation of U.S. sanctions because Devincci could be a U.S. 

citizen. The intelligence officials note that Devincci Hourani 

‘‘partnered with Yasser Abbas to initiate other business projects in 

Sudan, including construction of a hotel and other real estate 

14

projects.’’ The officials further add that Yasser and Tareq have 

‘‘been in continuing contact with the Hourani brothers about business opportunities in Kazakhstan, the Ukraine, and Montenegro.’’ 

Open source information about these businesses, if they are active, 

is not readily accessible. 

Mr. Chairman, shifting gears, in congressional testimony last 

year I raised concerns about the Palestine Investment Fund. Since 

then, I have had several discussions with PIF’s representation in 

Washington. Without getting too detailed, my most serious lingering concerns stem from indications that the fund is not as transparent as it was first intended to be. 

But there is also the question of PIF operations in Gaza. PIF 

claims to have ceased working there after Hamas seized its assets 

in 2011, but an official at the American International School in 

Gaza now claims that PIF representatives have ‘‘taken over the office of a vice principal.’’ Admittedly, PIF owns the school through 

a subsidiary, but if PIF maintains a presence in Hamas-controlled 

Gaza, it requires an explanation. PIF should also explain the 

Fund’s presence in a school receiving USAID funds. PIF counsel 

has indicated that they will look into this matter. 

There are more issues to raise, but I will wrap up in the interest 

of time. Mr. Chairman, Washington should first acknowledge there 

is a problem. The consulate in East Jerusalem knows what is happening, but the State Department has yet to openly address this 

issue. If steps are not immediately taken, Hamas will exploit the 

problem. Hamas, after all, won the 2006 elections on a campaign 

that centered on fighting corruption, and frustrations over corruption fueled the Arab uprisings that recently toppled several leaders. 

The Palestinians must know that Israel is not the only obstacle 

to independence. If self-governance is the goal, they must also 

grapple with corruption. Washington can also leverage its $600 

million in annual aid. We squander our influence if we fail to withhold portions of this aid when we identify areas of corruption and 

restore it only when the problems are addressed. 

Finally, with enough political will, Congress could even press for 

an Executive order on Palestinian corruption. This would send a 

signal to violators that Washington will no longer tolerate this 

problem. 

Mr. Chairman, thank you again for the opportunity to testify. 

Mr. CHABOT. Thank you very much. 

[The prepared statement of Mr. Schanzer follows:]

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Mr. CHABOT. And, Mr. Zanotti, you are recognized for 5 minutes. 

STATEMENT OF MR. JIM ZANOTTI, SPECIALIST IN MIDDLE 

EASTERN AFFAIRS, CONGRESSIONAL RESEARCH SERVICE 

Mr. ZANOTTI. Chairman Chabot, Ranking Member Ackerman, 

and other distinguished members of the committee, thank you for 

inviting me here today. I would like to begin with a brief overview 

of the topic within a broader U.S. policy context. 

The Palestinian National Authority was established in 1994 by 

agreement between Israel and the PLO to exercise limited self-rule 

under supervening Israeli control in the Gaza Strip and parts of 

the West Bank. Substantial material assistance from international 

donors backed the formation of the P.A. and continues in support 

of improving the P.A.’s capacities to govern and provide public security and services. 

U.S. bilateral assistance appropriated for Palestinians in the West Bank and Gaza since 1994 has exceeded $4 billion. Since the 

2007 de facto split between the Fatah-led P.A. in the West Bank 

and Hamas in Gaza, this has included more than $1 billion for direct budgetary assistance to the P.A. It has also included $645 million for nonlethal security and criminal justice sector assistance in 

the West Bank. 

Successive U.S. administrations and Members of Congress have 

routinely asserted that this aid supports at least three major U.S. 

policy priorities: One, preventing terrorism against Israel from 

Hamas and other militant organizations; two, fostering stability, 

prosperity, and self-governance in the West Bank that inclines Palestinians toward peaceful coexistence with Israel and a two-state 

solution; and, three, meeting humanitarian needs. 

Since the 1990s, allegations have swirled around the Fatah-led 

P.A. and its two Presidents, first Yassir Arafat and now Mahmoud 

Abbas, accusing them and/or various of their associates of avoiding 

transparency and accountability with funds they have controlled, 

misusing or diverting assets intended for public benefit, and/or fostering a general environment in which corrupt or unaccountable 

practices are encouraged or accepted as the norm. 

The popular Palestinian perception of entrenched corruption 

within Fatah is commonly cited as one reason that Hamas, running 

under the moniker of the Change and Reform List in January 2006 

elections, won a majority of Palestinian legislative council seats. 

Some Palestinian leaders have attempted over the years to curb 

corruption and institute reform with mixed results. P.A. Prime 

Minister Salam Fayyad, for example, established a reputation as a 

reformer in the early 2000s after becoming Arafat’s Finance Minister. He exposed and discontinued various unsanctioned practices 

and strengthened P.A. accountability mechanisms. Many Western 

officials and analysts laud and support Fayyad’s continuing P.A. reform efforts in the West Bank under Abbas’ Presidency. 

A June 2012 poll indicated that 71 percent of Palestinians in the 

West Bank and Gaza believe that corruption exists in the West 

Bank’s P.A. institutions. A Washington Post article from June 

quoted an analyst as saying that favoritism and off-the-books payments continue within the P.A. However, the same article cited 

antigraft activists who say that the problem has diminished since 

31

Arafat’s death. And surveys published last year by the World Bank 

found that, generally speaking, Palestinians’ perceptions of corruption exceed their personal experience with it. 

Apparently in response to corruption allegations leveled against 

various P.A. officials in 2010, President Abbas appointed an 

anticorruption commission and empowered a court to adjudicate 

cases resulting from the commission’s investigations. The first conviction resulting from the commission’s activities occurred in June 

2012 against Arafat’s former financial advisor, Mohammed Rashid, 

for embezzlement. Rashid has responded publicly with allegations 

of corruption and nepotism against Abbas, and multiple reports indicate recent increases in official efforts to arrest and silence media 

and civil society critics of Abbas and the P.A. 

So what are the implications for U.S. policy? A next step for U.S. 

lawmakers and officials could be to determine whether various allegations of P.A. corruption are true, likely, plausible, or none of 

these. In determining whether and how to respond to corruption allegations deemed to have merit, they might weigh the following 

considerations: How important is preventing or limiting P.A. corruption in the context of overall U.S. priorities with respect to the 

Palestinians? How effective are existing U.S. laws and policies in 

addressing these priorities? And how might changes to U.S. laws 

and policies pertaining to aid and oversight affect this picture, 

along with regional public opinion and political trends? 

Thank you very much. I look forward to your questions. 

Mr. CHABOT. Thank you very much. 

[The prepared statement of Mr. Zanotti follows:]

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Mr. CHABOT. We appreciate all three of the witnesses’ testimony 

here this afternoon. And we will now have 5 minutes to ask questions, and I will recognize myself for that purpose at this time. 

Mr. Abrams, in your written testimony you stated that, and I 

quote:

‘‘The challenge here is not only to President Abbas and to the 

P.A. It is, for one thing, a challenge to the Fatah Party, whose 

future ability to defeat Hamas is surely tied to public perceptions of whether it remains a home to corruption. And it is a 

challenge to us, to the United States. If we turn a blind eye 

to corruption and to persecution of those who expose it, we are 

in a very real way contributing to the problem and undermining those Palestinians who wish to build public integrity 

into their system. It is widely understood that donors in the 

Arab states and Europe, as well as we ourselves, look favorably 

on Prime Minister Fayyad, but that is not enough.’’

And you said some other things, as well. 

Could you please elaborate on specific measures that you believe 

should be taken by the various parties—the U.S., the Palestinians, 

and the Arab donor states—to stem future corruption? 

Mr. ABRAMS. Of course, one would hope—and it has been an idle 

hope over the past years—but, for the most part, one would hope 

the Palestinians would clean this up themselves. And there was 

some real progress made when Fayyad first became Finance Minister, 2003 if I remember, and then became Prime Minister. For example, they put the P.A. budget on the Internet. For the first time, 

you could get a sense of where things were going. 

But he is not a member of Fatah, Prime Minister Fayyad. And 

the pervasive corruption of the Fatah Party is, as has been said, 

I think, one of the things that contributed to their defeat by Hamas 

in the 2006 elections. And they have not been willing to do that 

kind of self-policing. And it starts, as Dr. Schanzer said, it really 

starts, I think, at the top of the Fatah Party with President Abbas 

and his family. 

So I don’t think we are going to get a lot more from that direction. I think it really depends more on us and whether, for example, it is possible to build into our aid, whether it is through AID 

or MEPI or the National Endowment for Democracy, some specific 

anticorruption activities. I mean, they have an anticorruption program now, but when it, instead of going after anybody who is in 

the inner circle, it goes after outcasts, it goes after enemies of 

President Abbas, I think we have to draw the conclusion that it is 

not a serious program. 

Mr. CHABOT. Thank you very much. 

Dr. Schanzer and Mr. Zanotti, in your testimonies you referenced 

numerous specific instances of Palestinian corruption. What actions 

do you believe the U.S. Government should take in investigating 

past instances and combating future ones? Do you believe the current Palestinian leadership is corrupt beyond salvation? And if so, 

how should U.S. policy accommodate that reality? 

And if either one of you wants to go first, and then I will take 

the other one after that. 

Mr. SCHANZER. I suppose I will go first. 

35

First of all, you know, I think that the importance here is to take 

a look at this problem and to try to address it with the current Palestinian leadership. When we look at the importance of the Palestinian Authority, I think it can’t be understated, this was designed 

to be a caretaker government that would help build up institutions 

while the Israelis and Palestinians tried to hammer out core issues 

in the peace process and ultimately midwife a state. And what we 

have seen here is that it has gone off the rails. This Palestinian 

leadership has decided that it doesn’t want to negotiate any longer. 

We are seeing that right now under the top leadership. They are 

going unilaterally to the U.N. and basically going outside of the 

Oslo process to which we believe they had been bound. And now, 

on top of this, we are seeing blatant instances of corruption. 

And so I think we need to bring this back to where it was, which 

was a fledgling state designed to help bring together the institutions necessary for statehood. I think we have lost sight of that, 

and that is why I think it is important that the United States focus 

on this. I believe it is good for the Palestinians; I believe it is good 

for the peace process. 

In terms of what we can do specifically, you know, I did mention 

that I think that we could probably remove areas of our aid when 

we identify specific line items where there is corruption. In other 

words, when we identify, we say, this is a problem, we are going 

to remove funds until you rectify the situation, and we will replace 

it. Right now we just hand it over blindly. It is just given to the 

Palestinians as if it is owed to them, and there are no expectations 

on the part of the Palestinians that they need to deliver anything 

in return. I think this is a problem. It has ultimately undermined 

this project of the Palestinian Authority. 

Mr. CHABOT. Thank you. 

Mr. Zanotti? 

Mr. ZANOTTI. Yes. And to clarify, my citing various reports did 

not advocate any sense of whether corruption has taken place within the P.A. or not. I have very few means of actually independently 

verifying those. 

But without advocating any investigative measures per se or specific means of U.S. policy, you know, one approach would be to relate back to the U.S. priority for our political support, our material 

support with the P.A., one of which I enunciated in my earlier remarks, talking about helping the P.A. develop capacity for self-governance and stability and prosperity in the West Bank. 

And if the Palestinian Authority, through establishing an 

anticorruption commission, through seeking to address this problem, has not done so in a way that evokes confidence from its people, then—a World Bank survey that was conducted last year in 

2011 said, not only do you have to effectively pursue corruption, 

but you also have to convince your people that it is not politically 

motivated and that there is enough transparency that there can be 

discussion of it within the West Bank. And some of these reports 

that have come out in the last few months have cast some doubt 

as to whether there is this credibility. 

As for specific measures, specific ways that U.S. policy could perhaps address the situation, of course there are a range of options, 

going from more stringent oversight of various P.A. or P.A.-related 

36

bodies or accounts to the notion of revisiting various conditions on 

U.S. aid, adding to, changing those conditions; and then, of course, 

also addressing various types and levels of the aid itself; and then, 

you know, other measures having to do with having the issue 

raised on a more common basis. 

Mr. CHABOT. Okay. Very good. 

Mr. ZANOTTI. So these are some of those measures that——

Mr. CHABOT. Okay. Thank you very much. I appreciate it. My 

time has expired. 

The gentleman from New York, the ranking member, Mr. Ackerman, is recognized for 5 minutes. 

Mr. ACKERMAN. Thank you. 

I would just like to comment first on something that Dr. 

Schanzer said. I believe that the money that we give the Palestinian Authority directly is to pay bills, which means that that 

money that we give them is really a passthrough to Israel to pay 

their bills for their electricity so that Israel keeps their lights on. 

So I don’t know what we investigate there. I am not saying there 

is no corruption, but as far as that is concerned, that pays the electric bills to Israel, and we are really paying Israel for their electric 

bills by giving them the money so that they are paying their electric bills. 

And that is a couple hundred million dollars’ worth. And almost 

equal, slightly more—or slightly less goes to AID in contracts. And 

I think that is where we really have to watch what is being spent. 

But that is not direct aid to them that is being handled by AID. 

I just want to sound a cautionary note as to where we are going 

with this and what we do with the information as far as policy and 

what others do with the information here as policy and whether 

that is helpful or not. If we stipulate, as I said before, that there 

is corruption, there are those who would use that information solely and exclusively to say, ‘‘You see? The Palestinians are unworthy, 

and we should not be giving them any aid or assistance.’’

I would divide the camp up into those who want to help the 

peace process, and then there is a small splinter group of people 

who are so blinded in their support, trip over themselves, that say 

we should do everything we have to do to help Israel, and helping 

the Palestinians get their act together so that they achieve their 

legitimate goals and do not act in ways that are disruptive to the 

international community, Israel included, would also be something 

that is helpful to Israel. 

But there are those who would use this, they see this corruption 

there, let’s cut them off until, you know, they act like Mother Teresa would act. That is not going to happen. There is corruption everywhere. I think on a scale of all the nations, 1 to 184, I think 

Sweden or Finland is number one with the least corruption and 

North Korea is 184. We come in, like, 24th. So, you know, everybody is somewhere on this spectrum. Palestinians don’t get rated 

because they are not a country. I assume they would be closer to 

North Korea than Scandinavia if they were. 

But there was a race once in Louisiana for Governor in which the 

former Governor, whose name I believe was Edwards, was running. 

And he had been known primarily because he was thoroughly corrupt. And he was running in a primary, and suddenly the guy who 

37

challenged him turns out to be David Duke, the well-known Nazi 

leader. So people had that choice. It wasn’t their ideal. So bumper 

stickers were springing up, some of which said, ‘‘I am with the 

crook.’’

You know, you don’t always get your ideal choices. 

If we come to the conclusion that you have to put your money 

down somewhere, you know, who are you going to be with? And 

this is not necessarily a good choice. There is one group that wants 

to completely destroy Israel, and that is their lifeblood. The other 

one, you know, Fatah, at least contends that they are interested in 

a negotiated settlement, and if we take them at their word, even 

despite that, they are the group that is known to be corrupt. 

One of those groups is going to win. We don’t want to pull away 

altogether. If you completely embarrass and humiliate the guys 

that are crooks, you force the voters or the electorate to go to the 

guys that are the Nazis, in relative terms. I am not calling them 

that. But, you know, in life you don’t always get to pick your 

choices. You get two choices that confront you; sometimes they are 

bad and terrible. 

What is it that we do here to keep enough pressure and spotlight 

on the Palestinians, who are the guys that we might prefer win 

this battle, so that they clean up their act so that the guys who 

are the terrorists don’t win? 

That was a 5-minute question, but maybe I can have a short answer. 

Mr. SCHANZER. Well, thank you for raising all of these points. I 

will try to address them just very quickly. 

First of all, on the issue of paying the electricity bills, I am actually very glad that you raised that. It is something I brought up 

about a year ago in this very building. 

Part of the problem with the electricity bills that we are paying, 

or that we are giving funds to the Palestinian Authority to pay, is 

they are, in turn, financing the operations of the Gaza power plant. 

The Gaza power plant is operated under the auspices of Hamas. Interestingly, Hamas goes out and asks people to pay their electricity 

bills but does not remit those funds back to the Palestinian Authority. So, in many ways, when we give funds to the P.A. to fund electricity, we are actually funding Hamas. 

Mr. ACKERMAN. Well, everything is fungible. We know that. 

Mr. SCHANZER. Of course it is fungible, but, again, you know, it 

is not as simply as just we are paying the electricity bills. And so, 

you know, I would just say that, you know, even those sorts of line 

items that appear very straightforward have a wrinkle to them 

that can impact this question of Palestinian corruption. 

Now, as for those who would say that we shouldn’t fund the Palestinian Authority, period, because of the problem of corruption, I 

would say that they are very few. I certainly am not one of them. 

But I do believe that just saying that of course there is going to 

be a problem of corruption within the P.A., it is—what is the 

term—it is the soft bigotry of low expectations. In other words, if 

we don’t ask them to do what is right for their own people, we are 

complicit in what is happening inside the P.A. 

And the frustration level, sir, is rising. We have seen it in recent 

demonstrations against the Palestinian Authority. You can see it in 

38

terms of the way the people are writing against the P.A. right now 

online. This is a growing sentiment. It is important that we try to 

address this now. 

Now, just on one other point here, yes, of course, corruption is 

an issue that every country faces, and, of course, we know that it 

is rife in the Arab world. But here I think when we talk about our 

choices, we can find a way to make sure that the choice of the Palestinians isn’t Hamas in the end. In other words, as long as the 

Palestinian Authority continues to pursue this path of corruption, 

the Palestinian people will undoubtedly go running in the direction 

of Hamas. We saw it in 2006. I believe that if we don’t tackle it 

now, the next time there is an election—I am not sure that we will 

ever actually see one held, but if there was an election, I think 

Hamas would win hands down. 

But then there is also just the question of the people rising up 

against the P.A. We are now in the middle of an unprecedented 

time in the Arab world. Some people call it the Arab Spring, the 

Great Unrest. All of this is about corruption, sir. All of this is about 

people being very angry at their leaders for squandering American 

aid, for allowing their children, whether it was Gamal Mubarak or 

Saif al-Islam Qadhafi, they all got rich off of their parents’ systems. 

What we are looking at right now is the potential for this to come 

back to the Palestinians. If it does, it will have grave ramifications 

for the potential of a Palestinian state as well as the two-state solution. 

These are the all the reasons why I think it is important that 

we try to tackle this now. And whether we do it by addressing line 

items in the aid, whether we do it through proclamations through 

the State Department, we have to start to think about these problems more seriously. 

Mr. CHABOT. The gentleman’s time has expired. 

The gentleman from Pennsylvania is recognized, Mr. Marino, for 

5 minutes. 

Mr. MARINO. Thank you, Mr. Chairman. 

Good afternoon, gentlemen. Thank you for being here. 

I am just a country lawyer, a country prosecutor from Pennsylvania but with an insatiable appetite for foreign policy. I have four 

questions I would like to ask each of you, and if you could please 

be as succinct as possible, if there are answers to these questions. 

Who is more inclined to deal with the U.S., Hamas or Fatah? 

And why or why not? 

Mr. Abrams, please. 

Mr. ABRAMS. Oh, Fatah, Mr. Marino. Hamas continues to view 

the U.S. as an enemy. 

Mr. MARINO. Okay. And why Fatah? 

Mr. ABRAMS. Well, they have always been, first of all, a secular 

group, not an Islamist group. And they have generally seen the 

possibility of getting what they want, which is a Palestinian state 

under their own leadership, as more likely to be brokered by the 

United States because of our status as a close friend of Israel. 

Mr. MARINO. Does anyone want to supplement that? No? 

Second question: Could more of a wedge be cultivated between 

Hamas and Fatah? Doctor? 

39

Mr. SCHANZER. Congressman Marino, I would say that—probably 

not. I like to say that the two factions can’t agree on the color of 

hummus. There is very little that the two sides can agree on one 

right now. One is very secular; the other one is Islamist in nature. 

One is at least nominally inclined to work with the United States; 

the other, absolutely not. And so the wedge is rather large, the divide is large. 

I don’t necessarily think that would be a good thing for U.S. policy moving forward, because it means that we lack a credible interlocutor on the Palestinian side, which would make peace discussions that much more difficult. 

Mr. MARINO. Thank you. 

Mr. Zanotti—and, again, if others have a response—what realistically happens if we cut all aid to Palestine? 

Mr. ZANOTTI. Well, I mean, there is a universe of possibilities. 

You know——

Mr. MARINO. Narrow it down to the galaxy. 

Mr. ZANOTTI. Dr. Schanzer spoke previously, in previous testimony, talked about the possibility of other countries, other influences stepping in, that this situation in the region is not simply a 

vacuum, that you have Iran looking to influence matters. There 

have been some reports, not saying that Abbas is cultivating a financial relationship with Iran, but there have been reports that 

Mr. Abbas might be attending some kind of a meeting in Iran in 

the near term. 

Other states, the European Union, other donors, not saying that 

these are all bad influences, necessarily, but they are influences 

other than the United States, that if the United States leaves the 

playing field at that point, there is an argument to be made that 

some of these other actors can step in. 

Mr. MARINO. Anyone else? Doctor? 

Mr. SCHANZER. I would say that, yes, we leave the playing field 

open to other bad actors to step in, whether it be Iran, Saudi Arabia, Qatar. I think there is no shortage of actors. Of course, the 

Muslim world is notorious for not making good on its pledges to the 

Palestinians for aid. But, nevertheless, if we stepped out, we certainly would lose our leverage and potentially yield it to other actors that are working against U.S. interests, and I would warn 

against it. 

Mr. MARINO. I hear this more and more from State Department 

people. Give me an example. How could it get worse, and what 

could happen? 

Mr. SCHANZER. Okay. So, for example, let’s say Iran steps in. 

What we look at right now in the Gaza Strip, with the number of 

rockets that Hamas currently has in its possession that have been 

furnished by an Iran, somewhere in the vicinity of, let’s say, 20,000 

to 30,000 rockets, reinforced bunkers, they are preparing for another war against Israel. That is in one small area about the size 

of metropolitan Washington, DC. Now imagine you have another 

territory, the West Bank, roughly the size of the State of Delaware, 

with equal capacity, equal preparations for war, possibly more 

weaponry. You are destabilizing the region further. 

Mr. MARINO. All right. Very complex. 

Mr. SCHANZER. Yes. 

40

Mr. MARINO. Last question. Mr. Abrams, how much U.S. cash did 

Arafat steal from us? And does his family still have it? 

Mr. ABRAMS. It was thought by the time that some money began to come back that he had stolen over $1 billion. That is not to say 

that it was all U.S. cash, because he was getting money from Europe, he was getting money from many Arab donors. 

But the original funding of what is now called the Palestine Investment Fund was, if I remember correctly, money that he stole 

and that he was forced to turn back over. Of course, it has grown, 

but you are talking, round numbers, $1 billion. 

Now, how much they still have, I think no one—well, somebody 

knows the answer to that. Perhaps his widow knows the answer, 

and perhaps Mohammed Rashid knows the answer, the guy who 

used to handle money for him. 

Mr. MARINO. Thank you, gentlemen. I could talk with you for 

hours, but I yield back. 

Mr. CHABOT. Thank you. The gentleman’s time has expired. 

The gentleman from Florida, Mr. Deutch, is recognized for 5 minutes. 

Mr. DEUTCH. Thank you, Mr. Chairman. 

Mr. Chairman, I have a series of questions that I was prepared 

to ask about—corruption and transparency and where we might 

need to shine the light in order to succeed in routing out some of 

this corruption—but then the day’s events took hold. 

And, Mr. Abrams, as you point out, we have now seen there has 

been this long history. The last parliamentary elections were in 

2006. New parliamentary and Presidential elections were supposed 

to take place in January 2002, until the P.A. abandoned them; municipal elections in July of last year, then pushed back to October 

of last year; legislative and Presidential elections again by some 

point in the spring of this year. 

So, given that history, there is probably little reason for me to 

even ask. Nevertheless, in today’s news we learn that there are 

now municipal elections that have been called for October—October 

20th, 2012. 

Given everything that the three of you have talked about in 

terms of public opinion, the 70 to 71 percent figure that several of 

you referred to, 71 percent of the people who think that there is 

some level of corruption, Abbas is corrupt, the regional public opinion, let’s talk about these elections. I mean, to what extent, given 

that backdrop, will this issue be one that is part of these municipal 

elections if they take place? 

And, Dr. Schanzer, as you pointed out a couple times, it is corruption which in many ways is at the heart of so much that we 

have seen take place over the past 11⁄2 years in the region. Is there 

reason for us to think that it may play an important role in determining the direction that these elections go, as well? 

Mr. SCHANZER. Well, Representative Deutch, thank you for this 

question. 

First of all, I think that the likelihood, at least based on the 

track record, is rather low that we will see elections. We continue 

to see the Hamas and Fatah factions talk about elections because 

we know that reconciliation between these factions and the unity 

discussions are important for them to talk about to the public, beVerDate 0ct 09 2002 14:37 Sep 13, 2012 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 F:\WORK\MESA\071012\74960 HFA PsN: SHIRL
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cause the current state of quasi-civil war is deeply unpopular. It 

very much undermines the very question of Palestinian nationalism that there are now two separate quasi-states governed by 

two separate governments. 

But at the end of the day I believe that both of these factions 

are very satisfied with the little fiefdoms that they control. In fact, 

I think they are looking to perhaps take over the other, but neither 

one is willing to chance it, I believe, in an election. 

I do believe that the question of corruption will come to pass if 

and when elections do take place. It will be an important issue. We 

are hearing right now, that same survey that I mentioned also indicates that a majority of Gazans believe that Hamas is involved 

in some sort of corruption. The problem is, for us it is a lot harder 

to get at. It is a much less accessible society for a lot of us. 

Mr. DEUTCH. Right. 

And just, if I may—and I bring this to the entire panel—who is 

going to raise it? Where is the movement in the West Bank, let 

alone in Gaza? Who is going to raise this issue? And who will be 

the candidates who will take up fighting corruption as their top 

priority? 

Mr. Abrams? 

Mr. ABRAMS. Thus far, Mr. Deutch, the answer is very few people. Hamas and Fatah have really gotten the vast majority of Palestinian political activity and votes. Other parties, including 

Fayyad’s party, for example, he got two seats in the Parliament. 

When Abbas ran in January 2005, he got about 67 percent of the 

vote. The next candidate down got, I think, 14 percent. 

So organizing other parties has been almost impossible. They 

seem to have a dual monopoly here on political life. 

Mr. DEUTCH. Mr. Zanotti? 

Mr. ZANOTTI. I mean, again, this is somewhat of a hypothetical, 

but if you are thinking of it analytically, you look at—as Dr. 

Schanzer said, I mean, Hamas, you know, they have a track record 

now. So, you know, they are perhaps vulnerable in a way that they 

might not have been in 2006. 

That being said, we don’t have very good insight into the dealings in Gaza. And so when you are looking at it from an international standpoint, you have a much longer track record that 

Fatah has. And so Hamas, I mean, that perhaps leaves it a little 

bit more vulnerable. 

Mr. DEUTCH. Let me ask it a different way. We have all of the 

different ways, all of the different actions that we can take in this 

country as it relates to our foreign aid and ensuring that the aid 

is tied to these anticorruption measures. But who is it—or is there 

anyone on the West Bank or in Gaza, is there anyone who is willing to stand up and speak out against these issues, that, according 

to these polls that you cite, would be the popular position to take? 

Mr. SCHANZER. I will try to answer that. 

I think there is only one, but I am not sure that he is still the 

man who can do it, and that is Salam Fayyad, the current Prime 

Minister. He has a track record of fighting corruption. 

But, unfortunately, he has been undermined recently by 

Mahmoud Abbas himself. The two are reportedly at odds over this 

very issue. You know, Fayyad is trying to clean up the P.A., and 

42

Abbas has a system that he is quite happy with, and so it has been 

a power struggle. 

It is also unclear—in the Palestinian territories, as well as in a 

lot of places Middle East, if you don’t control the guns and the 

money, you don’t have a lot of power. And Fayyad is not associated 

with Hamas, he is not associated with Fatah. He is a true reformer. And I think he is the best bet for the Palestinians, but I 

don’t believe that the system right now could sustain him. 

Mr. DEUTCH. Mr. Chairman, could I ask for just an additional——

Mr. CHABOT. Yeah. Without objection, the gentleman is granted 

1 additional minute. 

Mr. DEUTCH. Thank you, Mr. Chairman. 

Just on the issue of guns and money, particularly on the issue 

of guns, we have been reading in the past day or so about the issue 

of the Russian guns that have been delivered and warehoused, not 

yet delivered. 

I mean, when we get back to what role can we play, shouldn’t 

part of the discussion about the delivery of those guns include a 

very specific discussion about fighting corruption, Mr. Abrams? 

Mr. ABRAMS. I think it should, Congressman. And I would urge 

you to just take a look at the Web pages of AID for the West Bank 

and MEPI. Because it is all—you know, it reads very nicely, but 

nowhere do you see, ‘‘We are going to work with Palestinian NGOs 

on a major anticorruption drive. We are going to try to fund some 

NGO that is really pushing this issue. We are going to try to help 

broadcasters who are pushing this issue.’’ It is just not there. And 

it ought to be. 

Mr. DEUTCH. All right. Thank you. 

Thank you, Mr. Chairman. 

Mr. CHABOT. Thank you very much. 

The gentleman’s time has expired. We will go into a second 

round at this point for any members that are interested. And I will 

recognize myself for not more than 5 minutes. 

Mr. Abrams, in your testimony, again, the written testimony, you 

stated that, and I quote you again, ‘‘Corruption is an insidious destroyer, not only of Palestinian public finance, but of faith in the 

entire political system.’’

Would you explain how corruption affects the confidence of the 

Palestinian population in their own government and what the impact of this has been or probably will be in the future? 

Mr. ABRAMS. Thanks, Mr. Chairman. 

I think the best photo of this is the elections in 2006 when, to 

our surprise, Hamas won. How is it possible? Palestinians were 

supposed to be secular, educated people. How is it that they voted 

for an Islamist group like this? 

I don’t think there is one simple answer, but I think the heart 

of it is corruption. They were tired of the kind of governance that 

they saw, which was, they knew, making them a laughingstock 

throughout the Arab world and the rest of the world, where they 

had a terrorist leader, Arafat, whose wife was living the high life 

in Paris with their money. So what does it produce? In that case, 

it produces a Hamas victory at the election. 

43

Now they look around and see the elections in Libya, which seem 

to have been pretty good elections, judging from what the observers 

said. They have to be asking themselves, what is going on here? 

How is it that Libya, after 30 years of Qadhafi, can have free elections but we don’t seem to be able to have elections here? 

So I think it is this combination of political frustration and the 

sense that the top figures are corrupt that leads Palestinians really 

into a kind of cul-de-sac. How do you get out of this? They keep 

hearing about elections being scheduled, and they are never held. 

And my fear is, of course, that ultimately this leads to some kind 

of violence as the level of frustration rises. 

Mr. CHABOT. Okay. Thank you. 

Let me ask each of the panel members here a question. This may 

be unfair, but I am going to do it anyway. 

As far as the U.S. Aid that goes to the Palestinians, if you had 

to put a percent, based upon your expertise, common sense, things 

you have read, what you believe, if you had to put a percentage of 

how much of that aid gets siphoned off to somebody’s pocket or to 

something that went to a relative for some reason and they had an 

unfair advantage over other people in the competition, so a percent 

of how much of our aid that the U.S. taxpayers send over there 

that goes to corruption, gets siphoned off in some manner or form, 

what percent would you put on that? 

And I will give you that unfair question first, Mr. Abrams. What 

would you say? 

Mr. ABRAMS. I would imagine, Mr. Chairman, that the number 

is reasonably low, partly because so much of our money is given in 

programming, so we know exactly where it is going; partly because 

to the extent that Fayyad has his hands on it, he would prevent 

the corruption. 

In some of these cases where we are looking at, say, the Palestine Investment Fund, we are not putting money into that now. 

It is a huge block of money that I think is being mishandled. But 

I suspect the percentage of our money that is actually being stolen, 

in the way it was stolen in the Arafat days, is now low. 

Mr. CHABOT. Okay. 

And I saw a nod from Dr. Schanzer. So you would concur with 

that? 

Mr. SCHANZER. I would concur, with a caveat. I do believe that 

it is also probably low. I think that the idea that anyone would be 

so brazen as to simply pocket money, you know, I think it would 

be a difficult thing to imagine on a very large scale. 

But I will also add this, that I believe that the funds that we are 

providing to the Abbas government, all of it—you have to look at 

it in the big picture. What they have done is they have used this 

funding to shore up and consolidate economic and political power. 

So all of the institutions help reinforce the power of Abbas, which 

is, you know, at this point not anything that we can really challenge. You are not going to see elections; he is not interested in 

stepping down anytime soon. And so his forces crack down on demonstrators, as they did recently. His cyber teams hack Web sites 

that are critical of him. So, in other words, by contributing to the 

broader Palestinian Authority, they are using it for political or economic corruption. 

44

Mr. CHABOT. Okay. Thank you. 

Mr. Zanotti? 

Mr. ZANOTTI. Mr. Chairman, I have no reason to disagree with 

my colleagues on the panel. 

I would add that the State Department since 2008 has certified 

to the Committees on Appropriations that all money contributed 

from the United States to the Palestinian Authority’s budget 

goes—that the Palestinian Authority has established a single 

Treasury account, eliminated parallel financing mechanisms, and 

has a comprehensive civil service payroll. And then there are additional safeguards such as a 3-year power of audit and refund that 

we attach to the money that is given to the Palestinian Authority. 

The remainder of the Economic Support Fund money that we 

provide for the benefit of Palestinians in the West Bank and Gaza 

is distributed to various private organizations for programs in the 

West Bank and Gaza. And, by law, that is routinely renewed in appropriations legislation each year. Each of these vendors, if you 

will, have to be vetted and also are subject to audits at least annually by USAID. 

Mr. CHABOT. Okay. Thank you very much. 

My time has expired. The gentleman from New York is recognized for 5 minutes. 

Mr. ACKERMAN. Thank you, Mr. Chairman. 

The corruption and the money from corruption, both under the 

regime of Yasser Arafat and under the current government of 

Mahmoud Abbas, seems to center on them and their families acquiring all of this money. Is the corruption for basically self-aggrandizement, or is it a powerful tool for control and politics? 

And tie that in with the word or the concept or the excuse that 

we really haven’t brought up here at all, the occupation, which usually gets blamed in the Palestinian territories for everything, and 

everything is justified because of the occupation. ‘‘I steal because 

of the occupation.’’ ‘‘We can put off the election because it doesn’t 

really matter because of the occupation.’’ Everything is the occupation. 

If there was no so-called occupation, would this become a Sweden 

or a Finland? Would corruption cease? Would democracy take full 

root? What would happen? And what do we do about this? 

Elliott? 

Mr. ABRAMS. Just as a beginning, Mr. Ackerman, I think we 

should not look at this as an Abbas family problem only. If we look 

at, for example, the Palestine Investment Fund, his sons are not 

on the board of that. But if you look at the board of that, it is cronies, it is Fatah guys. 

Mr. ACKERMAN. Yeah. 

Mr. ABRAMS. And the accusation, which I personally believe to be 

true, is one of self-dealing. It is doing business with your cousin 

and my cousin and your wife and my sister, and it is a very oldfashioned form of who gets what and making sure that your friends 

and relatives get it. That is what is going on, and the friends and 

relatives and cronies are all part of the old Fatah Party establishment. 

So it is one of the ways both of keeping Fatah in power by making sure there is money around in the machine and also keeping 

45

its popularity, unfortunately, down, because Palestinians are not 

stupid and they know that this kind of activity is going on. 

Mr. SCHANZER. I will agree with Elliott again here. I think that 

certainly the funds are—it is a tool for politics. It enriches the 

inner circle. And from a recent trip that I took to Ramallah actually late last year, talking with a number of, let’s call them senior 

insiders, or former insiders of the P.A., the idea here is that you 

have to play ball. You have to work within the system if you want 

to get business done. And it is a known fact that if you try to go 

out of the system, you will be edged out of business. So it is about 

wielding power. That is what a lot of this is about. 

As for the occupation or Israel’s presence in the West Bank and 

the Gaza strip, I think that it, to a certain extent, is the best thing 

that ever happened to the Palestinian leadership, in the sense that 

they can blame this presence on—or they can say that this presence is the root of everything. And you hear it from Abbas now, 

that he can’t tackle some of these important issues because of 

Israel’s presence in the West Bank and the Gaza strip. 

And so, if that were to be gone tomorrow, I think the Palestinian 

leadership would be left looking around, saying, well, geez, now 

how do we shift the blame? And it really has become a convenient 

crutch for this leadership. 

Mr. ACKERMAN. Let me ask an additional question. What happened to all those young people I met some years ago that were 

young reformers trying to get into the Fatah Party? They were full 

of—we used to say piss and vinegar. I don’t know if that is an appropriate term anymore. But they were filled with a lot of spunk 

and wanted reforms and wanted in. Were they coopted, or did they 

just tire and go away? 

Mr. SCHANZER. Many of them have been pushed out. I think one 

of the individuals who we had identified as a potential up-andcomer was Mohammed Dahlan——

Mr. ACKERMAN. Yeah. 

Mr. SCHANZER [continuing]. Who was a West Bank security chief. 

And I have actually written about this for The Weekly Standard. 

Abbas has gone after him tooth and nail. 

Mr. ACKERMAN. He is the one with the bad knee. 

Mr. SCHANZER. What was that? 

Mr. ACKERMAN. He is the guy with the bad knee, disappeared 

during the shooting? 

Mr. SCHANZER. Yeah. And so Dahlan was basically railroaded out 

of the Palestinian Authority. Abbas has recently tried to seize his 

assets in Jordan. There has been a campaign to malign him. 

Now, I am not going to tell you that he didn’t have his own problems with corruption. The allegations are out there. I can’t verify 

them one way or the other. But certainly he became a political opponent of Mahmoud Abbas, and this became yet another grudge 

match that played out in the public sphere. It was rather ugly. 

Mr. ACKERMAN. If I could abuse my time and ask one additional 

question? 

Mr. CHABOT. The gentleman has permission to ask an additional 

question. 

Mr. ACKERMAN. Thank you. 

46

The neighbors, they all make pledges. They promised the Palestinians a lot of money. They always seem to default big league. 

One of the excuses that they use for not coming through with their 

pledges is the corruption. But can’t, in fact, they be of assistance 

by contributing money for projects in other ways, through other 

international projects, through the international community, 

project assistance, multilateral programs, the World Bank, et 

cetera? Can’t they really do that, without putting money in someone’s pocket directly or indirectly? 

Mr. ABRAMS. Mr. Ackerman, I think you are exactly right. They 

certainly can. They don’t give zero. In the case of—we are talking 

about the oil producers who have plenty of cash. But they give late. 

They give smaller amounts than they pledge. Months and months 

go by when they give nothing. And, in fact, Fayyad, the day before 

yesterday, made another speech in which he said, we have about 

a $1 billion deficit because the Arab pledges have not been paid. 

So if they are worried about corruption, they could talk to him 

about it and work out ways to try to ensure that the money is not 

abused. 

Mr. ACKERMAN. In some synagogues, they call out your name to 

ask you what you are pledging and actually give a shout-out to everybody as to what they gave and what they didn’t give based on 

last time. 

Do you think it is possible that they get more specific, rather 

than just generically blame their cousins, their brothers, for not 

coming through? 

Mr. ABRAMS. Not realistically, because they don’t want to make 

them angry. 

Mr. ACKERMAN. Yeah. 

Mr. ABRAMS. So we know——

Mr. ACKERMAN. Because then they might not give again. 

Mr. ABRAMS [continuing]. What the Arab League level of pledges 

are. And, in fact, we do a lot of cajoling. I mean, the reliable money 

they get is from the United States and Europe. And we are passing 

the tin cup constantly. I can’t remember a meeting with Saudis or 

Emirates or Algerians or Qataris in which were not saying, ‘‘By the 

way, how about giving money to the Palestinians?’’ It is actually 

quite disgraceful. 

Mr. CHABOT. The gentleman’s time has expired. 

Before I recognize the gentleman from Pennsylvania to ask questions, it had been brought to my attention that you have a 4 o’clock 

program you are supposed to speak at, Mr. Abrams. I am going to 

try to stop over there, although I have three things at 4 o’clock, as 

well. So you are free to go if you need to get over there. 

Mr. ABRAMS. Thank you. 

Mr. CHABOT. So thank you. 

Mr. Marino, you are recognized for 5 minutes. There are still two 

witnesses left. 

Mr. MARINO. Mr. Abrams, going out the door, as you are walking 

out the door, I happened to be in Israel several months ago, and 

the Prime Minister came and talked to a group of us. That alone 

was a good indication—the Prime Minister of Palestine. He clearly 

wanted to become friends or negotiate with us. How do we foster 

that? 

47

Doctor? 

Mr. SCHANZER. Representative Marino, Salam Fayyad is a partner to the United States. I think that is without question at this 

point. And he has been very open to working with us, to conditioning the support. I mean, he will work with us pretty much no 

matter what and has that track record. 

So the question is not how we foster that relationship with him. 

I think the question now is, how do we empower him further? Because I believe that he has been weakened over time. At one point, 

it was the columnist Tom Friedman that had celebrated his approach to governance. He called it Fayyadism. And, you know, everybody sort of celebrated this new era of Palestinian politics. I 

would argue that his power has sort of eroded over time and 

Fayyadism is really on the wane. 

Mr. MARINO. But can we not work into him some control over the 

aid that we give to Palestine? 

Mr. SCHANZER. I have not seen that political will yet. 

Mr. MARINO. Okay. 

And my second question. I had the opportunity to be in Egypt, 

in Cairo, several weeks ago, among other things, observing the 

elections. And we know how the elections went. But women in traditional garb were lined up for blocks and blocks and blocks to 

vote, and they voted for the Muslim Brotherhood. In most countries—in some countries over there, women are not even second- or 

third-class citizens. 

Why is this happening? 

Mr. SCHANZER. I am not sure I am equipped to answer that, 

other than it is something that needs to be addressed. 

But I can assure you that that is not the case in the Palestinian 

territories. Women inside the Palestinian territories are equal citizens. I would say that the Palestinians, because of their education, 

their exposure to the West over the years as a result of being in 

the diaspora, it is a very forward-leaning society in that way. And 

so that is really not what the problem is in this area. 

Mr. ZANOTTI. Again, I am also not—Egypt is not my area of expertise, but there are a multiplicity of factors that could, you know, 

have some influence on the phenomenon. One, this was, I think in 

their perceptions, their first real opportunity to effect something at 

the ballot box. And, number two, there are, you know, conservative 

values throughout the region. There are conservative values in 

many places around the world. So those are a couple of reasons 

that can explain some of this phenomenon in Egypt. 

Mr. MARINO. Gentlemen, thank you. 

I yield back. 

Mr. CHABOT. The gentleman yields back his time. 

And the final questioner will be the gentleman from Virginia, 

Mr. Connolly. 

Mr. CONNOLLY. Thank you, Mr. Chairman. And forgive me for 

being in and out. I have two hearings at the same time, and so I 

am trying to make both of them. 

Let me ask both gentlemen, first of all, I mean, the title of this 

hearing, ‘‘Chronic Kleptocracy’’—maybe I will start with you, Mr. 

Zanotti. I mean, what do we know about how pervasive corruption 

is in Palestinian governance, both in the Gaza and West Bank? 

48

And does it really stand above, for example, corruption in other 

countries in the region? 

Mr. ZANOTTI. Mr. Congressman, thank you for your question. 

As I had mentioned earlier, there was a 2011 World Bank study 

on the topic of Palestinian governance and corruption, and one of 

the quotes from it says, ‘‘Given the fact that corruption is an activity which is concealed and hidden, it is generally difficult to identify specific acts when they occur or to ascertain the scale of the 

problem through observable indicators.’’ So, of course, that is a 

problem not confined to the Palestinian context, but that is a situation——

Mr. CONNOLLY. Excuse me, but it does sound like kind of traditional bureaucratic gobbledygook. I mean——

Mr. ZANOTTI. Sure. 

Mr. CONNOLLY [continuing]. I have been in the development 

world for 30-plus years, and the World Bank has always had a little bit of a difficulty identifying corruption and doing anything 

about it. 

Mr. ZANOTTI. So that being said, Mr. Congressman, the conclusions of this study, which were based on some surveys of both public officials and households within the West Bank and Gaza, came 

to the conclusion that when you are talking about, kind of, at the 

lower and the mid levels throughout the West Bank and Gaza, that 

the perceptions of corruption, particularly with regard to bribery 

and preferential treatment of family members and personal connections, the perceptions are significantly higher than the actual experience with it. And they compared the incidence in the West Bank 

and Gaza with Egypt and Yemen as benchmarks, and it was significantly lower in those cases. 

Mr. CONNOLLY. So are you saying that the title of our hearing 

here, ‘‘Chronic Kleptocracy,’’ might be a bit of an overstatement? 

Mr. ZANOTTI. I am not necessarily saying that. I am just citing 

the evidence that the World Bank had offered. 

Also, they had offered some evidence having to do with perceptions of the investment climate in the West Bank and Gaza compared with others in the region——

Mr. CONNOLLY. And? 

Mr. ZANOTTI [continuing]. And whether corruption——

Mr. CONNOLLY. No, no, but what did they find? 

Mr. ZANOTTI. Well, what they found was the perception, at least, 

was that corruption, compared with similar surveys from 1996 and 

I believe 2002, had declined quite a bit from it being one of the 

main factors to dissuading potential investors from entering the 

market. 

Mr. CONNOLLY. And what they found was, whatever that barrier 

was, it was diminished as a barrier. 

Mr. ZANOTTI. Correct. 

Mr. CONNOLLY. Dr. Schanzer?

Mr. SCHANZER. It is a very interesting question about how pervasive this is. First of all, you know, just looking at the polls, the recent polls that were taken inside the Palestinian territories, West 

Bankers in particular, 71 percent of West Bankers in particular believe that corruption is a chronic problem within the Abbas governVerDate 0ct 09 2002 14:37 Sep 13, 2012 Jkt 000000 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 F:\WORK\MESA\071012\74960 HFA PsN: SHIRL
49

ment. And so I think, you know, to a certain extent we need to take 

their word for it. 

But in my study of the problem of corruption, we can look at it 

in two ways. That is typically the way political scientists look at 

it anyway. One is the idea of systemic corruption, and then the 

other one of empirical. 

The empirical model is, you know, if you have been to maybe 

some countries in the Southern Hemisphere, you get pulled for allegedly going through a stop sign; a policeman will shake you 

down, you give him $10, and you go on your way, and this happens 

every couple of miles while you are there, constantly people making 

sure that you pay them for, sort of, bogus reasons. 

Then there is the question of systemic corruption, which is the 

consolidation of power, economic and political. This is what I believe we are seeing right now inside the Palestinian territories. The 

insiders get wealthy, the insiders gain more power. And those who 

are not insiders suffer, and they blame the occupation for it, as opposed to taking responsibility for helping to bring up a middle 

class. 

Mr. CONNOLLY. I am running out of time, but let me ask you 

both one more question. 

When I was last in the West Bank, I met with Dr. Fayyad. And 

the impression at the time was that he was sort of a clean government type and actually was making strides to clean up that corruption, to discourage it, to highlight it, and to set a different kind of 

model, to show that the Palestinians were very capable of self-governance and that he was committed to making local services work. 

Your comment on—I heard what you said to Mr. Marino’s question, but I would like you to expand just a little bit. Are you saying 

he stalled in that effort or failed in that effort or there has been 

a little bit of regression? Or what thought are you leaving us with 

with respect to the Prime Minister? 

Mr. SCHANZER. Thank you, Representative Connolly. It is a terrific question, and it is something that I think we need to look into 

a bit more. 

I believe that when Salam Fayyad first became Finance Minister 

and then rose to Prime Minister, he really had a good head of 

steam. I mentioned the Fayyadism piece that Tom Friedman had 

written, and there was this celebration that the Palestinians were 

really turning a corner and that there was a realization among the 

leadership that something needed to be done about the question of 

corruption. This was particularly the case after the second intifada 

broke out in the early part of the last decade. There was this sense 

that something needed to be done. 

But I would argue that over the last several years Fayyad has 

sputtered, and not necessarily of his own doing. I believe that he 

has been undermined by the Abbas government. Abbas, in his hunt 

for alleged corruption inside the Palestinian Authority, he has gone 

after really primarily either outsiders, which doesn’t affect Fayyad, 

but then has also gone after some of Fayyad’s cabinet, which 

Fayyad appointed. And these were not for things that they did 

while they sitting in government; it was for what they did before 

they came into government. 

50

But the idea here is that Abbas has sort of undermined Fayyad 

in many ways. We hear that the two of them are not talking very 

much, that it is not a terribly close relationship, they are not coordinating on the question of corruption. So, as a result, I think 

Fayyad has been stripped of some of his power. And I find this very 

disconcerting, because we continue to hold up Fayyad as the answer to the Palestinians, but, meanwhile, his power has decreased 

significantly. 

Mr. CONNOLLY. Would the chairman just allow Mr. Zanotti to answer the same question? 

Mr. CHABOT. Absolutely. Yes. Mr. Zanotti is recognized. 

Mr. CONNOLLY. I thank the chair. 

Mr. ZANOTTI. Again, there are these reports about the current 

dynamic between Mr. Fayyad and Mr. Abbas. Without directly approaching them, to give you a little bit of a historical basis for the 

office of the Prime Minister, this office was established in 2003, actually installing Mr. Abbas as Prime Minister when Mr. Arafat was 

still President. And some of the peculiarities of how this has 

evolved over the years may shed some light on perhaps what is 

going on right now, which is sometimes hard for current observers 

to fully glean exactly what the facts are. 

So you have a situation where Mr. Abbas was installed as Prime 

Minister largely to be able to take some of the powers away from 

Mr. Arafat, be a different interlocutor with Israel, to battle some 

of the corruption that was talked about at the time. Then, of 

course, Mr. Arafat passed away, Mr. Abbas was elected President. 

And a year later, Hamas was elected and we had a Hamas person 

occupying the seat of the Prime Minister, in which case many people from the international community, the United States included, 

looked to empower the President a bit more. 

So then when you had this split in June 2007 between Hamas 

and Fatah, then Mr. Fayyad was appointed by Mr. Abbas. But, 

again, you have a dynamic of personalized rule, where Mr. Abbas 

to some extent stands in the shoes of Mr. Arafat at this point. 

And in addition to that, what you don’t have now that you even 

had back in 2003 is a functioning legislature that could act as a 

check on power. The ranking member referred to this notion of 

kind of a young group of people in Fatah. They had turned into a 

bit of a check on Mr. Arafat and holding his feet to the fire a bit. 

You don’t have that currently because the Palestinian Legislative 

Council is not in session because you have the split between 

Hamas and Fatah. 

Mr. CHABOT. The gentleman’s time has expired. 

Mr. CONNOLLY. Thank you, Mr. Chairman. 

Mr. CHABOT. Thank you. Absolutely. 

And I want to thank the panel here this afternoon for their excellent testimony, and Mr. Abrams, in his absence, as well. 

And, without objection, members will have 5 legislative days to 

extend their remarks or submit questions. And if there is no further business to come before the committee, we are adjourned. 

Thank you very much. 

[Whereupon, at 4:15 p.m., the subcommittee was adjourned.] 

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