Israel Deprives Arafat of Funds to Meet Payroll

Palestinian Authority President Yasser Arafat grappled Sunday with a new crisis: how to meet his payroll after Israel made good on a threat to withhold millions of dollars from his government in the wake of last week’s devastating market bombings.

The action, one of several punitive measures Israel announced after Wednesday’s attack here, left the Palestinian Authority unable to meet its $40-million payroll, now overdue to about 80,000 Palestinian police officers and civil servants. On Friday, Israel withheld $25 million in tax revenues it owed the authority.

“The Palestinian Authority was barely making it even before this,” said Salam Fayyad, the International Monetary Fund’s representative in the Gaza Strip and West Bank. “I don’t see how this can be sustained.”

As the Palestinians scrambled, halting all nonsalary payments in an attempt to make the payroll, U.S. officials expressed concern that the financial squeeze could undermine any effort by Arafat to follow through on Israeli demands for a crackdown--by the very security forces owed paychecks--against Islamic militants. The U.S. has urged Israel to “be flexible” on the financial issue, one official said.

But amid widespread fears of further attacks, Israel showed no sign of backing down--on that issue or anything else. Prime Minister Benjamin Netanyahu, already on the offensive against Arafat in a battery of recent interviews, hammered away at the Palestinian leader again Sunday.

In an appearance on the CBS-TV program “Face the Nation,” Netanyahu said the future of Middle East peace depends on whether Arafat mounts an immediate, comprehensive campaign against Islamic militants who attack Israeli civilians in an effort to scuttle the peace accords. Last week’s twin bombings killed 15 people, including the two bombers, and wounded nearly 170.

“We expect the Palestinian Authority to do what it hasn’t done so far,” the Israeli leader said. “That is, to make an all-out effort, an all-out sweep to round up the terrorists, the leaders, and interrogate them.”

Arafat, Netanyahu said, “must make a choice and must make it now.”

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The U.S. too is urging the Palestinian leader to cooperate more fully with Israel on security matters and take concrete steps against terrorism. U.S. special envoy Dennis B. Ross, who postponed a scheduled trip the day after the bombings, is expected to arrive late this week for a visit that will now focus primarily on Israel’s security concerns.

“Our message to the Palestinians is that we’re not unsympathetic [to their concerns], but in order for us to help them, we have to see more concrete steps on security,” a U.S. diplomat said.

But Ahmad Tibi, a Jerusalem physician and Arafat advisor, said the Palestinian leader long ago made a choice for peace.

“Yasser Arafat is not the prime minister or defense minister of Israel,” Tibi said. “He is responsible for the Palestinian people, and he is committed to the peace agreements between Israel and the Palestinians. But security cooperation is just one part of the agreements, and Israel is violating all the rest.”

Tibi said Israel’s decision to stop payments of funds it owes to the Palestinian Authority is part of a policy of “collective punishment” against the Palestinians.

Under terms of the Israeli-Palestinian peace agreements, Israel each month collects taxes and customs fees on Palestinian goods and labor inside Israel and transfers the funds into a bank account controlled by Arafat. The $25 million the Israeli government withheld Friday was accumulated from such revenues.

“This is Palestinian money; it is not Israel’s,” Tibi said. “By their own hand, they are creating more anger among Palestinians, and more suicidal people willing to act against Israel.”

Netanyahu, Tibi said, “is pushing the Palestinian Authority and the Palestinian people to the corner, and then he is asking them to act . . . but without means.”

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Israeli and Palestinian security officials have met at least half a dozen times since Wednesday and are cooperating, in a limited fashion, in the bombing investigation. But both sides said there has been no resumption of the broader coordination that existed before March, when Palestinians broke off the security contacts in anger over the groundbreaking for a new Jewish neighborhood in traditionally Arab East Jerusalem.

Since last week’s attack, Israel has maintained a tight closure of the Palestinian territories, preventing Palestinians from entering Israel or traveling between their cities and towns. Border crossings to Jordan and Egypt have also been closed for several days, stranding travelers and tourists on all sides.

On Sunday, security was tightened even further, with soldiers, extra police and bomb squads deployed in crowded areas throughout Israel’s major cities and along the borders between Israel and the Palestinian autonomous areas.

Police Commissioner Assaf Hefetz warned that more attacks could come and asked the public to be vigilant about reporting suspicious packages, people or cars.

Israelis responded with a vengeance. Police in Jerusalem were overwhelmed with hundreds of calls, but all the leads turned out to be false, police spokeswoman Linda Menuhin said.

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Overnight Sunday, Israeli troops and security forces also rounded up 37 Palestinians in the West Bank on suspicion of involvement in Hamas or Islamic Jihad, militant Islamic organizations that have carried out numerous attacks in the past.

Israel has arrested more than 150 people since the explosions, all from within areas it controls.

A leaflet discovered after Wednesday’s bombings claimed responsibility in the name of Hamas and set a Sunday evening deadline for Israel to release all Palestinian prisoners or face unspecified actions.

But both Israeli and Palestinian officials have voiced skepticism about the leaflet’s authenticity, and the deadline passed without incident.