Remarks by Assistant Secretary of State for Near Eastern Affairs David Welch

Update on the Israeli-Palestinian Situation and Palestinian Assistance Programs

House Foreign Affairs Middle East and South Asia Sub-Committee

May 23, 2007

Chairman Ackerman, Representative Pence and members of the sub-committee, thank you for giving me the opportunity to appear before you today to address our strategic, diplomatic, and programmatic efforts with respect to the Israeli Palestinian conflict, and in that context our assistance to the Palestinian people and certain Palestinian institutions outside of the control of the Hamas-led Palestinian Authority Government. While my colleagues will elaborate on our assistance efforts, I would like to focus on our diplomatic efforts and our strategy for moving the parties closer to the President’s vision of two states, living side by side in peace and security. It is within this framework that our assistance is planned and administered.

We see three tracks before us: a bilateral Israeli-Palestinian track; a regional Arab-Israeli track; and an international track led by the United States and the Quartet. Through Secretary Rice’s personal commitment and regular diplomatic engagement we have re-energized the bilateral track, preserving it despite the challenges posed by the Mecca Agreement, the formation of a Palestinian unity government, and the turbulent Israeli and Palestinian domestic political environments. During the Secretary’s most recent trip to Israel and the Palestinian territories in March, she obtained agreement by President Abbas and Prime Minister Olmert to meet regularly, and to expand the substance of their meetings from an initial focus on practical issues like security and movement and access, to include elements of the political horizon for Palestinian statehood, such as economic relations between Israel and a future Palestinian state, and the institutions of governance for such a state. The bilateral dialogue is vital to build confidence between the parties and to lay the foundation for meaningful negotiations, with regional and international support, on the establishment of a peaceful, democratic, and viable Palestinian state, consistent with the Roadmap.

We have also seen new impetus on the regional track with the re-affirmation of the 2002 Arab Peace Initiative at the Riyadh Summit in March. The Arab Peace Initiative provides a regional political horizon for Israel that complements efforts to advance the bilateral Israeli-Palestinian track, and offers the prospect of a comprehensive end to the conflict. We have welcomed its reaffirmation, and believe it can be a basis for engagement by the Arab states with Israel. From our discussions with members of the Arab League Follow-Up Committee charged with outreach on the initiative, we understand that it is not meant to be a “take it or leave it” proposal, but rather a basis for discussions. The Israeli response has been positive. Foreign Minister Livni met with her Egyptian and Jordanian counterparts in Cairo recently, and we anticipate additional meetings in the coming weeks and months. We believe there is a real opportunity here, and we are working with the Arab states, our Quartet partners, and the Israelis and Palestinians to make the most of it.

On the international track, we are working with our Quartet partners and others to build on the bilateral and regional tracks and to establish a political process between the parties. At the same time, we are working to maintain international pressure on the PA government which has yet to commit itself to the Quartet’s foundational principles of peace: renunciation of violence, recognition of Israel, and acceptance of previous agreements and obligations. Through the Quartet, we have sustained a unified international position that these principles, which must be embraced by the Palestinians if there is to be progress towards Palestinian statehood, and must be the measure of support any PA government receives. President Abbas, in contrast to the Hamas-led PA government, has shown his personal commitment to the Quartet principles and to partnership with Israel and the international community in pursuit of peace, and realization of the President’s two-state vision. We continue to strongly support President Abbas in his efforts to restore law and order in the Palestinian territories, and to build a partnership with Israel in seeking peace through pursuit of a PA government prepared to clearly and credibly embodies these principles.

As we seek to advance each of these three tracks, we must take into account the political realities on the ground in Israel and the Palestinian territories, and the deteriorating security situation in Gaza. But we remain confident that our approach is the right one. We must continue our efforts with the Prime Minister of Israel, Palestinian Authority President Abbas, and others committed to peace in order to build a meaningful political process between the parties and achieve progress towards the realization of President Bush’s vision of two states living side-by-side in peace and security.

Our assistance programs are designed to support and complement these diplomatic efforts. Since Hamas was elected in January 2006, we redirected our efforts to focus on providing vital assistance to the Palestinian people without benefiting the Hamas-led PA government. Our programs currently focus on humanitarian aid, promoting democracy and civil society, and supporting business and economic development in the Palestinian territories. We continue to work with our international and regional partners, including the United Nations, to advance these objectives. We are also proceeding with non-lethal security assistance to the Presidential Guard and the Office of National Security, as well as financing for physical security and infrastructure upgrades at the Karni commercial crossing between Gaza and Israel, the economic lifeline of Gaza. Through this comprehensive assistance strategy, our goal is to help create conditions conducive to advancing Israeli-Palestinian peace via the Roadmap – that means supporting security, stability and prosperity in the Palestinian territories, and empowering Palestinian moderates as a counterbalance to radical and rejectionist groups like Hamas. We do this through our support for economic development, our efforts to address the basic needs of the Palestinian people, our advocacy of political, economic and security sector reform, and our commitment to building a political process between the Israelis and Palestinians that can provide hope to the Palestinian people that their aspirations of freedom and statehood can be realized.

Advancing Israeli-Palestinian peace requires not only the commitment of the respective leaders, but more importantly, the support and buy-in of the people. The majority of Israelis and Palestinians seek peace and security, but deteriorating economic and security conditions in the Palestinian territories, including extensive restrictions on freedom of movement within the West Bank, are leaving Palestinians with little hope that their daily lives will improve. These conditions threaten to radicalize the Palestinians and undermine the economic foundation necessary for the establishment of a Palestinian state that will serve as a source of security and stability for Israel and the region. According to the UN, the GDP in the West Bank and Gaza has dropped 40 percent in the past seven years, over 60% of Palestinian households live below the poverty line, meaning they survive on less than $2.40 per day, and 50 percent of Palestinians rely on food assistance to feed their families.

Our humanitarian assistance is vital to help meet the basic needs of the Palestinian people, and to show that the U.S. and the international community continue to support and stand by the Palestinian people, even as we maintain diplomatic pressure on the Hamas-led PA government to change its behavior and commit itself to peace and a two-state solution. UNRWA, the UN Relief and Works Agency for Palestine Refugees in the Near East, is our largest channel to support the humanitarian needs of the 1.7 million Palestinian refugees in the West Bank and Gaza. UNRWA’s core activities – health, education, and social services - provide essential basic services and relief services to almost 90,000 of the poorest and most vulnerable refugee families. UNRWA’s emergency activities have created 58,000 short-term jobs and provide food assistance benefiting one million Palestinian refugees.

Similarly, our economic and business development assistance seeks to improve economic and humanitarian conditions in a sustainable way by building the Palestinian economy, creating jobs, and improving the standard of living. The Europeans and the World Bank continue to provide significant assistance as well, including through the Temporary International Mechanism, which has been an effective vehicle for channeling assistance to the Palestinian people. The TIM provided more than 260 million Euros in the form of allowances to frontline healthcare workers, certain PA employees whose annual income fell below a certain level, as well as pensioners, social hardship cases, and others. The EU did an excellent job ensuring a broad swathe of Palestinians were included in the TIM, coordinating payments with the Office of President Abbas in an effort to accrue political credit to Abbas, and ensuring adequate oversight through direct deposit payments and superb on the ground management. The great challenge in this, as in much of our assistance, is ensuring that it is provided in a way that benefits President Abbas, and not the Hamas-led PA government. We continue to work with the EU to improve the coordination of all support with President Abbas, and to provide assistance in ways that provide a political boost to Palestinian moderates.

At the same time, we are working to advance political and economic reforms and to strengthen Palestinian moderates in support of our diplomatic efforts for peace. We have a number of programs through both USAID and the Middle East Partnership Initiative, working with local, U.S., and international implementers, focused on developing important organizational skills and structures of moderate Palestinian organizations, to generate grassroots political activism, and to support reform both within Fatah and other moderate political parties, as well as within certain elements of the PA government, including security forces under the authority of President Abbas. These efforts are vital to improve the image and organizational effectiveness of these moderate organizations, broaden their grassroots support, and instill core principals of transparency and oversight that will be key to the success of a future Palestinian state.

But economic and political progress is difficult if there is no security. Over 200 Palestinians have been killed in factional violence since January, and more than 500 others injured, with dozens of Israelis injured and one killed as the most recent violence spilled over into Southern Israel in an apparent attempt to draw Israel into the factional violence in Gaza. When the National unity government was created in March, ninety percent of Palestinians supported its establishment in order to put an end to such bloodshed, but as we have witnessed recently, violence between Fatah and Hamas continues. In terms of our security assistance program, we are in the early stages of the contracting phase, but have established solid protocols for vetting and oversight. General Dayton will discuss this in detail, but let me just say that the recent violence in Gaza, and the resulting Palestinian and Israeli casualties, has highlighted the importance of this program, and we will likely seek your approval for the use of available FY2006 carryover funds, previously set aside for these critical security needs, to further support President Abbas as he works to enforce law and order and create an environment conducive to progress on the political horizon.

Let me stop there and turn it over to General Dayton to speak to the current security situation and the status of our programs, and then to Mark Ward to speak to the current and planned USAID programming. Thank you for your attention and your continued support. I look forward to answering any questions you may have.