The purpose of this briefing note is to describe the humanitarian and other aid given by the EU to the Palestinians. It is does not attempt to describe the history of the EU’s involvement in the peace process.

The European Community first provided aid to the Palestinians in 1971. Since the an international ad-hoc committee was established to support the Palestinians following the Oslo peace accords in 1993, the EU (that is, both European Communities budget and individual Member States) have provided in excess of half a billion euros in assistance. Initially, this support was in the form of development assistance but since the start of the Second Intifada in 2000 and the subsequent collapse of the Palestinian economy, EU aid has focused on direct support to the Palestinian Authority (PA) and the development of the authority’s institutions.
 

The surprise victory of Hamas in the January 2006 Palestinian parliamentary elections led, after a brief period of uneasy coalition and eventual civil war, to a de facto separation between Hamas controlled Gaza and the PLO/Fatah controlled West Bank. This in turn led to a breach between the EU and the Hamas-controlled Palestinian Authority in Gaza. Since then new methods of have had to be found for supporting the PA without the funds being diverted to Hamas, which the EU (and most of the international community) regards as a terrorist organisation.
 

The EU has been closely involved in seeking a lasting solution to the problems of the Middle East for over thirty years. Although the United States has for long been the major external power in the Arab/Israeli dispute and the Palestinian question, the EU has at different times also played a significant part. For example, the Venice Declaration of June 1980 by EU heads of government was important in recognising the right to existence and security of all countries in the region including Israel, and for the first time the EU recognised the Palestinians’ right to self-determination. The EU, which has its own Middle East Special Representative in the region, continues to work with the United States, Russia, the UN and states in the region, as well as the parties, for a settlement of the Israel/Palestinian dispute based on a two-state solution, most recently through its participation in the Quartet (EU, Russia, UN & USA). The frustrating lack of progress is certainly not due to the EU.
 

European humanitarian aid to the Palestinians was begun by the EC in 1971 when the organisation first contributed to the United Nations Relief and Works Agency for Palestine Refugees in the Near East (UNRWA). Support accelerated after the Israel-PLO Oslo peace accords in 1993. 
 

The need for continuing humanitarian aid to the Palestinians is shown by World Bank figures on poverty in West bank and Gaza. Forty per cent of the population are living on less than $2 a day and a quarter of adults are unemployed. The particular problems of West Bank and Gaza today have their origins in the second Intifada that began in September 2000 but the UN operation to support refugees from Palestine was originally established as a temporary measure in 1948. Its mandate has been repeatedly extended since then and UNRWA now employs 27,000 staff looking after a registered 4.3 million refugees. UNRWA’s work is primarily in the fields of health care, social services and education.
 

The EU and the UNRWA have a written agreement about the aid that the EU provides. Between 1994, when the international community came together to provide support to the Palestinians following the Oslo accords, and 2002, the EU contributed €500 million to UNRWA. Aid has continued since then with the EU giving €66 million to UNRWA in 2008.
 

Aid through UNRWA is only one of the ways the EU supports the Palestinian people. Since 1993 the EU’s Humanitarian Office has been making grants to NGOs and others working in the West Bank and the Gaza Strip. In addition to the grants to UNRWA, €1 billion in grants and loans was provided to organisations and agencies working in the West Bank and Gaza Strip from 1994 to 2002 as part of the wider programme of international assistance for development.
 

EU policy is for a two-state solution to the Israel-Palestine dispute. With this in mind, the EU has supported the development of the institutions necessary to establish a democratic Palestinian state as part of a permanent settlement. 
 

The EU and the United States have provided funds for a variety of programmes to strengthen Palestinian institutions as well as infrastructure, notably Gaza airport and also a sea-port (still closed by the Israelis). Through its aid to the Palestinian Authority, EU programmes have provided support for the judiciary, including training for judges and the refurbishment of courts. The EU has provided financial assistance for elections and observer missions to monitor those elections. In 2005 the programmes supported included ones to strengthen financial control and audit arrangements in the Palestinian Authority and to support good governance and the rule of law.
 

Aid of this kind is always given with conditions, including that part of all monies should help in capacity-building and that there must be reform of Palestinian institutions. These conditions have reflected the need to ensure that EU aid achieves its objectives of humanitarian relief or the strengthening of the institutions of civil society and that it does not get diverted to terrorists or their sympathisers. The EU was the largest single donor to and works closely with the World Bank’s Public Financial Management Reform Trust Fund – the key international vehicle for ensuring that aid to the Palestinians is properly spent. Following the breach between the Hamas-controlled PA in Gaza and the international community in 2006, a new mechanism for conveying funds, the Temporary International Mechanism, was established to keep donor’s funds separate; it has now been replaced by another system, described below.
 

The EU has had an Interim Agreement on Trade and Cooperation with the Palestinian Authority since 1997 (uniquely, and only interim, since the Palestinian Authority does not represent a state).
 

Improving the economic position of the Palestinian people is of critical importance to achieving a lasting peace in the Middle East. The EU and the Palestinian Authority Interim Association Agreement provides for technical and financial assistance and preferential trade access to the EU, particularly for agricultural products (similar to that given to the EU’s other Mediterranean trading partners and is quite separate from and additional to the humanitarian assistance described above.
 

Technical and financial assistance has been directed towards achieving the economic and social reform necessary to implement the Trade Agreement and to providing budgetary support for the Palestinian Authority. €40 million of EU aid in 2005 was directed towards the kind of infrastructure projects that would facilitate trade, including transport and energy and for border management. But the outbreak of the second Intifada made it difficult to implement the trade aspects of the agreement as a result of the regular Israeli restrictions on the movement of goods and people in and out of the Palestinian territories.   In the absence of ports or an airport (Gaza Airport has been closed since the Israeli’s bombed it in 2001) in Palestinian-held territory, all Palestinian imports and exports must pass through Israel, giving the Israelis control over Palestinian trade whenever they choose to exercise it, or conceivably the Sinai frontier, which however the Egyptians keep closed. In addition, all customs and other duties are collected for the Palestinian Authority by the Israelis, who are supposed to hand them over regularly, but during the second Intifada have seldom done so. 

Successful economic projects include a programme of loans to small and medium-sized enterprises in the agricultural sector, operating through a local Palestinian NGO. This resulted in the creation of 1,500 new jobs and the development of a self-sufficient micro-finance initiative across the Palestinian territories. But such initiatives are difficult to sustain when the Palestinians are unable to export goods or services.
 

The outbreak of the second Intifada resulted in the international community having to switch many of its aid programmes from long-term development to short-term humanitarian assistance. This problem accelerated after Israel withheld taxes and duties due to the Palestinian Authority in 2001-02 and again following the elections of January 2006. Since the establishment of the Hamas government, Israel has largely kept the Gazan border closed, preventing the movement of Palestinian goods as well as labour.
 

Although the EU expressed a desire for better relations with the Palestinian Authority, the establishment of the Hamas-led government in Gaza in January 2006 led to a breakdown in relations with the Government although the EU continued to work with the President of the Authority, Mahmoud Abbas in the West Bank. The EU’s commitment to a two-state solution meant that it could not provide funds to a government that refused to recognise the state of Israel and which refused to renounce violence. All payments to or through the Palestinian Authority ceased in April 2006 and EU resources were provided through the Temporary International Mechanism for the Palestinians or the UN in order to ensure that EU funds did not fall directly or indirectly into the hands of Hamas. 
 

A donor conference was held in Paris in December 2007, part of an initiative by the Quartet (which includes the EU) to improve the economic position of the Palestinian territories. The West Bank-based Palestinian Prime Minister presented to that meeting a three-year reform programme. As a result, a new mechanism for transferring funds to the PA was established by the EU at the request of the international community and the European Council. PEGASE (a French acronym for a mechanism to supply aid to the Palestinians) was set up in March 2008 to channel support for the three-year Palestinian Reform and Development Plan (PRDP)
 

The PRDP contains several elements:

The value of the PEGASE mechanism is that it provides monitoring and verification to ensure probity as well as being a longer-term arrangement linked to a proper development plan rather than just emergency assistance. 
 

The EU will continue to provide funds through UNRWA and humanitarian assistance through its own direct aid programme. A further Gaza donor’s conference in March 2009 received support from the United States Government with a pledge of $900 million. The European Commission will provide almost €440 million to the Palestinian Authority in 2009.
 

The EU is, therefore, doing its best to maintain genuine humanitarian aid and other aid to Palestinian people but for there to be any resumption of normal relations between the EU and the Palestinian Authority, the current Palestinian political impasse arising out of the double stand-off between the PLO/Fatah- controlled West Bank and Hamas-controlled Gaza, and over Hamas’ refusal to meet the Quartet’s conditions will have to be overcome.