US embassy cable - 04TELAVIV2056

C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 002056 
 
SIPDIS 
 
FOR NEA BURNS/SATTERFIELD AND NEA/IPA, USAID FOR KUNDER AND 
MCCLOUD 
 
E.O. 12958: DECL: 03/30/2009 
TAGS: EAID, KPAL, KWBG, ASEC, IS, GAZA DISENGAGEMENT, ISRAELI-PALESTINIAN AFFAIRS, HUMANITARIAN AID 
SUBJECT: RECOMMENDATIONS ON MAJOR GAZA/WEST BANK USAID 
PROJECTS IN LIGHT OF SECURITY SITUATION 
 
 
Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4 (b), (d). 
 
This is a joint message from Ambassador Kurtzer, 
Consul-General Pearce and USAID Director Garber. 
 
1. (C)  Summary/Recommendations:  On January 30, Chiefs of 
Mission in Tel Aviv and Jerusalem and the West Bank/Gaza 
USAID Mission Director decided jointly to put an eight-week 
hold on four USAID projects to allow time to: 1) measure 
progress in the investigation of the October, 2003 murder of 
our security personnel in Gaza; 2) measure progress in 
Egyptian-sponsored security planning; and 3) evaluate whether 
it would be possible to manage major projects without 
participation of American citizen employees or contractors. 
The projects put on hold were the Gaza water carrier and 
desalination plant, the Bani Naim water project in the West 
Bank, and emergency road repair projects affecting mostly 
Gaza.  On March 26, the same group met and concluded that 
virtually no progress could be reported in the murder 
investigation and the Egyptian security plan has been put on 
hold as the instability and insecurity in Gaza has grown in 
the last eight weeks.  On the third issue, it is not 
desirable but it is possible to waive virtually all use of 
direct hire or contractor Amcit personnel in carrying out the 
projects. 
 
2. (C) Recommendations:  The Embassy, ConGen, and USAID 
Mission differ on next steps, and offer three distinct 
recommendations: 
 
--  The Embassy, (with overall responsibility for U.S. 
government activities in Gaza), believes that given the 
continued lack of progress in the Gaza murder investigation, 
and the continuing lack of workable security arrangements in 
Gaza, the USG should suspend the Gaza water carrier and 
desalination projects, as well as road repair in Gaza.  While 
the conditions in the West Bank are not as bad as in Gaza, 
the Embassy also believes that suspension of the Bani Naim 
water project will send an important signal to the 
Palestinian Authority.  The Embassy is deeply concerned that 
to go on with business as usual will signal to Palestinians 
that no cost is associated with killing Americans in Gaza. 
 
--  The USAID Mission for the West Bank and Gaza believes 
that the Bani Naim and road projects should go forward and 
would have either the two water projects proceed subject to 
starts and stops due to security concerns, or reprogram the 
money for other uses in the West Bank/Gaza assistance effort. 
 The USAID mission believes other means could be used to 
leverage progress on the investigation, that operations could 
proceed through actively managing security concerns, and that 
the greater U.S. interest is in averting a humanitarian 
crisis in Gaza, which could contribute to even greater 
instability.  The USAID mission believes it can adequately 
address the oversight issues within very severe security 
constraints on travel by AMCIT direct hire or contract 
personnel. 
 
--  The Consulate-General, (with overall responsibility for 
Jerusalem and the West Bank as well as the policy dialogue 
with the Palestinians), agrees for security reasons with 
Embassy recommendation that the Gaza water and road projects 
be deferred or canceled.  But it concurs with USAID that the 
Bani Naim water project should proceed, using local 
contractors to the maximum extent possible, and subject to 
ongonig monitoring of the security situation.  Similarly, the 
proposed West Bank road projects, on which local contractors 
will do the work, should proceed.  The ConGen notes that the 
USG threat to suspend or cancel assistance projects in the 
WB/Gaza has had virtually no demonstrable impact on the 
security behavior of the PA, and questions whether actual 
cancellation will provide additional leverage.  If all the 
projects are canceled without distinguishing among the 
differing level of risk each poses, we may send not only a 
signal to the PA on security, but also a signal to the 
Palestinian populace that the USG does not care about its 
basic humanitarian needs.  It could also signal the donor 
community that the USG is disengaging from assistance, which 
could spark similar actions by other donors and worsen the 
situation on the ground. 
 
Given contractual decisions that must be made on the water 
carrier project in the very near future, we request prompt 
Washington consideration of this matter.  Posts will supply 
any additional inputs required. 
 
(End Summary/Recommendations) 
 
--------------- 
Security Issues 
--------------- 
 
3.  (C) In early December of last year, the USG put the 
Palestinians on notice on the relationship between security 
issues and our ability to carry out major USAID projects. 
This theme has been reiterated constantly since to senior 
Palestinian interlocutors.  At the meeting of the Ad Hoc 
Liaison Committee (for Palestinian assistance) held in Rome 
on the 10th of December, NEA Assistant Secretary Burns told 
the group: 
 
I want to speak plainly about the importance the United 
States attaches to investigating the murder of three of our 
diplomatic colleagues in Gaza last fall.  We are still 
waiting for results in that investigation.  Without progress, 
culminating in the arrest and conviction of those 
responsible, we simply cannot carry out our full range of 
assistance projects for the Palestinian people.  Without a 
more secure working environment, moving forward with large 
scale programs -- such as the long-planned Gaza water 
infrastructure projects, and millions of dollars in road 
repair money ready to be disbursed in the spring -- will be 
impossible. 
 
Neither of the two conditions stated by A/S Burns had been 
met when we reviewed them as of January 30 and neither has 
been met two months later.  Promises of major developments in 
the investigation have been made at some junctures with no 
results.  A security court trial of suspects, who may or may 
not have been directly involved, was scheduled and then 
canceled.  The investigation is further hindered by lack of 
trust and coordination between the Palestinian security 
services.  Arafat's role has been at best unclear; at times 
he has given orders to spur further action while at other 
times he has reportedly viewed the investigation as a 
political enticement with which to lure the USG back into a 
relationship with him. 
 
4.  (C)  Meanwhile the overall security environment in Gaza 
has deteriorated, with the Palestinian security leaders 
advising for the last three months that they are not in 
control and that travel by U.S. Government personnel in Gaza 
remains quite risky.  The killing of Sheikh Yassin further 
exacerbated the situation, with perceptions among many 
Palestinians that the USG condoned the killing.  At this 
time, no direct hire American staff are being permitted to 
travel inside Gaza, and with new threats at Erez, we have 
even stopped meetings just inside the border at the Abu 
Eskander guest house.  USAID American citizen contractors are 
sharply limiting their travel into Gaza.  Even travel by 
contractors could be halted if the missions in Tel Aviv or 
Jerusalem decided that it was no longer sustainable in a 
relatively safe manner. 
 
-------------------------------- 
The Projects and Their Oversight 
-------------------------------- 
 
5. (C) The Gaza water projects will be the largest projects 
USAID has embarked on in its support for the Palestinians. 
The water carrier and desalination plant in Gaza are expected 
to cost about $65 million each.  Given the current security 
situation in Gaza, the prospect of direct-hire American staff 
being allowed to travel to Gaza to exercise oversight of 
these projects is very questionable.  USAID Washington has 
already agreed that these projects could be carried out with 
a very limited number of trips by U.S. direct hire staff. 
For example, perhaps only a trip by contracting officer and 
engineer at the end of the water carrier project (i.e., in 
2006 or 2007) to certify the project would be technically 
required.  Also the Gaza regional water carrier project could 
be broken up into smaller pieces and involve more local 
contracting.  While it would be preferable to have an 
American contractor providing engineering oversight on a 
daily basis, particularly the desalination plant, it would be 
possible, according to USAID Director, to waive such a legal 
requirement should it be decided to proceed under adverse 
security conditions, and to insist that the contractor retain 
instead a U.S.-trained, non-American engineer.  Obviously the 
absence of U.S. direct hire personnel to inspect and certify 
progress would not be ideal, but with a talented local staff 
and a qualified construction management firm Mission is 
willing to accept the risk.  (USAID Mission advises that 
USAID Washington is also prepared to accept the risk.) 
Oversight requirement would be more easily manageable for the 
Bani Naim project in the West Bank, and the roads projects 
could be carried out with very limited Amcit involvement. 
 
--------------------- 
Policy Considerations 
--------------------- 
 
6.  (C)  A robust assistance program, combined with 
diplomatic efforts to assure funding for the needs of the 
Palestinians, has been a consistent element of U.S. policy. 
This vector has been maintained even as the USG has assessed 
that the near term chances of significant progress on the 
political issues are minimal.  We have strongly supported 
revenue transfers by the Israelis.  We have urged other 
donors to address Palestinian needs, and we have done all we 
can to support reformers in the PA.   Thus, any decision to 
defer or forego a significant element of our assistance 
program would send a negative signal to the Palestinian 
reformers and to the donor community.  On the other hand, 
moving ahead with major projects absent resolution of the 
Gaza murders and a creation of a more secure environment 
would send a message to the Palestinian leadership and 
Palestinian terrorists that there is no cost for killing 
Americans.  However, we do not claim any success so far in 
use of an implicit "stick" in eliciting progress in the 
investigation or in prompting Palestinian security 
improvements.  Those PA reformers who understand the impact 
of such a decision have little or no influence on security, 
and those in charge of security and the investigation have 
little or no appreciation for the costs of canceling the 
projects.  We cannot rule out, however, that a clear cut-off 
of substantial programs would have a greater impact than our 
warnings to this effect have had so far. 
 
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Costs 
----- 
 
7.  (C) The direct costs associated with any suspension of 
the four projects are minimal.  The water carrier project is 
the most advanced and would require an approximately $300,000 
cancellation fee and associated costs in demobilizing the 
construction management firm's operations here.  Such costs 
must of course be weighed against the security premiums 
associated with protective measures that would be required to 
carry out the projects in Gaza at this time.  We have not 
identified any significant costs related to the deferral of 
the other three projects. 
 
8. (C)  We recognize fully the humanitarian costs in not 
addressing or delaying solutions to the dire water situation 
in the WB/G, particularly in Gaza.  However, if we cannot be 
at least somewhat assured that these projects to alleviate 
the water problems can be carried out in safety, we would 
face both excessive construction costs and the prospect of 
more costly cancellation at a later date due to security 
problems.  Other donors are likely to be influenced by a 
suspension; some have scaled back their exposure in Gaza 
already.  In general, it will be more difficult to mobilize 
support for Palestinian needs, a role the United States has 
played for many years. 
 
---------------- 
Requested Action 
---------------- 
 
9.  (C)  We cannot take final decisions on these matters in 
the field.  The significant policy questions require a full 
airing in Washington and we will supply further inputs and 
elaborated arguments as requested for such consideration.  We 
would ask that such a deliberation take place as soon as 
possible, given the advanced stage of the contracting process 
for the Gaza Regional Water Carrier in particular and the 
need to issue an RFP for Bani Naim within the next couple of 
weeks, or risk losing $15 million in FY03 funds. 
 
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