Palestinian Authority resumes statehood bid efforts despite U.S. aid cut

Palestinians view Congress decision to freeze assistance to PA as “rejected blackmail”

Western resentment grows over Tel Aviv as Germany-Israel crisis surfaces over settlements

U.S. Secretary of Defense Panetta warns Israel against growing international isolation

A move by Congress to cut aid to the Palestinian Authority will not hinder Palestinian readiness for statehood, a top PA official said on Monday.

On Saturday, U.K.’s Independent newspaper reported that Congress had blocked nearly $200m in aid to the Palestinians over their bid for recognition at the United Nations.

The aid, which was destined for projects related to food aid, health care, and state building efforts, was to have been transferred to the Palestinian Authority during the U.S. fiscal year that ended this week, according to the report.

However, following what the Independent described as an “unpublicized block” imposed on funding to the Palestinians since August this year, in response to the Palestinian bid for statehood at the UN, the remainder of the aid allocated to the Palestinian Authority for the current financial year will not be transferred.

Speaking to the official Palestinian news agency WAFA on Monday, Palestinian Minister of Planning and Administrative Development Ali Jarbawi said that the Congress move would not affect Palestinian readiness for statehood.

“The Palestinian Authority is now fully ready to embody the reality of a state after its success in building and developing the institutions of a state,” Jarbawi told WAFA.

On the subject of the economic crisis plaguing the Palestinian Authority, and its possible effect on the Palestinians’ readiness for statehood, Jarbawi stressed the need to separate the PA’s financial condition and the readiness of its institutions.

The official also said that the Palestinians were working toward ending their dependence on foreign aid by 2013, adding that the PA still needed aid to help bolster development projects.

Abbas told the United Nations' top official on Monday he would seek full U.N. membership for a Palestinian state, a move the United States and Israel warn could lead to disaster and shatter chances for resuming peace negotiations.

Abbas told U.N. Secretary-General Ban Ki-moon he would press ahead with plans to ask on Friday for a Security Council vote on Palestinian membership. Washington has threatened to veto any such move.

Ban told Abbas he would perform his duties for any application submitted, and called for the Israelis and the Palestinians to resume talks "within a legitimate and balanced framework," U.N. spokesman Martin Nesirky said.

The Palestinian crisis has overshadowed this week's meeting of the U.N. General Assembly and sparked hectic last-minute talks aimed at averting a confrontation which carries risks for the Palestinians, Israel and the United States.

Abbas, speaking to reporters on his plane en route to New York, acknowledged it could have repercussions for his Palestinian Authority, the fragile government-in-waiting which depends on international financial aid for its survival in the Israeli-occupied West Bank.

"We decided to take this step and all hell has broken out against us," he said, adding that he would not be swayed.

"From now until I give the speech, we have only one choice: going to the Security Council. Afterwards, we will sit and decide," he said.

The administration of U.S. President Barack Obama, who had sought to use the "Arab Spring" uprisings to recast U.S. ties with the Arab world, has vowed to veto a statehood resolution.

It says only a resumption of a two-decade-old negotiation process can bring lasting peace between the two sides.

Some U.S. lawmakers say they will try to cut the some $500 million in U.S. aid per year to the Palestinians if they refuse to back down.

The Palestinian Authority's central bank chief, Jihad al-Wazir, warned that this could spell the end of the Palestinians' current efforts at self-government.

"Really, the risk of PA collapse is very real under the financial strain," he told Reuters.

With virtually no hope of success in the Security Council, the Palestinians could also ask the U.N. General Assembly to upgrade their standing from an "entity" to "a non-member state" -- a move they believe is likely to pass with support from at least 126 members of the 193-member body.

Abbas was also due to meet on Monday with French Foreign Minister Alain Juppe, who warned that both Israel and the Palestinians were courting disaster.

"The only solution is to resume talks," Juppe said in remarks at the Council on Foreign Relations in New York.

British Foreign Secretary William Hague, who was due to meet Abbas on Tuesday, said the Palestinians had no hope of winning approval on the Security Council in a vote that could leave members of the European Union on opposing sides.

"It's not clear how many of the members of the Security Council would support it but it would leave no one any further forward," Hague said, adding that all sides were pressing for talks "to allow a Palestinian state truly to come into being."

A U.S. Security Council veto would carry diplomatic risks for Washington, which could find itself isolated alongside its longtime ally Israel during a period of unprecedented political turmoil across the Middle East.

It would also likely boost tensions between the Palestinians and Israeli Prime Minister Benjamin Netanyahu's government, which has already seen traditionally steady ties with key neighbors Egypt and Turkey deteriorate quickly.

Senior diplomats from the United States, Russia, the European Union and the United Nations -- the so-called Quartet of Middle East mediators -- were expected to meet throughout the week in hopes of finding a way forward.

The Quartet has for months been trying to put together guidelines for future peace talks, but Abbas has said they have offered nothing new.

The last round of the U.S.-backed talks between Abbas and Netanyahu collapsed nearly a year ago. The Palestinians pulled out after Israel declined to extend a partial moratorium on settlement building in the West Bank on land occupied in the 1967 war which the Palestinians want for their state.

Apart from borders, key points of contention include the status of Jerusalem, the future of Palestinian refugees and whether Israel should be acknowledged as a Jewish state.

The Palestinians say they will not resume talks unless the moratorium is reinstated. Israel says talks should resume without preconditions but that it accepts the idea that the Palestinians should ultimately have their own state.

German Chancellor Angela Merkel has told Israeli Prime Minister Benjamin Netanyahu that the decision to green-light new Jewish housing units in Occupied East Jerusalem has “raised doubts that the Israeli government is interested in starting serious negotiations” with the Palestinians, her spokesman said Friday.

Steffen Seibert said in a statement that Merkel called Netanyahu to tell him “it is now necessary to dispel those doubts.”

Seibert said Merkel told Netanyahu it is important to start negotiations “as soon as possible” on a two-state solution and that in the meantime both sides must refrain from “provocative acts.”

Germany enjoys close relations with both Israel and the Palestinians, and has been frequently involved in acting as a neutral party to help negotiations between the two sides.

Merkel has also been a strong supporter of the need for a negotiated two-state solution.

But in the latest setback, Israel announced Tuesday that it has approved new construction sites in the Jewish neighborhood of Gilo in southeast Jerusalem.

The Palestinians condemned the plan, and the U.S., European Union and United Nations all swiftly expressed their disappointment over the settlements, which heightened tensions after last week’s Palestinian move to seek U.N. membership.

The Palestinians have demanded that Israel halt all settlement construction in East Jerusalem, which the Palestinians claim as their future capital, and the adjacent West Bank – territories captured by Israel in the 1967 Mideast war – as a condition for resuming peace talks.

Amid escalating tensions, fresh clashes erupted Friday between Israeli forces and Palestinians protesting settlement expansion in the West Bank village of Nabi Saleh, near the Jewish settlement of Halamish.

Merkel’s comments also came as a U.N. Security Council panel, admitting new members to the United Nations, met Friday for the first time concerning the Palestinian bid to join the world body. Palestinians are lobbying council members for support.

After the closed-door meeting of the council’s standing committee on admitting new members, which comprises all 15 council members, Lebanon’s U.N. Ambassador Nawaf Salam said the committee unanimously agreed to continue meeting next week.

Western diplomats on the council say the Palestinian U.N. bid is doomed to failure due to U.S. opposition. But the chief Palestinian delegate at the United Nations, Riyad Mansour, reiterated his hope that the application would not sit too long in the committee but would be swiftly approved by the panel.

Security Council resolutions need nine votes in favor and no vetoes from the five permanent members to pass.

The Palestinians, Western diplomats say, have only six certain votes on the council. Those are the five “BRICS” nations – Brazil, Russia, India, China and South Africa – and Lebanon. Bosnia, Gabon and Nigeria are “swing votes” on the council that could go either way, envoys say.

The three undecided council members are quickly becoming the focus of intense lobbying efforts by the Palestinians, Israelis and Americans, U.N. diplomats say.

Israel must find a way to resume negotiations with the Palestinians and has a responsibility to try and ease tensions with its neighbors in the region, Israeli Defense Minister Ehud Barak said Monday amid prodding from the United States to return to peace talks.

Standing next to Defense Secretary Leon Panetta, Barak pushed back a bit on the Pentagon chief's warning that Israel is becoming increasingly isolated in the region, threatening its security. And he offered no new thoughts on the thorny issues that have stymied the peace talks, including the proposed timetable and the contested settlements in the West Bank and East Jerusalem.

Making his first trip to Israel as defense secretary, Panetta has pressed the Obama administration's view that the two sides must restart the long-stalled peace talks. And during a news conference with Barak, Panetta said it's time for bold action by both sides to move toward a negotiated two-state solution.

The visit comes amid new international pressure to reach a peace deal by the end of next year, fueled by Palestinian President Mahmoud Abbas' move two weeks ago asking the U.N. Security Council to recognize an independent Palestinian state in the West Bank, east Jerusalem and Gaza Strip. Those areas were captured by Israel in the 1967 Mideast war.

Mideast negotiators — known as the Quartet — are urging the Israelis and Palestinians to produce comprehensive proposals on territory and security within three months. The Quartet — the United States, European Union, United Nations and Russia — is also urging both sides to avoid "provocative actions."

The administration opposes the Abbas' U.N. bid, and Panetta's visit was clearly part of a broad campaign to avoid such a vote, and instead nudge the two sides back to the table.

On Sunday, Panetta issued his edgy warning that Israel risks eroding its own security if it does not reach out to its neighbors, such as Turkey and Egypt, where relations are eroding.

"It's pretty clear that at this dramatic time in the Middle East, when there have been so many changes, that it is not a good situation for Israel to become increasingly isolated. And that's what's happening," he said.

Barak offered only general agreement but made no commitments that Israel would be more receptive to discussions about the settlements. Israel has continued to build settlements in the West Bank and east Jerusalem, where some 500,000 Jewish settlers now live. Israel withdrew from Gaza in 2005.

But, he added, "I fully agree that we have to look for any reasonable and proper way to ease tensions with Turkey, with Egypt, to find a way to resume negotiations in a sincere and effective manner with the Palestinians."

But he also criticized Abbas' move at the U.N., saying the "events of last week in New York clearly prove that there are limits to the Palestinians' capacity to navigate the world."

And while he agreed Israel needs to reach out to its neighbors, he said that it's clear there are others in the world "who would like to see Israel cornered into some kind of isolation."

Panetta met Monday with Barak in Tel Aviv on the first leg of a Middle East trip that also includes meetings with Palestinian leaders, and a stop in Egypt to meet with top officials there.

Later in the week, he will head to Brussels for a meeting of NATO defense ministers, to talk about the Afghanistan war and the military mission in Libya.

He is scheduled to meet with Israeli Prime Minister Benjamin Netanyahu, as well as Abbas and Palestinian Prime Minister Salam Fayyad.

According to U.S. officials traveling with Panetta, those Israeli and Palestinian leaders would not be making any public statements to the media during the meetings.

Panetta's visit to Israel comes six months after his predecessor, Robert Gates, traveled to the region to meet with Israeli leaders and make the first journey by a Pentagon chief to the West Bank to talk with Fayyad.