The growing foothold of Shari’a finance

By Alyssa A. Lappen
FrontPageMagazine | May 9, 2008

The global sub-prime mortgage mess would have been “unthinkable in the Islamic capital markets sector,” Malaysian Islamic finance scholar Mohammed Mahmud Awan told Arab News on April 24; Islamic law, or “shari’a principles” would prohibit selling “a debt against a debt,” Awan said at a Bahrain university globalization conference. Trading trillions of dollars in debt without assets backing them caused the crisis, Awan claimed, adding that the “Islamic finance model…would have easily prevented the current economic crisis.”

Others disagree. All “Islamic finance today is interest based,” notes Rice University Islamic economics, finance and management chairman Mahmoud el-Gamal in the Financial Times. Islamic banking, merely “shari’a arbitrage,” is “first and foremost about religious identity,” el-Gamal says.

Indeed, Islamic finance debt instruments are no better than Western mortgage securities, and probably worse. Islamic sukuk al-ijara (shari’a bonds) are merely reverse-engineered structured finance instruments. Many grave secular risks accompany the growing foothold of shari’a finance in the West.

Despite claims of their superior safety by International Center for Education in Islamic Finance professor Awan, Islamic financial institutions manufacture “special purpose entities” (SPEs)—which coincidentally helped destroy Enron. Islamic financial engineers merely renamed the prickly SPEs “special-purpose vehicles (SPVs)”—legal devices to “restructure interest-bearing debt, collecting interest [as] rent or [a] price mark-up,” el-Gamal observes.

Here’s how they work: sukuk bond issuers sell real estate or assets to SPVs, which then capitalize their investment by selling share certificates. In turn, the SPVs then lease back the assets they purchased to the sukuk issuers, collecting principal plus interest, which they pass on to sukuk investors as “rent.” When the sukuk matures, the SPVs sell or return the property to the sukuk issuers. Supposedly safe “alternative” Islamic finance instruments that claim to avoid usury, in short, use Western structured finance tools—“some of the most complex ever created.”

Repeat. Using Western securitization technology, shari’a finance banks now transform liquid, traceable cash flows from interest-bearing debt—that is, real interest-bearing assets—into illiquid assets.

“Junk” synonymous with high yields

Shari’a finance is an “invented tradition” empowering Islamic radicals, writes USC King Faisal Professor of Islamic Thought, Timur Kuran, in Islam and Mammon: “Neither classical nor medieval Islamic civilization featured banks in the modern sense, let alone “Islamic banks….” Thus, the Muslim Brotherhood (forefathers of current political Islam) heavily used modern Western securitization technology to advance MB founder Hassan al-Banna’s shari’a banking invention.

The messy sub-prime mortgage market—which some astute observers consider a mere extension of opaque Enron-era mark-to-fairly-tale accounting—could end tame compared to the 20th century-hatched shari’a banking boondoggle: The latter has far fewer regulatory or monitoring protections against abuses than the mortgage market. Even staunch Islamic banking purveyors admit: The industry’s “documentation is not standardized,” its “inter-creditor agreements can be complex,” it frequently employs “off-balance sheet financing,” it’s preferred by “certain corporate (sic) and individuals”—and “Shari’a regulations can override commercial decisions.”

Western markets are now dangerously in “panic mode.” And as frequent experience demonstrates, the bigger the financial innovation, the greater the “unforeseen consequences”—i.e. market declines. In the 1987 equity market crash, “portfolio insurance” played a key role; in 1994, mortgage-backed bonds wiped out $1 trillion in value—then roughly 10% of the U.S. bond market. They whacked huge pension funds, municipalities and institutional investors—and beached a few hedge funds like dead whales.

Secular market risks of shari’a finance show in above-market sukuk interest rates—oops—rents. Despite Western central banks’ historic 2007 rate cuts to limit losses feared equal to the 1986 to 1995 savings and loan crisis, a sukuk index with a mere 3.8 year duration on Nov. 30, 2007 sported 6.2% “œcoupon.” In mid January 2008, intermediate Treasury yields were 2.89%—and the Lehman Brothers intermediate U.S. corporate bond index yielded just 5.25%. Only long-term U.S. corporate debt then paid above 6.5%.

Among other Islamic market hazards are doubts on surety of payments for the scheduled life of the sukuk loans—and whether, on maturity, investors will recover 100% of their principal. Then there are the dubious underlying “profit and loss sharing” Islamic finance philosophy. And possible back taxes, interest or penalties, were the Internal Revenue Service to rule sukuk enterprises “uneconomic,” as it did innumerable similarly-structured 1980s tax-shelter schemes.

Moody’s Investors Service (like other financial rating agencies) now profits by formally assessing Islamic financial instruments Yet the industry has several major risks, a 16-page Moody’s analysis reported in January 2008. These include its range of asset classes, “weak position of investment account holders,” “importance of the Shari’ah supervisory board,” rate-of-return-risks, new operation risks, short track record—and foundations in third world countries where transparency, corporate governance and risk management basically don’t exist.

Ideological pitfall: Once Islamic, always Islamic

Moody’s missed the biggest risk of all, however—the ideological risks of shari’a, or Islamic law— despite a significant precedent. Citibank Islamic financiers launched its Saudi American Bank subsidiary in Jeddah and opened a Riyadh branch in 1955 and 1966 respectively—apparently without due diligence on operating under shari’a. But in 1980, Citibank learned about the risk of sudden confiscation when the Saudis abruptly seized SAB by royal decree, denied Citi all future profits, and ordered the bank to train Saudis staffers—essentially because the bank was insufficiently Muslim. Evidently, it was a case where “shari’a regulations can override commercial decisions.”

Shari’a banking is not governed by secular finance law alone. And it cannot be severed from the complete body of Islamic law—statutes initiated by Mohammed and developed by caliphs, scholars and jurists over 1,400 years.

These laws grant the Islamic ummah (Muslim nation) supremacy over all others—and give them all land and property to hold in trust for Allah. Under shari’a, land or property once conquered or acquired by Muslims cannot generally revert to its original owners.

Possessions confiscated from non-believers “is a way of exacting revenge,” writes 11th century jurist Abul Hasan al Mawardi. As Qur’an 57:2 argues, “To Him belongs all dominions of the heavens and earth.” Echoes Qur’an 59:7: “That which Allah giveth as spoil [war booty] unto his Messenger…it is for Allah and His Messenger and for the near of kin.”

Al-Mawardi (d. 1058) holds that Allah authorized the 2nd Islamic Caliph, Umar Ibn Khattab, to confiscate property in three ways—by fulfilling a trust to Islam, by force, or by ruling under Allah’s law—and that it is just to take anything from nonbelievers thereby. (The Laws of Islamic Governance, 1996 Ta-Ha edition, pp. 207-251)

Consider, moreover, modern Muslim Brotherhood applications of classical shari’a law. They claim all territories ever controlled by Islam. Islam will soon reconquer Rome, “the capital of the Catholics, or Crusader capital,” just like Constantinople, Hamas “legislator” Yunis Al-Astal preached on Al-Aqsa TV on April 11, 2008.

Similarly, Islamic laws are key to shari’a finance, MB “economic reforms,” and the MB central plan, “Towards a Worldwide Strategy for Islamic Policy.” Swiss police discovered the so-called Project, penned by Qaradawi, in MB chief financial officer Yusef Nada‘s Lugano villa in November 2001.

The 12-point handbook rests on shari’a interpretations of MB founder Hassan al-Banna, who in 1928 envisioned a caliphate (Islamic empire) to impose shari’a law globally. To establish the universal Islamic state, the plan orders Muslims to conduct “gradual, parallel work to control local power centers …[with] institutional work as means to this end” and create “special Islamic economic, social and other institutions,” as well as “necessary economic institutions” to fund spreading fundamentalist Islam.

Far from benefiting investors, as Islamic finance “scholar” Nizam Yaquby claimed last October, shari’a doctrine advocates a supremacist ideology, commanding Muslims to wage jihad warfare until they subdue all “infidels” and “unbelievers” into accepting universal Muslim rule.

“Holy War is a religious duty, because of the universalism of the Muslim mission and (the obligation to) convert everybody to Islam either by persuasion or force,” argues 14th century Tunisian jurist Ibn Khaldun in The Muqaddimah. Unlike other faiths, he argues, Islam is obligated “to gain power over other nations.” (trans. Franz Rosenthal, abridged, Princeton Univ. Press, 9th printing, 1989, p. 183).

The MB invented shari’a banking and finance in the 20th century to implement classical financial jihad (jihad bi al-mal) and the Islamic statutes requiring it. Al Banna designed the political, economic and financial foundations that give 21st century Muslims tools to fulfill this classical form of jihad, mandated by and central to the Qur’an.

“True believers are those who strive with their wealth and their lives,” states Qur’an 49:15. “Strive for the cause of Allah with your wealth and your lives,” reiterates Qur’an 61:10-11. “Financial jihad is more important than self-sacrificing,” (suicide bombing) instructs Saudi MB cleric Hamud bin Uqla al-Shuaibi. Their sacrifices for Islam necessitates collecting money for mujahadeen, commands Qaradawi.

MB links to Saudi Arabia

Arabian King Saud bin Abdel Aziz welcomed Muslim Brotherhood exiles from Egypt in 1954, 1961 and 1964. He funded the MB’s Islamic University of Medina in 1961 to spread fundamentalist Islam, particularly to foreign students. Later, Saud and his heirs subscribed to the Brotherhood’s bottom line: constructing a cornerstone global financial joint venture—to fund charitable foundations.

The vast resulting web of “relief” organizations include the Muslim World League, Rabitta al-Alam al-Islami, and the International Islamic Relief Organization (IIRO)—all implicated in funding al Qaeda, the 9/11 attacks, Hamas, and a vast array of other MB terrorist groups. As Qaradawi told BBC Panorama on July 30, 2006, donations constitute “jihad with money, because God has ordered us to fight enemies with our lives and our money.”

In 1969, the Saudis used MB guidelines to found the Organization of the Islamic Conference (OIC). In March 2008, President George W. Bush subserviently appointed Pakistani-born OIC “special envoy” Sada Cumber. Identifying with Texas “communities of the Muslim Umma” as much as the U.S., Cumber professes to bring to the OIC official U.S. resources to “tackle” Muslim world problems of “education, culture, the status of women, … science and technology, … [and] civil society…,” rather than present U.S. views there, as expected of diplomats.

More than solving problems, however, the OIC wants to “promote Islamic banking worldwide,” as with the 1973 founding of the Islamic Development Bank (IDB), which since 1975 approved over $50 billion in funding to Muslim nations. In 2001 alone, the IDB also transferred nearly $540 million from Saudi and Gulf royal telethons to fund suicide bombers and the Palestinian Authority war on Israel.

Universal Islamic banking—“a jihad worth supporting”

The MB and IDB Islamic banking architects also now control two central Islamic finance standard-setting agencies—the 1990-founded Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), and “de facto Islamic central bank,” or Islamic Financial Services Board (IFSB). Former Malaysian Prime Minister Mahathir Mohamed christened the latter in November 2002 “to absorb the 11 September shock and reinforce the stability of Islamic finance,” and support “a jihad worth pursuing to abolish … slavery” to the West, namely, a “universal Islamic banking system.”

AAOIFI members include the Saudi Dallah al Baraka Group, al-Rajhi Banking & Investment Corporation, and Kuwait Finance House—all implicated in funding al Qaeda and other MB offspring, according to Richard Clarke, the former national coordinator for security, infrastructure protection, and counter-terrorism. Sudan and Iran—both on the Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions list—are members too. Iran is also a U.S. State Department-designated terror-sponsoring nation.

IFSB members include the central banks of Iran, Sudan, and Syria (all designated state terrorism sponsors) and the Palestinian Monetary Authority (PMA), since its inception, widely documented to fund terrorism.

U.S. laws theoretically prohibit dealing with terrorists, their associates or enablers. Yet AAOIFI and its shari’a board advise many Western banks, Moody’s and Dow Jones. Moreover, terror-supporting Pakistani cleric Muhammad Taqi Usmani heads AAOIFI religious advisers. In September 2007, he ordered British followers to remain “peaceful” only until they are “strong enough for jihad” and to “establish the supremacy of Islam.” Such radicals adorn shari’a boards advising U.S. banks.

Religious banks obviously cannot prevent financial crisis.

Therefore, U.S. government and IRS regulators, bankers and investors should insist on keeping the best, safest and fairest secular markets in the world strictly unIslamic.

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by Rachel Ehrenfeld and Alyssa A. Lappen
FrontPageMagazine | March 24, 2008

The Bush Administration’s search for partners to promote “peace” and “democracy” within the Palestinian Authority (PA) resembles Lord Charles Bowen‘s “blind man in a dark room looking for a black hat … which isn’t there.”

For the first time, the Bush Administration plans to give $150 million in cash directly to the Palestinian Authority (PA) Treasury, as part of a $496.5 million “aid” package, including $410 million for development programs. This added to the $86.5 million for CIA “security training,” which Congress authorized in April 2007.

The CIA has apparently assumed the Palestinian terrorist-training role previously held by the former Soviet Union. Since 1994, the CIA armed and trained thousands of Palestinian “security forces,” who subsequently joined every Palestinian terrorist organization.

CIA Palestinian training success is best described by a member of the PA’s Chairman own security unit — Force 17, officer Abu Yusef: “The operations of the Palestinian resistance would [not] have been so successful and …would not have killed more than 1,000 Israelis since 2000, and defeated the Israelis in Gaza without [American military] trainings,” he boasted in August 2007.

Since the Oslo Accords, the PA received some $14 billion to $20 billion in international aid, according to a 2007 Funding for Peace Coalition (FPC) report to the British Parliament. Each Palestinian received $4,000 to $8,000 per year. In comparison, the US Agency for International Development (USAID), provided $1 billion in humanitarian aid for 2.5 million Darfur refugees from 2003 to 2006 — only $100 per person annually. Moreover, of the $7 billion pledged international aid, only $5 billion were spent to assist more than 5 million Tsunami victims in more than 15 countries on two continents.

The PA received “the highest per capita aid transfer in the history of foreign aid anywhere,” according to former World Bank country director for Gaza and the West Bank, Nigel Roberts. Not surprisingly, hundreds of thousands of Gazans spent more than $300 million in less than two week shopping spree, after Hamas blew up the border with Egypt. Yet, the Palestinian economy is in ruins, Why?

In March 2007, PA Prime Minister and former World Bank official Salam Fayyad, told London’s Daily Telegraph: “No one can give donors that assurance” that funds reach their designated destinations. “Where is all of the transparency in all of this? It’s gone.” Controlling Palestinian finances, Fayyad concluded, is “virtually impossible.”

Palestinian violence has escalated since the 1994 PA establishment and PA officials have produced an unbroken record of unfulfilled promises and outright deception. Yet President George W. Bush in his January 28 State of the Union Address, reassured the Palestinians that “America will do, and I will do, everything we can to help them achieve…a Palestinian state by the end of this year.”

Nevertheless, US-favored PA President Mahmoud Abbas, who in 1957 with Yasser Arafat co-founded the al Fatah terrorist group, assumed the role of his predecessor. Like Muslim Brotherhood, Marxist-trained Jihadist Arafat, neither does Abbas “recognize that confronting terror is essential to achieving a state where his people can live in dignity and at peace with Israel,” as President Bush declared.

Abbas remains committed to the organization’s raison d’etre — destroying Israel and expelling the Jewish people from the region. Despite public Fatah-Hamas leadership disagreements, branding one another “murderers and thieves,” Abbas arranged on Jan. 30 to give Hamas $3.1 billion of $7.7 billion that international donor community pledged last December in Paris.

Abbas’ support for Hamas is not new. In Feb. 2007, He announced, “We must unite the Hamas and Fatah blood in the struggle against Israel as we did at the beginning of the intifada.” He stated this en route to Mecca to meet with the Saudi King, and Hamas terror chiefs Khaled Mashaal and Ismail Haniyeh. The Saudis pledged hundreds of millions of dollars in “humanitarian aid” — which, like previous pledges, they failed to deliver.

Rather than $660 million in annual aid the Saudis promised in 2002, the kingdom donated only $84 million since then, according to World Bank reports. Other Arab League members, who in 2002 promised $55 million monthly to foster PA economic development, gave even less.

Meanwhile, however, the Saudis and the Gulf states funneled hundreds of millions of petrodollars — some raised in government-sponsored telethons — to reward Al Aqsa Martyrs Brigades, Hamas and Palestinian Jihad suicide bombers and fuel the anti-Israel Jihad. Indeed, “Saudi Arabia remains a source of recruits and finances for…Levant-based militants,” said National Intelligence Director J. Michael McConnell, before the Senate Select Committee on Intelligence, on February 5, 2008.

McConnell should have included USAID on his terror-funding list. A Dec. 2007 USAID audit reported that the mission administering its funds gave money to groups and institutions affiliated with US designated terrorist organizations, including Hamas and Islamic Jihad. It warned: “Without additional controls, the mission could inadvertently provide support to entities or individuals associated with terrorism.”

USAID “failure” to prevent funds from reaching Palestinian terrorist is not surprising given US previous Administrations support for Arafat, and now for Abbas, who repeatedly claims: “We have a legitimate right to direct our guns against Israeli occupation,” while reiterating his desire for “a political partnership with Hamas.”

It is time for President Bush to remove his blinders and stop donating US-taxpayer funds to this murderous partnership. It is also time for Congress to demand a proper monitoring program to oversee the legitimate use of US aid to the Palestinians.

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Dr. Rachel Ehrenfeld is author of Funding Evil; How Terrorism is Financed and How to Stop It. She is director of the American Center for Democracy and member of the Committee on the Present Danger. Alyssa A. Lappen, Senior Fellow at the ACD, is a former editor for Forbes, Corporate Finance, Working Woman and Institutional Investor.

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By Rachel Ehrenfeld & Alyssa A. Lappen
Washington Times | March 22, 2008

With the U.S. economy “obviously going through a tough time,” America should welcome capital investments even from foreign sovereign wealth funds, President George W. Bush asserted on March 14, 2008 at New York’s Economic Club.

“It’s our money to begin with,” he added, referring to roughly $95 trillion in OPEC holdings of U.S. dollars and investments accumulated largely through oil sales. Contending that we can “protect our people against investments that jeopardize our national security,” Mr. Bush added, “Seems like we ought to let it come back.” But President Bush is ignoring some basic principles of U.S. capitalism and democracy: personal and corporate ownership rights are nearly sacrosanct.

Dollars may be “coming back,” but they do so with strings attached, giving foreigners huge leverage and control over the U.S. currency and economy. Of the world’s 86 million barrels in daily crude oil output, the Middle East produces only 25.6 percent. With escalating prices, crude oil now runs $111 per barrel, putting $2.4 billion daily in Middle East pockets.

Unlike President Bush, market observers don’t think we can burn the candle at both ends. Legendary investor and Vanguard Group founder John Bogle blasted the “orgy of speculation” that granted foreign investors excessive influence over the U.S. economy. “We should have never let ourselves get into this position where so many dollars are . . . held by foreign countries and bought by foreign countries that are enemies,” he stated also on March 14. “Friend or enemy, they have a lot of control over what happens here,” he said.

Indeed, major Middle East oil producers have a different understanding than Americans of economics and ownership. The October 2006 Organization of the Islamic Conference (OIC) “Mecca Declaration” is but one, albeit pointed example of this fundamental difference. Islam views all property owned by Muslims as held “in trust for Allah.” The Qur’an decrees, “The land belongs to Allah, He gives it as a heritage to those of His devotees whom He pleases” (15:128). Therefore, Muslim property “shall be subject to the terms and conditions established by their owners.” While OPEC and the Saudis blame the Bush administration for high oil prices, by “mismanaging” the U.S. economy, in fact OPEC policies cause the escalation.

In a significant indication of brazen Saudi determination to undermine the U.S. and Western economies with petrodollars, King Abdullah rebuffed President Bush’s recent appeal to boost production and lower prices.

“I would hope, as OPEC considers different production levels, that they understand that if… one of their biggest consumers’ economy suffers, it will mean less purchases, less gas and oil sold,” the President pleaded. Without hesitating, however, Saudi Minister of Petroleum and Mineral Resources Ali Al-Naimi responded, “We will raise production when the market justifies it.” Considering the effects on U.S. markets, the Saudi strategy should be recognized as economic warfare.

Despite protracted violence against the United States, West and Israel since 1979, only the September 11 attacks forced America to recognize the Islamic holy war (jihad) waged by al Qaeda, Hamas, Islamic Jihad and Hezbollah.

What will it take for the United States to recognize the far more dangerous and important part of that jihad—economic warfare (financial jihad, or al-jihad bi-al-mal)–which the Saudis and Gulf States now aggressively also pursue? Shari’a mandates that Muslims fund jihad: Qur’an 61:10-11, “strive for the cause of Allah with your wealth and your lives. . . .” And Qur’an 49:15, “(true) believers are only those who…strive with their wealth and their lives for the cause of Allah…. Financial Jihad [is] ‘ more important’ than self-sacrificing,” says Saudi Islamic cleric and Muslim Brother Hamud bin Uqla al-Shuaibi.

This open economic warfare, however, has not affected U.S. economic or foreign policies, much less media coverage or presidential election campaigns or debates.

While the U.S. currency weakens and Saudi and Gulf interests continue their binge buying of strategic U.S. assets and financial institutions, their petrodollars lure more and more ignorant, and even desperate American bankers and investors into the purported glimmer of shari’a banking — a gold-plated Islamic money pit.

The president and his economic advisors should heed Jack Bogle. Without emergency measures to redirect U.S. economic policy and market regulations, the petrodollar- and shari’a-driven takeover of America will indeed endanger national and global security.

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Dr. Rachel Ehrenfeld is director of the American Center for Democracy and member of the Committee on the Present Danger. Alyssa A. Lappen, Senior Fellow at the ACD, is a former editor for Forbes, Corporate Finance, Working Woman and Institutional Investor.

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by Dr. Rachel Ehrenfeld and Alyssa A. Lappen
Pajamas Media | February 16, 2008

Unwavering U.S. determination to fund, train, and arm more than 50,000 Palestinian “soldiers” raises serious doubts about the repeated promises President George W. Bush has made to secure Israel’s safety and bring peace to the Middle East.

If the Bush administration gets its way, $4.2 billion to $7 billion in American taxpayer dollars over the next five years may fund training and purchase arms for tens of thousands of seasoned Palestinian terrorists. Many are veteran murderers, released from Israeli prisons in “confidence building” measures repeatedly demanded by the U.S.

It’s as if the U.S. proposed sending money, arms, and military instructors to help Sudanese strongman, Omar Hasan Ahmad al-Bashir, assist Darfur refugees — against whom he openly pursues genocide.

Rewarding Palestinian terrorism began in earnest in September 1993 with the Oslo Accords. Closely examining funds and propaganda mechanisms that facilitated PLO persuasion of the West should have indicated how al-Qaeda and other terrorist organizations operate financially and otherwise. Alas, the U.S. and the West paid no attention.

Instead, in 1994 the U.S. helped establish the Palestinian Authority (PA), headed by one of the most wanted criminals in the world — the Muslim Brotherhood member and Soviet-trained jihadist Yasser Arafat. His comrade in arms, vizier, and chief negotiator, Mahmoud Abbas, follows in Arafat’s footsteps — albeit without the trademark kafiyah and beard — even more successfully.

Ignoring $10 billion [PDF] in Palestine Liberation Organization (PLO) loot that Arafat already controlled, plus more than $2 billion in illegal annual income, the West showered millions more on Arafat. The West assumed that giving the PA legitimacy, funding it, and persuading Israel to cede territory would convince Palestinians to stop targeting Israel and the West.

As the world recognized the PA, however, Palestinians abused their new status. They expanded their illegal activities and terrorism. The more violent the Palestinians became, the more money and concessions they exacted from the West.

In 2001, a year into the second intifada, official donations to the PA jumped over 80% from $555 million to $1.002 billion [PDF] — including at least $114 million from the U.S. Sure enough, that year hundreds of Israelis were murdered and thousands injured in at least 121 attacks.

The U.S. distributes funds to the Palestinians through the United States Agency for International Development (USAID). Until now, the U.S. funded only selected projects, which were expected to be vetted and certified by the USAID to ensure recipients used the funds only for their allocated purposes, and did not “commit, threaten or support terrorism.”

Yet, in dozens of cases the USAID mission for the West Bank and Gaza failed to enforce federal laws requiring they bar organizations and individuals that threaten, support, or are affiliated with terrorism. The USAID also failed to certify that recipients have not provided material support for terrorism.

In at least 74 cases, according to a December 2007 audit, the mission “failed to comply” [PDF] with the anti-terrorism requirements of Executive Order 13224. It failed to vet subcontractors and require anti-terrorism certification for all contractors and subcontractors who received money.

Yet, the USAID mission even now plans to forfeit requirements on cumulative payments of under $25,000 annually. It should be noted that $25,000 can buy 50 Katyusha rockets.

The USAID mission argued that the prohibition against cash assistance to the PA is “technically an anti-corruption measure and not an anti-terrorism measure.” Thus, they claim they violated no anti-terrorism clause.

Such clever manipulation of U.S. laws to prevent funding terrorist and corrupt regimes seems equivalent to the irrational Bush Administration rationale for giving $150 million in cash directly to the PA within a new $555 million aid package.

This would be the first time the U.S. gives the utterly corrupt PA cash to use as it likes, even to share with U.S.-designated terrorist organizations such as Islamic Jihad and Hamas.

Notwithstanding Fatah-Hamas leadership disagreements branding each other “murderers and thieves,” on Jan. 30 Abbas agreed to give Hamas $3.1 billion of $7.7 billion pledged by international donors in Paris last December.

Money is fungible. PA Prime Minister Salam Fayyad, a former World Bank official, made this clear in a 2007 interview with London’s Daily Telegraph. “No one can [assure] donors” that funds reach their designated destinations, Fayyad declared. He went on to state that controlling Palestinian finances is “virtually impossible.”

But on February 11 at the National Press Club in Washington D.C., a straight-faced Fayyad claimed his “government’s platform is amongst the most progressive in the region.” and that it has ensured “transparency, accountability and adherence to the rule of the law.”

Even if true, the incitement to murder Israelis in PA media and schools is reaching deafening decibels. The Bush administration clearly needs a good oronthologist.

Even though Fatah took joint responsibility with Hamas for a suicide bombing that killed an Israeli shopper in Dimona on February 4, the Bush Administration may be considering a PA request to intervene on its behalf in U.S. courts against the families of Palestinian terror victims awarded compensation for the loses.

“Frankly, the Palestinian authority, which is corrupt and cavorts with terror, is not the basis for a Palestinian state moving forward,” said U.S. Secretary of State Condoleezza Rice on June 24, 2002.

The more the PA changed, the more it stayed the same. Incredibly, the only thing that changed was U.S. policy.
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Dr. Rachel Ehrenfeld is author of Funding Evil; How Terrorism is Financed and How to Stop It. She is director of the American Center for Democracy and member of the Committee on the Present Danger. Alyssa A. Lappen, Senior Fellow at the ACD, is a former editor for Forbes, Corporate Finance, Working Woman and Institutional Investor.

All Articles, Poems & Commentaries Copyright © 1971-2021 Alyssa A. Lappen
All Rights Reserved.
Printing is allowed for personal use only | Commercial usage (For Profit) is a copyright violation and written permission must be granted first.