Palestinians got more aid in 2006 than 2005, so the international embargo of the Hamas is a fiction. On the other hand, wherever that money is going, it is not getting to the people who need it. Some of the shortfall is due to Israel witholding funds, but that should have been more than compensated by huge increased in foreign aid - over double the amounts paid by the EU before the start of the Intifada, plus increased Arab subsidies. Where is all the money going?
Instead of going to the Palestinian Authority, much of the money was given directly to individuals or through independent agencies like the World Food Program.
The International Monetary Fund and the United Nations say the Palestinians received $1.2 billion in aid and budgetary support in 2006, about $300 per capita, compared with $1 billion in 2005.
While the United States and the European Union have led the boycott, they, too, provided more aid to the Palestinians in 2006 than 2005. Washington increased its aid to $468 million in 2006, from $400 million in 2005.
The European Union and its member states alone are subsidizing one million people in the West Bank and Gaza, a quarter of the population, as part of their effort to avoid creating a catastrophe from the embargo.
Asked if the European Union could spend any more money on the Palestinians if it recognized the new Palestinian government than it does now, a senior European diplomat laughed and said, "We'd probably spend less."
One side effect of the redirected aid, some officials said, is that while starvation has been avoided, institutions are withering and a culture of dependence is expanding.
In 2007, the United Nations began a humanitarian appeal for the Palestinians of more than $450 million, twice the 2006 appeal, the third largest United Nations request, after Sudan and Congo, ahead of 18 other disasters.
"These numbers are quite stunning," said Alexander Costy, head of coordination for Álvaro de Soto, the United Nations special Middle East envoy, "given the relatively small size of the population of the Palestinian territory."
He added: "What we do know for sure is that Palestinians, and their economy and society, are becoming increasingly dependent on humanitarian handouts, and this dependency is growing fast. For a state in the making, I think this was a step backwards in 2006 and a cause for alarm."
The International Monetary Fund and the United Nations estimate that direct budgetary support to the Palestinian Authority in 2006 was about $740 million, more than double the $350 million in 2004 and 2005.
But Salam Fayyad, the finance minister in the new Palestinian unity government, thinks the Palestinians received at least 250 percent more than that in direct support when cash from Iran and Arab nations is counted, as well as the amount smuggled in by Hamas officials after trips abroad.
"I say the minimum for direct budgetary support was $880 million in 2006 compared to about $350 million the year before," Mr. Fayyad said. He estimates total aid in 2006 was closer to $1.35 billion.
The United States, Europe and Israel imposed their boycott because Hamas supports terrorism and refuses to recognize Israel, renounce violence or honor existing Palestinian-Israeli agreements. The unstated aim has been to build enough disaffection among Palestinians that they would drive Hamas from power and replace it with Fatah.
Mr. Fayyad, who is from Fatah, says the international embargo should be lifted for the new unity government that includes non-Hamas ministers like him, because much of the money coming in cannot be traced and some is surely being stolen or misappropriated.
Mr. Fayyad, a former official with the International Monetary Fund, is considered to be credible by the United States and the European Union. He met Tuesday with the American consul here, Jacob Walles.
The larger amounts of aid Western countries poured into the Palestinian territories in recent months were aimed at making up for the inability of the Palestinian Authority to pay salaries. To a large degree, beginning in the summer of 2006, the European Union and Arab countries paid the salaries instead.
By the last quarter of 2006, full salaries were again being paid to Palestinian Authority employees, who, over the year, received about 55 percent of their salaries.
Those salaries were paid despite Israel's decision beginning in March 2006, when Hamas took office -- to withhold from the Palestinian Authority some $50 million a month it collects for the Palestinians in duties and taxes, after it deducts the cost of electricity and water that it supplies to the West Bank and Gaza.
While Israel recently handed over $100 million of the sum as a humanitarian gesture to the Palestinian president, Mahmoud Abbas of Fatah, Israeli officials say that as of today, they are holding back $475 million in money belonging to the Palestinians, a big hole in the normal Palestinian budget.
European and American officials also cited the difficulties in Gaza caused by Israeli security restrictions on Palestinian imports and exports as another reason for the increased aid. Their contributions were to United Nations agencies that deal with the Palestinians, like the United Nations Relief and Works Agency, the World Food Program and various health agencies, to nongovernmental agencies and, in the case of the European Union, large cash payments directly to employees of the Palestinian Authority.
The United States provides more money to the United Nations refugee agency than any other country. Congress authorized $400 million in aid to the Palestinians in fiscal year 2005, including its aid to United Nations agencies, said Micaela Schweitzer-Bluhm, a spokeswoman for the American Consulate in Jerusalem which deals with the Palestinians. In fiscal year 2006, she said, $468 million
The European Union, moved by the plight of Palestinians, set up a mechanism to pay partial salaries directly to nonsecurity employees of the Palestinian Authority and to help pay fuel bills, either to Israeli fuel companies or through the office of Mr. Abbas of Fatah.
In 2005, according to Emma Udwin, spokeswoman for the European Commission, the European Union and its individual states contributed about $711 million to the Palestinians, not including contributions through United Nations agencies.
In 2006, Ms. Udwin said, the European Union and its states spent $916 million on the Palestinians, not including United Nations contributions.
The amount of aid has increased, but the structure of the aid has changed: aid that had gone to economic development has been diverted to simply keeping people fed and sheltered. In 2005, 16 percent of European aid was classified as humanitarian; in 2006, 56 percent was.
The point, Ms. Udwin said, was to isolate the Hamas-run authority, "but not to punish individual Palestinians."
But rather than pressuring Hamas, the European aid is now paying 77,000 Palestinian households, or 88 percent of the salaried nonsecurity personnel of the Palestinian Authority, a subsidy to nearly 470,000 people, plus another 73,000 low-income households who are considered to have special needs.
Arab countries provided an estimated $400 million in 2006, the International Monetary Fund says.
Despite all the aid, the economy, hampered by security restrictions put on Palestinian travel and exports and fierce Palestinian infighting between Hamas and Fatah, continued to show signs of collapse. The Palestinian gross domestic product dropped by 6.6 percent in 2006, poverty rose by 30 percent and unemployment was over 30 percent. The proportion of those who would be unable to feed themselves without aid reached 49 percent of Gaza's population, and internal violence among Palestinians caused ten times the number of deaths and injuries as in 2005.
Since 1999, before the second intifada caused Israel, in the name of protecting its citizens, to reinvade the West Bank and set up various security restrictions, the Palestinian gross domestic product per capita has dropped 40 percent in real terms, according to the International Monetary Fund a severe depression. So even external aid of $1.2 billion or more doesn't offset the loss of what would have been another $2 billion in Palestinian Authority income.
In general, the Palestinians take in about $15 million to $20 million in taxes a month, Mr. Fayyad said, plus the $50 million or so from Israel. But the budget now is at least $170 million to $175 million a month, with a bill for wages and pensions alone of $115 million a month.
The Palestinian Authority's self-generated income, including the amount Israel collects but is not now delivering, is only about 60 percent of the monthly wage bill alone, and only about 40 percent of the monthly budget. So the Authority needs between $1.2 and $1.3 billion in foreign aid every year now just to break even about what Palestinians, if not the Authority itself, got in 2006.
Numerous aid officials think that the current aid structure for the Palestinians is highly inefficient and undesirable since it is not going to development or training but is simply being consumed by one of the most aid-dependent populations in the world.
A United Nations official who asked for anonymity in order to speak frankly, said "aid is going down the sink hole," keeping people alive rather than creating jobs or helping them to create economic opportunities.
Álvaro de Soto, the United Nations special envoy, says that because so much aid has been redirected to humanitarian purposes, development aid has dried up. "And by not engaging with government bodies that actually run Palestinian affairs, the international community has undercut its ability to promote the reform goals it advocates, to ensure that the Palestinian administration runs efficiently," he said in an interview.
"There is a real fear that Palestinian institutions that the international donor community has toiled to build and beef up over the years are being gradually undone," he said. "This has grave political consequences, since these institutions are meant to be the foundation on which, one day, a Palestinian state will be built."