EU to review its Palestine financial aid to ensure no 'indirect' support to terrorism

Palestinians remove a dead body from the rubble of a building after an Israeli airstrike Jebaliya refugee camp, Gaza Strip
Palestinians remove a dead body from the rubble of a building after an Israeli airstrike Jebaliya refugee camp, Gaza Strip Copyright Ramez Mahmoud/Copyright 2023 The AP. All rights reserved.
Copyright Ramez Mahmoud/Copyright 2023 The AP. All rights reserved.
By Mared Gwyn JonesShona Murray
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The European Commission confirmed on Monday evening it was launching an urgent review of its financial assistance for Palestine to ensure "no EU funding indirectly enables any terrorist organisation to carry out attacks against Israel."

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Earlier on Monday, a spokesperson on behalf of the bloc's executive had assured no EU funds destined for Gaza could have inadvertently fallen into the hands of the Hamas militia.

"The EU does not fund Hamas or any terrorist organisation activities, either directly or indirectly. The EU has very strict rules in place to screen and vet the beneficiaries of EU funds," Ana Pisonero, the European Commission’s spokesperson for enlargement and neighbourhood policy, said.

The EU is the biggest donor of aid to Palestinians residing in Hamas-controlled Gaza and the West Bank, governed by President Mahmoud Abbas' Palestinian Authority. The financial support is used to pay salaries and pensions, improve health services and access to water, and provide humanitarian aid in times of conflict.

Commission officials issued conflicting statements throughout Monday, casting uncertainty on whether the EU had decided to withhold certain funds.

In a statement on social media platform X, EU neighbourhood commissioner Olivér Várhelyi announced all payments had been "immediately suspended" while the EU's €691-million development support for Palestinians was "under review". But the EU crisis management commissioner Janez Lenarčič later stated that humanitarian aid to Palestinians will "continue as long as needed."

On Monday evening, the EU's top diplomat Josep Borrell attempted to dispel any doubts by confirming the EU would not suspend "any due payments".

Várhelyi's precipitated announcement stirred frustration among member states and drew criticism for failing to recognise the distinction between Islamist militia responsible for the attack on Israel and vulnerable civilians in Palestinian territories. A spokesperson for the Irish government told Euronews it was "formally requesting the Commission to clarify the legal basis for this announcement.”

Earlier, Luxembourg's acting foreign minister Jean Asselborn insisted that his government did not support the suspension of aid. "We are the largest donor to Gaza. This help is important for young people. This is not money for Hamas. It is for the people of Gaza," he told AFP.

Spain's acting deputy prime minister also criticised the decision to withhold funds as a "betrayal" of Europe's fundamental principles and called on the Commission to promote peace rather than "punish" the Palestinian people.

EU not in lockstep

While the European Commission will review its financial support for Palestine before taking any action, Austria on Monday announced it would cut off €19 million in funds to Palestinians on Monday morning. Germany also confirmed it would "temporarily halt" aid as it carries out a more thorough financial review.

Speaking on Austrian radio on Monday, the country's foreign minister Alexander Schallenberg chose not to distinguish between Hamas-ruled Gaza and the Palestinian Authority-led West Bank.

Hugh Lovatt, senior policy fellow at the European Council on Foreign Relations and expert on Israeli-Palestinian relations, told Euronews measures such as cutting aid to the Palestinian Authority and other forms of financial support to Palestinians could prove "counter-productive".

"Cutting financial support for Palestinians (...) would intensify the hollowing out of the Occupied Territories and exacerbate negative dynamics, including the increased influence of armed groups," Lovatt said.

"Europeans need to recognise the Palestinian Authority remains completely peripheral to ongoing events. Pushing Abbas to clamp down on Hamas and other groups such as Islamic Jihad will backfire," he added.

The Commission refrained from providing a full breakdown of its funding programmes for Palestine on Monday, but Commissioner Várhelyi said that a development portfolio worth €691 million would be reviewed. 

The EU executive has not had any contact with Hamas since 2007 when the terrorist organisation took over the Gaza Strip as a result of its military confrontation with Fatah.

Israel has the right to "self-defence"

Earlier on Monday, EU spokespersons reiterated the bloc's unwavering backing of Israel's right to defend itself.

"In light of this indiscriminate attack waged by Hamas, Israel has the right to defend itself, its territory and its people in line with international law," Peter Stano, the European Commission's spokesperson for foreign affairs and security policy, said on Monday afternoon.

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"It is also important, on the other hand, to see that Palestinian people are not suffering because of this," Stano added.

The statement came as the Israeli foreign minister announced a full siege on the Gaza Strip in response to Hamas' surprise attack on Saturday, blocking all essential supplies including food, water and electricity to the Palestinian enclave.

Stano refrained from confirming whether Israel's retaliatory airstrikes, which the UN estimates to have forcedly displaced 123,000 Palestinians, were considered by the EU to be a legitimate form of self-defence in accordance with international law.

EU leaders have vehemently condemned Saturday's large-scale assault on Israel by Hamas, which it considers a terrorist organisation, and called for civilians to be protected and hostages released. The ensuing violence, which has already claimed the lives of at least 1,100 people, is the biggest and deadliest escalation between both sides in decades.

The bloc's foreign ministers - many of whom are currently in Muscat, Oman, for a joint meeting between the EU and the Gulf Cooperation Council (GCC) - will convene for an extraordinary meeting on Tuesday to discuss the EU response.

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EU governments have also been ramping up security around key Jewish sites in fear of an uptick in anti-Semitic attacks as the conflict unfolds.

Lovatt believes the European decision to take sides in the conflict could prove dangerous.

"Europeans should support Israel’s right to self-defence, but should press for a response in line with international law," Lovatt explained.

"A full ground invasion and disproportionate attacks that target Palestinian civilians will have far-reaching and destabilizing consequences for Israelis and Palestinians alike, including by increasing wider support for Palestinian armed resistance and increasing the risk that Hezbollah enters the conflict," he added.

"Giving Israel a blank check, as Europeans may now be doing, risks a dangerous and counter-productive outcome," Lovatt said.

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On Monday, Iran denied reports it had helped Hamas plan the assault on Israel along with the Tehran-baked Shiite militant group Hezbollah. When asked about Tehran's possible involvement, EU spokesperson Peter Stano refrained from "pointing fingers", but confirmed European foreign ministers would address possible geopolitical motives during their Tuesday meeting.

Lovatt also believes Europe needs to work closely with other Arab states that can mediate the conflict. "Europeans should work with those who have some influence over Hamas, most particularly Egypt and Qatar, to similarly warn against its deliberate targeting and detention of Israeli civilians – which is also at odds with Islamic law," he said.

The EU is in dialogue with such partners and will ask them to "do everything they can to exercise their influence over this group (Hamas) to stop what they are doing", Stano said on Monday.

In early September, the EU launched a new initiative to revive Israeli-Palestinian peace talks in cooperation with Saudi Arabia, Egypt and Jordan. The efforts focused on achieving the so-called two-state solution, broadly backed by Western governments but hailed by some experts as a moribund solution to the conflict.

The EU's top diplomat is set to meet Gulf state ministers in Muscat on Monday, who could play a key role in a possible mediation. Recent US-backed talks on the normalisation of relations between Israel and Saudi Arabia, in exchange for a US-Saudi defense deal, had raised hopes of a de-escalation.

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