Even if it had funds, Palestinian government lacks bank

JERUSALEM — The new Hamas-led Palestinian government is struggling to find a bank willing to handle its finances, casting doubt on whether it can pay staff or receive foreign aid, Western diplomats and Palestinian officials said.

"You cannot run a government without having a bank," said a Palestinian official familiar with the Palestinian Authority's "single treasury account," where foreign donors deposit funds so the Authority can pay 140,000 workers and cover other expenses.

Officials of Hamas, which is listed by the U.S. and European Union as a terrorist organization and whose charter calls for Israel's destruction, say the banking problem is part of an international campaign against the Islamist group.

A Hamas Cabinet minister said Wednesday the Amman-based Arab Bank, which has long handled the treasury account, had come under pressure from "abroad" to stop working with the Authority, now under Hamas control.

Hamas took control of the Palestinian Authority last week, after winning parliamentary elections in January.

The Israeli government has frozen tax-revenue transfers to the Authority, and its banks have started severing remaining financial ties.

The Hamas-led government also faces a threatened cut in direct Western aid unless it renounces violence, recognizes Israel and abides by interim peace deals.

In the past few weeks, funds from the United Arab Emirates and Oman have been taken by the Arab Bank to repay earlier Palestinian loans, sources said.

Palestinian Finance Minister Omar Abdel-Razeq said the government expected to receive $80 million from Saudi Arabia, Kuwait and UAE, but was not sure when it would arrive.

Today, Israeli police arrested Khaled Abu Arafa, minister of Jerusalem affairs in the Hamas government, near Jerusalem, officials said. Israeli police did not comment.

Material from The Associated Press is included in this report.