A worried Obama administration has stepped up efforts to persuade US legislators to lift a freeze on almost $200 million (£130m) in aid for the West Bank and Gaza, which Palestinian leaders said yesterday was already hitting American-funded economic and social projects.
The block on the aid is threatening a series of projects ranging from food distribution to teacher training and medical provision, including a $58m five-year plan for improving Palestinian health services.
It has been strongly criticised not only by ministers in Ramallah but by the US Defence Secretary, Leon Panetta, and the international community's Middle East envoy, Tony Blair.
The freeze – first revealed on Saturday by The Independent and confirmed by the State Department and Congress in the past 24 hours – was imposed in August by hawkish pro-Israel US legislators as the Palestinian President, Mahmoud Abbas, was planning his bid for statehood recognition, currently lodged with the UN Security Council.
Hassan Abu Libdeh, the Palestinian Economy Minister, said yesterday that he had been informed officially by USAID, the US government's foreign aid agency, that two projects worth $55m and $26m were being put on hold. Fifty people had already been laid off and another 200 would be sent home by November due to the funding delay to the projects, which are designed to enhance the Palestinian private sector.
"We feel very sorry about this decision by the American Congress, which we think came to sabotage our ability to establish a Palestinian state," Mr Abu Libdeh said. "This is a political measure that reflects a blind bias against the Palestinian interests and will not help the efforts of the US administration to resume [Israeli-Palestinian] negotiations."
Dr Fathi Abu Moghli, the Health Minister, said last night that 35 to 40 administrative and technical staff working in the USAID-funded flagship health service development team had already been given one month's notice.
"We hope very much the American government will get this money released," he said. He added that individual projects at East Jerusalem and West Bank hospitals could be hit if funds continued to be withheld.
The ministers' comments came after the State Department spokeswoman, Victoria Nuland, acknowledged on Monday that the administration was in "intensive" discussions with the architects of the freeze, who include two Republican-led committees in the House of Representatives. She said that keeping aid flowing "is not only in the interest of the Palestinians, it's in the US interest and it's also in the Israeli interest".
Ms Nuland insisted there was still "some money in the pipeline" but added: "The concern is that if we don't get this going with the Congress in short order there could be an effect on the ground."
Brad Goehner, spokesman of the House Committee on Foreign Affairs, said the move had been a "tool of Congressional oversight" to allow more scrutiny of how the money was spent, but then went on to add a series of political factors he said had to be "taken into consideration". These included Mr Abbas's UN bid, the so-far abortive attempts at Fatah-Hamas reconciliation, and the Palestinians' rejection of Israeli Prime Minister Benjamin Netanyahu's demand that they explicitly recognise Israel as a "Jewish state".
Mr Panetta said in Tel Aviv on Monday that this was "exactly the wrong time" for Congress to be withholding funds from the Palestinians "at a point in time where we are urging the Palestinians and Israelis to be able to sit down and negotiate a peace agreement".
Mr Blair said: "Even if you're completely opposed to the Palestinian bid in the UN, this is not the right way to respond to it because it's harming Palestinian people and it's harming the very things that over the past few years we've been most strongly supportive of."
Republican champions of the cuts
Republican Representative from Virginia is the highest-ranking Jewish member of Congress in US history since becoming House Majority Leader this year. He told Israeli Prime Minister Benjamin Netanyahu that the Republican majority "understands the special relationship between Israel and the United States" and would "serve as a check" on the Obama administration's foreign policy.
As Republican Representative for a strongly Jewish-American district in Florida and chair of the House Foreign Affairs Committee, Mrs Ros-Lehtinen is considered to be a key ally for Israel. In 2008, she told the Jerusalem Post that she believed the US would stand "shoulder to shoulder with Israel" if Israel felt military action against Iran were necessary.
Chair of the Middle East Subcommittee of House Foreign Affairs, Republican Representative of Ohio has voiced support for a GOP-led campaign to cut aid to the UN over Palestinianstatehood. "A unilateral declaration of independence is simply rejectionism by another name [...] it takes away any motivation from the Palestinians to negotiate and deal with good faith with Israel," he said last month.