The Palestinians are the most foreign-aid dependent society on earth. So the threat by the United States to cut off most aid to Palestine after its 3.6 million people last month elected the militant group Hamas into government, is foreboding.
The European Union is weighing similar action. And Israel says it will withhold $55 million a month in taxes and other fees collected by Israel, but owed to Palestinians.
"The idea is to put the Palestinians on a diet, but not to make them die of hunger," Dov Weisglass, an adviser to Israeli Prime Minister Ehud Olmert, told the Israeli media.
That remark prompted condemnation in both Israel and in other nations.
"Chilling and cruel," comments Ali Abunimah, a founder of the Electronic Intifada, a pro-Palestinian website based in Chicago. "There will be hunger."
The goal of the financial squeeze, according to a recent New York Times report, is to destabilize a new Hamas Palestinian government so that it would fail, thereby prompting new elections.
Hamas is responsible for dozens of suicide bomb attacks over the past few years. To Hamas and its sympathizers, this is justified resistance to a decades-long Israeli occupation. But killing and injuring hundreds of civilians in Israel is also defined as terrorism.
"You cannot have one foot in the camp of terror and the other foot in the camp of politics," Secretary of State Condoleezza Rice told the press in Cairo last week. "You have to renounce violence."
She was on a Middle East tour to urge Egypt, Saudi Arabia, and the United Arab Emirates to stop aiding Palestine - at least until Hamas recognizes Israel, ends terrorist attacks, and accepts previous diplomatic agreements between Israel and the Palestinians.
There's no dispute that slashing US aid will lead to greater deprivation in the West Bank and Gaza. The US provided about one-third of the nearly $1.1 billion in aid disbursed to the Palestine Authority (PA) and for Palestinian projects last year. That amounts to about $300 per man, woman, and child.
In relation to a gross national income for the average Palestinian of $1,327 last year, any cut in foreign aid and tax revenue is serious.
In effect, Palestinians have a third-world income - a few dollars a day. And they live next door to first-world Israel, with a per capita gross domestic product (GDP) of about $22,200 last year. Israel gets about $420 per capita each year in aid from the US, partly as a result of the 1979 Camp David peace accords between Israel and Egypt. Though that's more aid per capita than Palestinians get, Israel is less dependent on it.
Noting the Palestinian aid numbers, Scott Lasensky, a researcher at the United States Institute of Peace, says, "Clearly there is room for leverage." But he doubts the aid cutoff will proceed to the point of "mass starvation."
One reason is that humanitarian assistance is likely to continue. And many contributors to Palestine may resist US pressure for cuts. Last week, Iran offered to step in with new money.
Nonetheless, there could be more malnutrition. A UN report two years ago said malnutrition among Palestinians was widespread at the height of the intifada when movement and commerce were strictly regimented by Israel in an effort to restrain the violence.
Another reason is that aid to Palestine comes from multiple sources. A World Bank trust fund gave $125 million to the PA in 2004. A new Congressional Research Service report lists nine other aid sources for the PA. At the top was the European Union with $105 million. Saudi Arabia gave $76 million, the US $20 million, and so on down through Libya, Britain, Norway, Japan, Canada, and Egypt. Even more aid comes from the EU, the US, and Persian Gulf nations for specific development projects ($300 million, $345 million, and about $200 million respectively in 2005).
Egyptian foreign minister Ahmed Aboul Gheit said Egypt would not cut off aid because it is important "to meet the humanitarian needs of the Palestinian people." Saudi Arabia has also said that it will not cut off aid. Other aid providers are unlikely to join an aid boycott.
Should Palestinians obtain an independent nation, its economic viability remains an open question. But until then, under the 4th Geneva Convention of 1949, an occupying power is responsible for the welfare of those whose territory is being occupied. Providing no aid, "Israel is not in compliance," says Mr. Abunimah.
A World Bank report this month reckons real GDP in the West Bank and Gaza grew 8 to 9 percent last year, continuing a modest recovery that began two years ago. Extra foreign aid helped. Yet the economy is still 29 percent below where it was in 2003. Unemployment is at 23 percent.
Another issue is that the Palestinian population grows more than 3 percent a year. Each Palestinian woman in Gaza has close to six children on average; in the West Bank, 4.4 children is the average.
Some Israelis see this as a demographic threat. Abunimah holds that large families arise from the parents' need to ensure help in their old age in a society without Social Security or a system of government medical care.
For economists, rapid population growth makes a rise in economic prosperity difficult, especially in an area with limited land and resources. What's needed, the World Bank report suggests, is peace, the lifting of restrictions on Palestinian travel and commerce, Palestinian governance reform, and more foreign aid.
Peace will probably be expensive. At one point, President Clinton offered $35 billion in incentives, attempting to broker a peace deal. That effort ultimately failed.