Yasir Arafat's 1990 decision to support the Iraqi invasion of Kuwait was probably the greatest mistake in the Palestine Liberation Organization's twenty-five year history. It cost money, it made enemies, and it profoundly weakened the PLO. And it puts the organization's future in jeopardy.
Loss of Support. Palestinian enthusiasm for Saddam Husayn prompted the Saudi and Kuwaiti governments immediately to stop funding the PLO-at the rate of $72 and $24 million a year, respectively. The United Arab Emirates, Qatar, and Egypt also followed suit. The Iraqis, who had been contributing some $48 million annually, lacked the funds to keep on paying (though they did offer oil instead, for resale). Even Libyan aid -- $12 million a year in cash, plus $50 million in equipment during the mid-1970s, came temporarily to an end.
To make matters worse, Kuwait had been the Palestinians' El Dorado, and they lost nearly all their wealth in that country. The numbers involved are large, even if they don't reach the estimates proffered by PLO officials of $8 billion to $13 billion. The intifada cost Palestinians under Israeli occupation, again according to Arafat, $1.4 billion. To make matters worse, Arab states froze PLO assets; Dr. Sa'ib 'Urayqat estimates these to be worth $221 million. Finally, the Soviet collapse left the PLO bereft of considerable assistance, less in cash than in the training of terrorists and other agents.
Arafat complained in December 1992 that "no oil state has given the Palestinians a single penny" since April 1990. While not strictly true, the sums are but a fraction of the old amounts. According to one source, the PLO lost all its government funds; only deductions from Palestinian salaries and donations from private Saudi citizens continued to come through. In late 1991, the Saudis announced the resumption of funding for the PLO, though the sum was a small one -- $2.1 million. A few months later, the Saudis agreed to permit the PLO to collect the tax levied on Palestinians resident in Saudi Arabia, a sum of about $5.5 million a month, but the Palestinians say they haven't seen the money. In October 1992, the Saudis sent the PLO $3 million. Qatar added the desultory sum of $1.6 million.
PLO assets have also disappeared. While no one outside the PLO knows for sure what these were, they probably amounted to somewhat over $2 billion prior to the Iraqi invasion of Kuwait. According to a Jordanian report, Arafat reported to the Fatah Central Committee that this sum "is almost depleted."
In all PLO income appears to be about half of what it was before the Iraqi invasion: U.S. News & World Report estimates the annual PLO budget before the Iraqi invasion at about $200 million and now it's about $100 million. A March 1991 report in The Jerusalem Post saw an even more precipitous drop in revenues, as much as 90 percent. It's probable that no one has an exact idea of the figures.
Alternative Sources. Arafat devised several strategies to cope with the financial shortfall, none very successful. In July 1991, he announced a plan "to ask the Europeans to increase their assistance to make up for the Arabs' shortcomings." Little came of this. Efforts to win funds from the Islamic revolutionaries in Tehran fared hardly better, for the Iranians' $80 million in 1991 went to fundamentalist Muslims among the Palestinians. Out of desperation, the PLO even considered applying to the United Nations for compensation under the terms of the U.N. Charter's Article 50 (which provides compensation to members harmed by a U.N.-sanctioned embargo).
Cutting Back. Unable to find new sources of income, the PLO had no choice but to reduce spending. Expenditures, which had already dropped 30 percent by the time Operation Desert Storm began, declined further. The PLO closed offices in the West and an information bureau in Amman. Its fighters lacked ammunition and youth of the intifada had to pay for their own spray paint. A reduction of pay to Palestinian fighters in early 1991 provoked a mutiny in Al-Fatah in Lebanon; Fatah responded by summarily executing the malcontents, apparently hoping this would prevent a collapse in the chain of command.
A wide range of PLO beneficiaries felt the shortfall in 1993. Central Committee members agreed (in principle, anyway) to take a cut in salaries and perks. PLO offices drastically reduced expenses; the one in Riyadh, for example, cut staff salaries by 20 percent "from the ambassador to the most junior employee." "Steadfastness funds" for widows and orphans of dead fighters, as well as wives of prisoners, dried up. Some 700,000 residents of the West Bank and Gaza (over one-third the total population) reportedly used to receive $120 million a year from the PLO; now that amount has been cut by two-thirds.
PLO-financed organizations stopped paying their staff. Workers at Ash-Sha'b, a Jerusalem daily, went on strike in February 1993 to protest months without pay, only to find their newspaper shut down a few weeks later. Two Jerusalem weeklies disappeared without a trace. Al-Fajr newspaper closed in July. No less than sixty-three press offices and minor media organizations financed by Fatah closed down. Strikes at the Women's Union Hospital in Nablus and other West Bank institutions did no good, as these either folded or limped along at a fraction of their former capacity. Bassam Abu Sharif understated the stark situation by noting that "The crisis has affected all walks of life and all individuals, including officials and ordinary people."
Implications. Running short of money has serious consequences for the PLO. Internally, it weakens Arafat's position. In May 1993 members of the PLO's Central Council quizzed him about finances, something he found a rude effrontery. A couple of months later, the grilling got so bad, Arafat actually resigned his position for a few hours as a form of protest.
Indeed, Arafat's position appears to have undergone a basic change. At the beginning of the intifada, Palestinians hailed him as "the stone we throw at the world"; today the "old man" of Palestinian politics finds himself the object of nasty remarks about his political failures and financial mismanagement. In a typical remark, a Jericho worker named Yusuf al-Masri declared that "With the billions of dollars those who claim to be our leaders have spent, we could have built a Palestinian state!" Haydar Abd ash-Shafi', head of the Palestinian delegation to the Washington talks, urged the formation of a "collective leadership" for the PLO. More gently, a newspaper editorial suggested that Arafat's retirement "would boost his standing." It got so bad, some Palestinian military officers accused Arafat of intending to liquidate the PLO to please the U.S. government.
Poverty compels Arafat to do others' bidding. Internally, he had to acquiesce when a faction led by Hani al-Hasan sought to reach out to Hamas, the PLO's fundamentalist Muslim rival. Externally, he distanced himself from Saddam Husayn hoping to win back Persian Gulf funding. He couldn't condemn the spectacle of Libyan pilgrims in Jerusalem for fear of jeopardizing the $6 million he receives monthly from Tripoli. Out of hopes of receiving $10 million from Riyadh, the PLO continues indirectly to take part in the Washington-based negotiations with Israel.
While it is unwise ever to discount the PLO, an organization that has often rebounded from adversity, poverty severely crimps its activities and obstructs its ambition to remain the dominant Palestinian organization. Payments to residents of the West Bank and Gaza had nurtured loyalty to Arafat for many years; as the money vanishes, the PLO has little to offer them and their fickleness is becoming apparent.