Urgent review of EU development aid to Palestine finds no inadvertent financing of terrorism

An "urgent review" was launched on October 9 to ensure EU development aid was not inadvertently falling into the hands of Hamas, designated a terrorist organisation by the bloc. The militant group had, two days earlier, killed 1,200 people and kidnapped a further 240 in a wave of attacks in Israeli settlements across the border with Gaza.

Of the 119 contracts screened by the EU since, worth a total of €331 million, 88% were cleared for future payments.

"Our analysis has not at this stage identified a breach of contractual obligations and therefore we will continue implementing our ongoing portfolio of EU assistance to Palestine," a senior EU official told reporters.

Speaking to Euronews on Tuesday, Palestinian ambassador to the EU Abdelrahim Alfarra welcomed the decision, claiming the bloc had not disbursed money to the Palestinian Authority since Hamas' attack on October 7. "Palestinians need this money to stay alive," he said.

The Commission maintains however that as the review had been concluded swiftly, no payments to the Palestinian Authority or to UNRWA have been delayed.

Alfarra also claimed the review, announced hastily after EU neighbourhood commissioner Olivér Várhelyi unilaterally announced the suspension of payments to Palestine, had the sole aim of saving face for Várhelyi.

Despite the audit clearing potential leakage of funds to terrorist organisations, two EU-funded projects in the Palestinian territories worth a combined €8 million have been suspended following "serious" allegations that civil society groups were using funds to incite hatred, the senior official said.

As it probes these two cases, the Commission has decided to consideradditional controls, including a new anti-incitement clause in contracts with both Israeli and Palestinian civil society groups.

This would involve monitoring the public communication, including social media posts, of groups receiving EU funding for hate speech or incitement of violence. Third-party financing, where the recipient of EU funds subcontracts other groups or individuals, would also be subject to stricter controls.

It is not yet clear whether the EU executive has yet formally adopted these stricter safeguards.

The Commission is awaiting further information on 51 civil society projects worth €39 million before pending payments can be cleared. While there are no specific allegations of breaches in relation to these projects, the Commission will apply all necessary controls to check compliance, the senior EU official said.

A communication on the review published Tuesday also suggests one educational project under the EU's flagship Erasmus+ programme in the Palestinian territories involved “possible reputational risks” and will be further scrutinised.

"Overall we are satisfied that our controls have worked adequately, but in the current context, where risks have increased given the ongoing war and the heightened political atmosphere, additional safeguards are needed," he added.

Of the 88% of projects cleared for payments, seven projects valued at €75.6 million - representing almost a quarter of the audited funds - were deemed "no longer feasible" due to the immense damage resulting from the crisis engulfing the Gaza Strip. 

These were mainly infrastructure projects planned in the Gaza Strip that can no longer go ahead, the official explained.

European Commission Vice-President Valdis Dombrovskis said the €75.6 million earmarked for these projects would now be re-allocated to Gaza as either humanitarian or development aid.

Critical EU aid continues to flow

The review’s findings come just in time for the Commission to process its next scheduled payment of development aid to the Palestinian territories before the end of November.

The European Union is the biggest donor of aid to Palestinians in Gaza and the occupied West Bank, investing €1.18 billion between 2021 and 2024 to prop up the local economy and prevent its people from plunging into poverty.

But both the EU and Western governments have maintained a strict policy of ‘no contact’ with Hamas since the militant group’s takeover of the Gaza Strip in 2007, channelling aid to Gaza through United Nations (UN) agencies and other organisations it considers outside Hamas’ orbit in order to side-step the government.

This means funds destined for Gaza are already subject to strict controls, which are now being further tightened as a result of the Commission's audit.

Funds are used to help the Palestinian Authority, which governs the occupied West Bank, pay salaries and pensions to civil servants. Recipients of these payments are individually vetted to ensure no links to terrorism and compliance with the EU's contractual obligations.

These checks will now be extended to first-degree relatives, according to the Commission, meaning the parents, children and siblings of Palestinian civil servants will be checked for potential contractual breaches or contact with terrorist groups.

Development aid is also channelled through the United Nations agency supporting Palestinian refugees, UNRWA, to support vulnerable and displaced families. 

The EU also finances development programmes linked to job creation and access to water and energy, including infrastructure projects in Gaza that will now be suspended

EU irons out position

The Commission's audit was announced amid its initially uncoordinated response to the war engulfing the Gaza Strip. Várhelyi drew harsh criticism when he went rogue by announcing the immediate suspension of all EU payments to Palestinians, forcing other senior EU officials including top diplomat Josep Borrell to scramble to set the record straight.

The U-turn sparked outrage among member states. Spain's then caretaker government, which holds the rotating presidency of the Council of the EU, confirmed its foreign minister José Manuel Albares had called Várhelyi to express his disagreement with the decision.

Ambassador Alfarra claimed the exercise had been launched with the sole aim of avoiding humiliation for Várhelyi.

"To save the face of this Commissioner (Várhelyi), the EU said they now wanted to review its money to the Palestinian people," Alfarra said, adding that for years the Commission has ensured its funds avoid "undesired channels".

The bloc has since quadrupled its humanitarian aid for Palestinians to €100 million this year, and has launched an airbridge to carry much-needed supplies to Egypt which controls the only open land border crossing into Gaza, Rafah.

The Commission says its scrutiny of development funds is not unprecedented, with EU member states also conducting similar exercises.

Austria, considered to have one of the strongest pro-Israel stances among the EU's 27 member states, suspended aid to Palestinians in response to Hamas' attack on Israel, while Germany announced it would review its portfolio of funds.

On Saturday, Germany's foreign ministry confirmed its internal review had not detected any misuse.

"The review of humanitarian aid to the Palestinians has been completed and there have been no anomalies regarding possible indirect aid to terrorist organisations," the foreign ministry said.

The senior EU official said he was "confident" that the Commission's system for vetting funds would also prove robust should EU resources to the Palestinian Authorities be scaled up, as has been floated by Josep Borrell in recent days.

Last week, Borrell called for a "reinforced" version of the Palestinian Authority that currently governs the West Bank as well as an increased EU involvement in the region, as part of a long-term solution to the ongoing conflict.

"If it is a case of increasing volumes of what we do I would not foresee any difficulties," the official said. 

The official also confirmed it was not the bloc's intention to reduce payments after the current cycle of funding ends in 2024.

Ambassador Alfarra told Euronews the Palestinian Authority had requested that the bloc advance all payments planned for 2024 given the crisis the territory faces.