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Occupied Jerusalem: Palestinian Prime Minister Salam Fayyad knew he had a big problem - foreign donors hadn't given him enough cash to pay public service salaries this month.
So the former World Bank economist secured a last-minute lifeline from an unconventional source - a mobile phone company that was keen to speed its entry into the Palestinian market, and which had the help of Middle East envoy Tony Blair.
Western and Palestinian officials said the unusual financial arrangement came together last week when Israel, after months of prodding from the former British prime minister and others, agreed to assign radio frequencies enabling Wataniya Palestine Mobile Telecommunciations Co to begin operations.
UAE support
The company, in turn, agreed to quickly pump an initial $78 million (Dh286 million) into the Palestinian Authority's cash-strapped coffers and even provided written assurances to banks so Fayyad could obtain short-term financing to meet the payroll on August 7.
Overall, Wataniya is expected over time to pay the Authority more than $354 million in licence fees, officials said.
The first payment to the government underscored how far the Palestinian Authority's budget is in crisis despite billions of dollars in aid pledged to support a US-backed peace drive.
The deal also shed light on Israel's grip on the Palestinian Authority's purse as well as on relations between Fayyad's government and a telecoms company that is seeking to establish only the second cellular network in the Palestinian territories after that of Jawwal, a unit of local firm PalTel.
Fayyad paid salaries to workers on Thursday after announcing that he had received $42 million from the UAE.
He made no mention of cash from Wataniya Palestine, an arm of Kuwait's National Mobile Telecommunications Co., which is in turn controlled by Qatar Telecommunications Co. (Qtel). But a senior Western official said: "Without this money, they would not have been able to pay salaries."
He called it a sign of "desperate" times.
Fayyad had been scrambling for weeks for the money to cover salaries after many Arab states failed to honour commitments.
Delay would have embarrassed Fayyad, who was appointed last year with Western backing when President Mahmoud Abbas fired a Hamas government after the Islamists routed his forces in Gaza.
"The rosy picture presented of Fayyad's financial and security predicament is increasingly at odds with reality on the ground," said Nicolas Pelham of the International Crisis Group. "At a time when Hamas is increasing its control of Gaza, there are worrying signs that the international backers of Fayyad's reform programme are reluctant to back him financially."
Donor countries pledged $7.7 billion to the Palestinians at Paris in December. But only a fraction of that has materialised and most of it is earmarked for projects, not general spending.
The Wataniya deal was clinched last week when Israel and the Palestinian Authority signed an accord to allocate the radio frequencies. An eventual agreement had been in little doubt but Fayyad's financial distress "increased the sense of urgency to seal the deal as soon as possible," one official said.
An Israeli official involved in the negotiations said, however, he felt no pressure to clinch a deal to help Fayyad.
Short-term loan
With the frequencies assigned, Wataniya agreed to transfer an initial $78 million to the government by mid-August.
Wataniya also helped Fayyad obtain a short-term loan by providing a "comfort letter" to banks, according to Palestinian and Western officials.
"It helped us in paying the salaries," a Fayyad aide said of the letter from Wataniya.
Wataniya Palestine's chief executive, Allan Richardson, declined comment on any financial arrangement with Fayyad's government.
He said: "It's between us and the Palestinian Authority and, from my perspective, it's a confidential matter."
He added that he was "not aware" of any comfort letter.
Azmi Al Shuaibi, who heads the West Bank-based advocacy group Coalition for Accountability and Integrity, said the Palestinian Authority and the companies doing business with it "should be more transparent in dealing with such issues."
Struggling to secure loans for the government, Fayyad had also appealed to the World Bank for a comfort letter -in vain.
Blair was involved in negotiations with Israel on Wataniya's case, arguing it would boost the Palestinian economy. Western diplomats said he faced resistance from the Israeli army, which uses some of the same frequencies in the occupied West Bank.
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