EU backtracks on Palestinian aid freeze over Hamas attack

The European Union backtracked in disarray on Monday on an announcement that aid to Palestinians had been suspended in response to the attack on Israel by Hamas after EU countries complained the bloc's executive had overstepped the mark.

The confusion began after Oliver Varhelyi, the top official for relations with the EU's neighbours, said the European Commission was putting all its development aid for Palestinians, worth €691 million, under review.

The EU said on Monday that it was suspending part of its aid to Palestinians and putting its programs under review, as countries within the bloc remained divided on whether to continue to provide financial assistance after Palestinian gunmen launched deadly attacks on Israel over the weekend.

Israeli said on Monday that he has ordered a "complete siege" on the Gaza Strip. It said that “no electricity, no food, no water, no fuel” would be allowed into Gaza, in effect cutting off a territory already under a 16-year blockade, as Israeli airstrikes continued to pound the tiny coastal strip.

The EU is the single biggest international donor to the Palestinians and any long-term freeze on assistance could have significant consequences for civilians affected by the latest violence. “As the biggest donor of the Palestinians, the European Commission is putting its full development portfolio under review, worth a total of EUR 691m,” Oliver Varhelyi, the bloc’s commissioner responsible for development aid, said on Monday.

Varhelyi was nominated for his post by Hungarian Prime Minister Viktor Orban, a staunch ally of Israeli Prime Minister Benjamin Netanyahu.

The announcement prompted consternation among multiple governments, who had warned against cutting off aid to the detriment of Palestinian civilians and questioned whether the Commission had the authority to take such a decision.

The European Union’s budgeted support to the Palestinians for 2021 to 2024 is €1.18 billion. The bloc provides two types of assistance: development aid, which is usually longer-term investment in projects, and humanitarian aid, which normally provides relief to people affected by conflict or natural disasters.

Some EU leaders stressed the need to distinguish between Hamas and Palestinian civilians when deciding on the future of aid to the population. “I think we really have to make the distinction between Hamas, the terrorist organization, and very innocent Palestinians who are just as likely to be victims right now, and again, in the case of Gaza, have been for sixteen years,” Netherlands PM Mark Rutte said.

The move also came as a surprise as officials had said earlier in the day that aid to Palestinians would be discussed at an emergency meeting of EU foreign ministers on Tuesday. Spain, Portugal, Luxembourg and Ireland publicly voiced alarm while other countries did so behind the scenes, diplomats said.

More than five hours after Varhelyi's social media post, the Commission issued a statement confirming it had started an urgent aid review but also declaring that "as there were no payments foreseen, there will be no suspension of payments".

EU foreign policy chief Josep Borrell then sowed further confusion when he said the EU would not suspend "due payments" - right after the Commission had said no payments were foreseen.

The Commission declined to explain the discrepancy. But it clarified that humanitarian aid - which is separate to funds for development - would continue.

It said it was carrying out the review to "ensure that no EU funding indirectly enables any terrorist organization to carry out attacks against Israel."