Paying for Peace: The Oslo Process and the Limits of American Foreign Aid

Article excerpt

American foreign aid has been essential for both cementing and sustaining efforts to resolve the Arab-Israeli conflict since the 1970s. During the Oslo process, aid was designed primarily to build public constituencies to support the negotiations. However, aid quickly became a bandage for a deteriorating Palestinian economy weighed down by corruption, damaged by violence, and stifled by Israeli closures. Rather than serve its original purpose, aid became a crutch for an unsteady process that collapsed following the 2000 Camp David summit. Unlike in other Arab-Israeli negotiations, where aid has been more effective, the Oslo process highlights the limits of foreign aid as an instrument of statecraft.

As Israeli-Palestinian violence continues to shake the Middle East and complicate America's war on terrorism, it is an opportune time to ask what is gained from the more than five billion dollars Washington provides annually to Israel and its Arab neighbors - a subject long understudied in both the academic and policy literature.1 Although foreign aid has been essential for both cementing and sustaining efforts to resolve the Arab-Israeli conflict since the 1970s, it is a limited tool. During the Oslo process (1993-2001), foreign aid and other positive inducements provided momentum to the peace process, underwrote practicalities, and smoothed over periodic crises in the negotiations. But ultimately, as evidenced at Camp David in 2000, despite unprecedented promises of American aid, a final peace deal remained out of reach.

With the US having already provided more than $200 billion in aid to the Middle East since 1970, and with nearly half of the current foreign aid budget going to the region, it is essential to know what foreign aid can and cannot accomplish. Moreover, understanding the utility of foreign aid (and the role of positive inducements more generally) is critical to the success of future American interventions in the ArabIsraeli arena and in managing other regional conflicts.

This article will evaluate the use and effectiveness of American foreign aid in managing the Arab-Israeli conflict. Specifically, the paper examines the role of this diplomatic instrument in Israeli-Palestinian relations since Oslo. The focus is on foreign aid for political purposes, as distinct from development or humanitarian aid.2 The following five arguments are made:

* Foreign aid was a necessary, but not sufficient, factor in sustaining the Oslo process from 1993-2001. Aid was effective once the parties demonstrated the political will necessary to reach negotiated agreements. Economic inducements did not bring either side to the table, but aid was necessary to consummate and implement peace accords and to maintain momentum in the negotiating process. The Oslo accords would not have endured as long as they did if aid had not been used. But foreign aid alone, including President Clinton's $35 billion offer at Camp David in 2000, was insufficient to save the process from collapse.

* Aid has been most effective as part of long-term strategies of engagement that combine political, economic, and security assurances. It was a strategy first developed by President Richard Nixon and his National security Advisor/Secretary of State Henry Kissinger. But during the Oslo years, the US did not provide Palestinians with sufficient political and security inducements to maximize aid effectiveness. In fact, at the Camp David summit, rather than use aid as part of an integrated strategy for underwriting peace, President Clinton attempted to use economic inducements to compensate for fundamental deficits in the negotiations.

* Foreign aid also has "expressive value." During the Oslo process, aid provided political cover for policymakers who faced domestic discontent over peace deals. This was true for both Israeli and Palestinian leaders. At times, Washington also used aid to express displeasure with the sides.

* As with other step-by-step peace settlements, Oslo aid was designed to build public constituencies to support the negotiations. …