The Funding of Palestinian Refugee Compensation
Source: FOFOGNET Digest (revised version, March 1996)
by Rex Brynen, McGill
University
Compensation has been almost
universally seen by analysts of the Arab-Israeli conflict
as a central and necessary feature of a final settlement
of the refugee issue. Estimates of compensation amounts,
however, have been driven by calculations of Palestinian
property losses in 1948, together with a possible
component for human capital losses and moral reparations.
In the early 1950s, the UN Conciliation Commission
for Palestine estimated the value of lost Palestinian
property at £122 million, or approximately $1.85
billion 1990 US dollars. At that time the Arab League
countered with its own estimate twenty times greater,
worth over $35 billion in 1990 dollars. Yusif Sayigh
estimated lost Arab property at £757 million
in 1948 ($11.5 billion).[1]
Atif Kubursi and Sami Hadawi calculate 1948 losses--including
material losses, human capital losses, and psychological
damage--at up to $92-147 billion in 1984 prices.[2]
Rashid Khalidi cites a possible figure of $40 billion,
based on an assumption of $20,000 for each of 2 million
eligible refugees.[3]
In practice, however, the amount made available
for refugee compensation may depend less on the valuation
of Palestinian losses in 1948 than on political circumstances
and the availability of regional and international
resources. This paper attempts an exploratory examination
of the issue of resource availability. In doing so,
it ignores the moral imperatives of historical justice--imperatives
which, this author believes, require that Israel offer
substantial redress for the refugee displacements
and property seizures of 1948 and 1967. Such an investigation
is, of course, a highly speculative undertaking. Nevertheless
a preliminary exploration highlights the potential
financial and political difficulties posed by resource
scarcity, and suggests an agenda for further reflection,
study and political action.
Israel
The primary source of funds anticipated by most analyses
of the Palestinian refugee issue is Israel. This source
is anticipated in United Nations General Assembly
Resolution 194 (1948), which states that “compensation
should be paid for the property of those choosing
not to return and for loss or damage to property which,
under principles of international law or in equity,
should be made good by the governments or authorities
responsible. [emphasis added]” This position
has been implicitly reiterated in a host of subsequent
UN resolutions, and represents the current stance
of both the Palestinian Authority and other Arab governments.
It has also been reflected in most scholarly analyses
of possible final status arrangements for the refugee
issue. Shlomo Gazit, for example, suggests that there
are “positive political and pragmatic considerations
in favour of Israel paying compensation to the Palestinians.”
Indeed, he argues, “the process of paying compensation
to refugees is likely to be of great psychological
value in contributing towards normalization.”
He has proposed an amount of $5-10 billion.[4]
It is by no means clear,
however, that Israel will offer substantial amounts
of compensation. Mark Heller and Sari Nusseibeh, for
example--while agreeing with Gazit that “even
a nominal disbursement of financial compensations
in this context may be of important psychological
value”--note that “a comprehensive program
would be extremely costly and would depend on
the active participation of the international community.
[emphasis added]”[5]
Compensation may be seen as implying moral responsibility
for the refugee issue, something that Israeli spokespersons
(including Prime Minister Peres himself) have frequently
denied. Any Palestinian compensation claims against
Israel will likely be met by Jewish claims for former
properties seized in the Arab world. According to
the World Organization of Jews from Arab Countries,
the value of these properties is about five to ten
times greater than the value of properties lost by
Palestinians in 1948. In addition, the WOJAC estimates
that Israel itself spent $11.5 billion on the absorption
of Jews from Arab countries.[6]
In recent discussion of damages arising from the occupation
of the West Bank and Gaza, the Israeli cabinet discussed
but largely rejected the establishment of a compensation
fund. The government’s position--that each side
should compensate its own--received near-unanimous
editorial support in the Israeli press, not to mention
from the opposition.[7]
There is now way of knowing, of course, how Israeli
public and government attitudes might change in the
context of final status arrangements. Consequently,
it is possible that the current reluctance to offer
compensation may erode over time. It is also possible,
however, that it will remain, or even increase. Israel
will likely face substantial short-term defence and
redeployment costs in the course of final status arrangements,
which may make it less willing to contribute funds
for compensation.
Whatever the future may bring
in turns of attitudes and resource availability, it
is likely that an inverse correlation will continue
to exist between the financial and normative (“admission
of guilt”) components of possible Israeli compensation.
In other words, the less compensation looks like reparations,
the more likely Israel may be to offer funds. Consequently,
it may be desirable to have Israeli donations made
through some form of regional development or “peace”
fund, thus disconnecting Israel from actual refugee
claims. At a minimum, such contributions might total
a few hundred million. The drawback, of course, is
that this will be less acceptable for Palestinians,
for whom the normative component is quite important.[8]
Another possibility is to tie Israeli contributions
to such a fund to Arab contributions, with the latter
used to compensate Jewish refugees.[9]
Israeli settlements can also
be considered as a potential part of an Israeli contribution
to a compensation package. The potential value of
ex-settler housing stock is uncertain, depending on
the outcome of territorial negotiations, the number
of settlers electing to remain in the West Bank and
Gaza, and the method used to value housing stock (purchase
price? potential selling price? Israeli government
compensation amounts for settlers? house construction
or replacement costs?) Back-of-the-envelope calculations
suggest that this might be worth between $280 million
and $1.4 billion, providing housing for between 84,000
and 210,000 returnees.[10]
A further difficulty of using housing stock is its
“lumpiness” and non-fungibility: the resource
cannot be used to compensate diaspora Palestinians,
and even the upper estimate only provides enough housing
for roughly a quarter of likely returnees. Other Israeli
“investments” in the West Bank and Gaza--the
value of which Peretz[11]
puts at “tens of billions [of dollars]”--are
even more problematic, since it is unlikely that Palestinian
refugees would consider such collective goods as power
lines or roads (built on expropriated land!) as representing
any meaningful form of compensation.
UNRWA
A second major source of potential refugee compensation
derives from the wind-down of UNRWA as part of any
final resolution of the refugee issue. At present
UNRWA has an annual budget of $360 million. However,
it is highly unlikely that, in an era of growing financial
austerity, donors will continue to maintain this level
of contribution to the refugee issue once UNRWA is
dissolved. More likely is a commitment to maintain
UNRWA-levels of funding for a refugee package for
a discrete period of time, say five years.
This is the assumption used
by Mark Heller.[12]
Updating his estimates to reflect the current level
of UNRWA funding, one arrives at a total of $1.8 billion
available for a UN assistance program. Of this, Heller
suggests, approximately $673 million would be required
for the maintenance of existing WBG refugees, $746
million for diaspora and yet-to-be repatriated refugees,
leaving $376 million in investment funds for the rehabilitation/compensation
of 750,000 returnees.
If anything, this estimate
lies at the upper level of possible resource availability.
To start with, the Palestinian Authority would be
required to bear to cost of (ex-)refugee maintenance
after the end of the five year period, thus imposing
a significant burden on its resources. Second, host
countries are likely to claim some of a “UNRWA
dividend” as their own, arguing that they will
face a continuing “burden” of unrepatriated
refugees. Indeed, one alternative calculation of possible
UNRWA resources available for compensation/returnee
integration estimates the amount at $200 million.[13]
International Donors
Existing WBG Aid
A third possible source of funding is contributions
from international donors. To date, $2.5 billion has
been pledged in assistance to the West Bank and Gaza
for 1994-98. However, prior to agreement on final
status arrangements, funding for refugee related projects
cannot and will not be regarded as representing part
of a compensation package (although some might be
directed towards the absorption of “displaced
persons” allowed to return to WBG under the
Quadripartite process). Thus, were agreement to be
reached on refugee compensation in mid-1997, approximately
$750 million might remain. In theory, refugees might
be expected to benefit from this in proportion to
their share of the WBG population (presently 53%),
or even disproportionately given their relatively
poorer socio-economic circumstances--thus suggesting
some $400 million. In practice, however, the front-loading
of the grant component of the 1994-98 assistance program,
start-up and administrative costs, and the in-stream
cost of non-refugee, non-compensation projects would
likely reduce this amount by half or more, to under
$200 million.
New International
Financing for Compensation
In addition to the redirection of some of the existing
WBG aid into refugee compensation, additional and
continuing contributions might also be sought from
international donors above and beyond the redirection
of (ex-) UNRWA funding. It must be recognized, however,
that most Western and Arab aid budgets are now facing
substantial contraction. Moreover, there are other
demands on international donors, notably from Bosnia
which may require in excess of $1 billion per year
in reconstruction funds during approximately the same
time period.[14]
Given this--and given that
only $2.5 billion was available for the far more urgent
and strategically important need for transitional
assistance to the West Bank and Gaza--it is likely
that additional international assistance specifically
for refugee compensation and rehabilitation will likely
total under $700 million, and possibly less than half
that amount.[15]
Conclusion
The figures presented above are, at best, very rough
estimates, based on tenuous assumptions about unpredictable
future developments. They do, however, point to what
appear to be potentially serious shortfalls in the
level of resources available for refugee compensation
(see Table 1).
TABLE 1: Potential Compensation Resources
SOURCE |
upper
range estimate |
lower
range estimate |
Israel
compensation
regional development/peace fund
transfer of settlements |
$10,000 m
$1,400 m |
$200 m
$280 m |
UNRWA:
wind-down funding |
$376 m |
$200 m |
International
donors
existing WBG aid
contributions to compensation fund |
$400 m
$700 m |
$200 m
$300 m |
TOTAL
per capita*
per household**
per claimant*** |
$12,896 m
$3,908
$25,401 $18,138 |
$1,180 m
$358
$2,324 $1,660 |
*(based on projected 3.3 million refugees in 1997)
**(based on average household size of 6.5)
***(based on PCC estimate of 711,000 1948 refugees)
The “high” estimate presented herein
($12.9 billion) falls below almost all Palestinian
assessments of refugee compensation claims, and far
below the highest such figures. Moreover, more than
three-quarters of the high estimate is based on the
(far-from-certain) assumption of Israeli willingness
to directly fund substantial amounts of refugee compensation.
The low estimate ($1.2 billion)--based on less optimistic
but perhaps more realistic political assumptions--is
far below the minimum level of compensation required,
amounting to the clearly inadequate sum of $358 per
UNRWA-registered refugee, or approximately $2,324
per household. These figures, moreover, assume that
such amounts are wholly available for compensation,
rather than some funds being diverted to non-compensatory
rehabilitation costs.
If a shortfall does indeed exist--and especially
if it is of the potential magnitude suggested by the
lower range estimates--this poses a severe challenge
to final status negotiations on the refugee issue.
This is particularly true if an individual claims-based
model is used. Consequently, it becomes important
to think about ways of both increasing potential resources
and delivering/packaging available funds in ways that
increase their real and apparent benefit. This suggests
a variety of possible areas for future research and
dialogue:
Israel: To what extent can existing Israeli
taboos against compensation payment be minimized within
the Israeli polity? Is there a role for public dialogue
on this issue? Can Jews displaced from Arab countries
be transformed from opponents of Palestinian refugee
compensation to potential allies in the quest for
a regional arrangement? What is the actual extent
and possible valuation of housing stock in Israeli
settlements? In what ways can a compensation fund
be structured and labelled so as to maximize Israel’s
willingness to contribute substantial funds? The preceding
analysis strongly suggests that the resources available
for refugee compensation will be highly inadequate
unless Israel assumes a substantial portion of the
compensation burden.
International Donors: How can Arab and
international support for compensation be increased?
Can the “wind-down” allocation from UNRWA
be extended? Can UNRWA itself be utilized as the mechanism
for compensation payments, thereby increasing the
likelihood of extended funding? To what extent can
existing WBG aid be used to assist in the development/rehabilitation
of existing refugee populations and the integration
of returnees? To what extent can the later (1997-98)
tranches of WBG aid be used for compensation purposes?
Can debt forgiveness be used as a mechanism for compensating
host governments for services to remaining diaspora
communities, thus freeing up cash resources for compensation
payments to the PA and/or individual claimants?
Mechanisms: Is it necessary to use individual
and claims-based models of refugee compensation, or
are there viable collective and entitlement-based
models? If so, what might they look like? Can the
amounts of compensation be increased by stretching
contributions and disbursements over an extended period?
Can the effectiveness (and apparent magnitude) of
compensation be increased by making a portion of it
available as medium-term loan or loan guarantee funds
at concessional rates? Are there potential non-monetary
components of a compensation package? If so, what
might these be?
To the extent that these issues are addressed in
advance of final status negotiations--and positive
and creative methods are found for dealing with the
problem of potential resource scarcity--the prospects
of reaching a just and mutually acceptable solution
for the Palestinian refugee issue will be substantially
enhanced.
Notes
[1]
Don Peretz, Palestinian Refugee Compensation Information
Paper 3 (Washington, DC: Center for Policy Analysis
on Palestine, May 1995), pp. 14-15.
[2]
Sami Hadawi, Palestinian Rights and Losses in 1948:
A Comprehensive Study (London: al-Saqi Books, 1988),
p. xvii. A lower figure of $25 billion results from
directly converting the 1948 assessment of £1.18
billion using the rates adopted by Peretz.
[3]
Rashid Khalidi, “Toward a Solution,” in
Palestinian Refugees: Their Problem and Future Special
Report (Washington DC: Center for Policy Analysis
on Palestine, October 1994), p. 24.
[4]
Shlomo Gazit, The Palestinian Refugee Question, Final
Status Issues Study 2 (Tel Aviv: Jaffee Centre for
Strategic Studies, 1994), translation from Hebrew
by Mira Sucharov. Gazit’s proposal that Israeli
compensation could be paid from future (East) German
holocaust reparations seems politically highly questionable.
[5]
Mark Heller and sari Nusseibeh, No Trumpets, No Drums:
A Two-State Settlement of the Israeli-Palestinian
Conflict (New York: Hill and Wang, 1991), p. 96. Elsewhere
they note competing Jewish compensation claims, and
the need for Arab financial assistance to fund Palestinian
repatriation/resettlement (p. 130).
[6]
Don Peretz, Palestinian Refugee Compensation, Information
Paper 3 (Washington DC: Center for Policy Analysis
on Palestine, May 1995), p. 11.
[7]
See, for example, Hatzfoeh, 2 January 1996; Ha’retz,
3 January 1996; Davar Rishon, 3 January 1996; Ma’ariv,
cited in Reuters World Report, 3 January 1996. Within
cabinet there was some support for the establishment
of a fund for “exceptional cases”, notably
from Moshe Shahal, David Libai and Michael Ben-Yair,
when it was suggested that a blanket refusal to pay
compensation might not survive a challenge in the
Israeli courts.
[8]
See, for example, Khalidi,”Toward a Solution,”
in which he stresses that “there must be some
symbolic recognition by Israel of the hurt that was
done to the Palestinians made refugees in 1948.”
(p. 24).
[9]
Here the major problem is Arab responsibility: the
Arab countries which account for the bulk of forced
Jewish migration are either relatively poor (Yemen,
Egypt) or politically unwilling to participate (Iraq).
None of the oil-rich Gulf states had large pre-1948
Jewish populations, and hence might be reluctant to
contribute.
[10]
The upper estimate assumes a full withdrawal of 140,000
settlers from the West Bank and Gaza, but none from
Jerusalem, thus making available approximately 28,000
housing units valued at $50,000 each. The lower estimate
assumes that Israel annexes 10-15% of the West Bank
(containing 70,000 settlers), and that 20% of remaining
settlers elect to remain under Palestinian sovereignty,
leaving approximately 11,200 housing units valued
at $25,000 each. Resettlement figures assume a Palestinian
household size 1.5 times larger than that of Israeli
settlers.
[11]
Don Peretz, Palestinians, Refugees and the Middle
East Peace Process (Washington, DC: United States
Institute of Peace, 1993), p. 85.
[12]
Mark Heller, A Palestinian State: The Implications
for Israel (Cambridge MA: Harvard University Press,
1983), p. 93. Heller’s original 1980 figures
have been multiplied by 1.7 to reflect the 1996 UNRWA
budget.
[13]
Rex Brynen, “Refugee Compensation: comments,”
posted to FOFOGNET Digest listserv, 4 November 1995.
This is based on the assumption that: 1) $2 billion
is available from the wind-down of UNRWA; 2) that
two-thirds of Palestinian refugees remain in the diaspora
at the end of five years, thus requiring that a proportional
amount be devoted to services and “compensation”
for host governments; 3) and that approximately two-thirds
of the remainder is required by the PA to maintain
services in the WBG.
[14]
Indeed, Bosnian Prime Minister Hasan Muratovic has
noted that Bosnia and the PA are “competitors
for reconstruction aid.” The World Bank has
estimated Bosnia’s aid requirements as totalling
$5.1 billion over 3-5 years. United Press International,
24 January 1996; Associated Press, 24 January 1996;
Reuters World Report, 4 February 1996. To date, $510
million has been raised for 1996.
[15]
This is based on an informal survey of Western aid
and foreign ministry officials, whose estimates have
run from $750 million to zero. Some added that the
Palestinians already enjoyed a disproprtionate share
of UN spending on refugees--$120 per capita, compared
to around $66 per capita for refugees in the Balkans,
and even lower amounts in Central Africa--and that
this could not be expected to continue. |