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Key points

• The appointment of a new Palestinian Authority (PA) cabinet, accepted by Hamas, leaves many important questions unanswered, with Hamas insisting it remains in control of Gaza.
• It remains unclear how the new government will handle difficult issues, including security coordination with Israel in the West Bank.
• The US has said it will work with the new government whilst continuing to evaluate its composition and policies, a decision that has met with deep disappointment in Israel.
• Israel has harshly condemned Palestinian President Mahmoud Abbas for choosing a pact with Hamas – an internationally-designated terrorist organisation – over peace with Israel. But the Security Cabinet did not announce any immediate new sanctions, rather authorising Prime Minister Netanyahu to do so.

What has been announced?

On Monday afternoon Palestinian Authority (PA) President Mahmoud Abbas announced the formation of a new unity government, which has the backing of Hamas. This follows the main Palestinian factions, Fatah and Hamas announcing at the end of April an agreement to form a unity government to prepare for elections. The two factions have been sharply divided since 2007, when Hamas forcibly expelled Fatah forces loyal to PA President Mahmoud Abbas from the Gaza Strip, leading to the establishment of a separate Hamas regime in Gaza.

The swearing in followed last minute wrangling over the makeup of the cabinet, and Hamas had to set aside a number of its reservations, reflecting its relatively weakened political position. Riyad al-Maliki was appointed Foreign Minister despite Hamas objections, and no separate Minister for Prisoner’s Affairs was appointed, despite Hamas insistence that the government must have one. PA Prime Minister Ramdi Hamdallah and finance minister Shukri Bishara remain in their posts.

What is the significance of the announcement?

It is significant that after numerous past failures to form a unity government, since the last joint government collapsed in mid-2007, this time a cabinet has been appointed with the backing of both factions.

However, many important questions remain unanswered about how the new government will function. Currently Hamas and Fatah run separate and exclusive security regimes in the Gaza Strip and West Bank respectively. In a speech yesterday in the Gaza Strip, Hamas leader Ismail Haniyeh insisted that “we are not in the government, but we are in control”. This fuels the assessment that Hamas intends to copy in the Gaza Strip the model of Hezbollah in Lebanon, by maintaining independent armed forces and freedom of action, regardless of whether or not it serves in the government or wins elections.

Meanwhile the Palestinian Security Forces loyal to President Abbas in the West Bank have in recent years cooperated closely with the IDF to prevent terrorism, and many Hamas activists are held in Palestinian Authority (PA) jails. It is unclear if Fatah has made any assurances to Hamas that would curb such counter-terrorism operations in the West Bank. If Hamas prisoners are released, or if the cooperation with the IDF ceases, this could trigger an immediate crisis with Israel.

The situation also creates a dilemma for the US, UK and other governments which provide financial and training support for Palestinian security forces in the West Bank, but which have designated Hamas as a terrorist organisation. A further question would be raised for international donors if Abbas were to agree to the Hamas demand to add 40,000 employees of the Hamas regime in Gaza to the PA wage bill.

Has the government met international conditions for engagement?

President Abbas said in a pre-recorded message after the swearing in ceremony that “This government, like its predecessors, will abide by all previously signed agreements and the PLO’s political agenda.” He said that this was a transitional government to prepare for elections, whilst diplomatic negotiations will remain in hands of PLO, of which he is the Chairman, and from which Hamas currently remains excluded.

The US State Department responded yesterday that “Based on what we know now, we intend to work with this government, but we’ll be watching closely to ensure that it upholds the principles that President Abbas reiterated today.” The 17 ministers in the new government are all individuals without explicit affiliation to Hamas, a move meant to circumvent the problem that Hamas is designated as a terrorist organisation both by the US and the EU.

However, Israel expressed deep disappointment with the US position and will continue to make the case internationally that this is a government backed Hamas, designated as a terrorist organisation in the US and EU, and that Hamas plainly remains committed to Israel’s destruction.

The EU overall has been warm to the Palestinian reconciliation process and said in a statement on May 12 that, “The EU looks forward to continuing its support, including through direct financial assistance, for a possible new Palestinian government composed of independent figures.”

What is Israel’s policy towards the new government?

The central message of Prime Minister Netanyahu is that Abbas’s decision to form a unity government with Hamas reflects his unwillingness to make peace with Israel. The Israeli Security Cabinet, after meeting on Monday afternoon, reiterated that it would not negotiate with a Palestinian government backed by Hamas; that it would “act against the participation of terrorist organizations in elections”; and that it would hold the PA “responsible for all actions that harm the security of Israel,” whether they originate in the West Bank or Gaza Strip.

However, it did not announce any specific new sanctions against the PA, rather authorising Prime Minister to “impose additional sanctions”. It remains to be seen how this policy will be implemented in practice. Though resuming final status negotiations is off the agenda, it is unclear whether Israel will continue routine coordination with the PA, including economic cooperation and facilitating the movement of Palestinian leaders. It is also unclear whether Israel will continue the monthly transfer of customs revenues to the Palestinians. In the past Israel has threatened to use the money to pay debts owed by the Palestinians to Israeli utility companies.

Within the cabinet Netanyahu is balancing between a range of views. Justice Minister and lead negotiator Tzipi Livni, and Finance Minister Yair Lapid have tended towards a more moderate line, with Lapid saying yesterday, “We need time to evaluate the new government … Now is not the time for harsh criticism.” Meanwhile parts of the Likud and Jewish Home leader Naftali Bennett are pushing a more hawkish position. Bennett called the new PA administration, “a government of terrorists in suits,” and pressed the government to consider responding with annexations of settlement blocks.