Hamas pushed to brink by banks fearing U S curbs

RAMALLAH, West Bank, Apr 23 (Reuters) Palestinian bank executives need only look down the road to the once-bustling al-Aqsa Islamic Bank building to remind themselves of the dangers of dealing with the new Hamas-led government.

Al-Aqsa boasted of being the fastest growing bank in the Palestinian territories with ties to Citibank, one of Wall Street's most powerful financial institutions -- until U S President George W Bush in 2001 labelled it ''a financial arm of Hamas'' and froze it out of the U S market.

''From that day on, they blocked all our accounts, all over the world,'' said Adnan Sabri, assistant branch manager for al-Aqsa, which denies harbouring Hamas funds.

''Anybody who deals with the new government will have the same problem. It's impossible to function this way,'' he said in his Ramallah office, on a street lined by banks.

Hamas's inability to find a bank to handle the Palestinian Authority's funds has put a spotlight on how the U S government can quickly paralyse an already fragile banking system and push a cash-strapped government to the brink of financial collapse.

The United States classifies Hamas, an Islamist group dedicated to Israel's destruction, as a terrorist organisation.

Without the help of banks, and with Israel controlling most of the borders, it is unclear how even the few donations made by Qatar, Iran and others will reach the Authority, already three weeks late paying salaries to 165,000 government workers.

Nabil Amr, an adviser to Palestinian President Mahmoud Abbas, said yesterdeay that U S warnings to regional and international banks were holding up the transfer of million in aid from Qatar.

Banks in the region are particularly vulnerable to U S pressure because they rely heavily on ''correspondent'' financial institutions on Wall Street for day-to-day transactions.

If those correspondent ties were severed, local banks could find it hard pressed to function, experts say.

''Access to the U S markets is an extremely important thing and they are unlikely to want to jeopardise that,'' said Daveed Gartenstein-Ross, a U S-based counter-terrorism consultant.

Suheil Gedeon, chairman of the board of the Commercial Bank of Palestine, said most Palestinian banks, rightly or wrongly, ''are afraid to deal with the government'' because ''small banks like us need the United States''.

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