The Arab League told the Palestinian President, Mahmoud Abbas, on Thursday that the League would not be able to transfer funds directly into the accounts of the unpaid employees of the Palestinian Authority (P.A).  Amr Mousa, Arab League Secretary-General, phoned Abbas and told him that the League will abandon the effort.

Mousa did not provide Abbas with any explanation, but told him that regional and international banks refused to transfer any money to the P.A  because of the American threats to impose sanctions on any country that help the Hamas-led P.A since its regards the Hamas movement as a terrorist organization.

Hamas was hoping that the Arab League, based in Cairo, would transfer $70 million directly to the accounts of P.A employees.
The Hamas-led Palestinian government is $1.3 billion in debt, and has no income to pay long overdue salaries to 165,000 employees.

On Tuesday, the Quartet, composed by the United States, Russia, the European Union and the United Nations decided to set up what was described as “a new mechanism to funnel aid to the Palestinians”, but it was unclear whether any of that money could be used to pay salaries.

The Quartet says it wants to find a way to transfer the money without funneling it to the accounts of the Hamas-led government.

Meanwhile, Abbas is expected to leave on Friday for Russia and European countries in an attempt to press them to quickly set up the mechanism, which was expected to take the form of a World Bank-run trust fund.

Banks in the area are vulnerable to pressures from the United States since they rely heavily on "correspondent" financial institutions in the United States to conduct their day-to-day business.

In accordance to the U.S law, any foreign bank that refuses to cooperate with the United States in cutting off funding to Hamas could have its U.S. assets frozen and its access to U.S. financial markets denied. Also, American banks that maintain "correspondent" relationships with banned foreign banks could also be found in breach of U.S. law.