Proposed U.S. legislation to halt funding to groups that oppose the Middle East peace process may itself damage the fragile Israeli-Palestinian peace, analysts argue.

The proposed bill — a draft for the Omnibus Counter-Terrorism Act of 1995 — may actually undercut the new Palestinian National Authority (PNA) now operating in Gaza and Jericho by chilling funding to a variety of groups there, some critics charge.

In particular, Arab groups have begun to report that people in the United States, uncertain of the sweep of the new legislation, now say they will avoid funding Arab or Muslim groups altogether.

Khalil Hahshan, director of the National Association of Arab Americans, said that in discussions with the Bill Clinton administration, even the bill’s backers seem unaware of its potential to stifle funding to more than a few Islamist groups.

“The administration didn’t think of the practical questions,” Hahshan said of his meetings. “This can have a chilling effect on funding for many activities.

“The amount of money may not be great, but it is great for the Palestinians. Then where are these people going to go for help?” he asked.

The bill follows last month’s executive order by President Clinton that makes it illegal for U.S. residents to send funds to 10 Muslim or Arab and two extremist Jewish organisations that oppose the Israeli-Palestinian peace process.

The groups range from Islamist organisations such as Lebanon’s Hezbollah and the Palestinian Hamas to opposition factions of PNA Chairman Yasir Arafat’s Palestine Liberation Organisation (PLO) to the far-right Jewish Kach and Kahane Chai groups.

The new legislation tightens the language of the executive order, but also creates a problem in determing which groups cannot be funded.

Hahshan says that under the current language, officials can claim that moneys going to humanitarian or social groups in the Palestinian territories or beyond can be deemed financial support for the banned groups.

Ironically, he noted, all of the groups on Clinton’s list — except for Kach and Kahane Chai — have been registered by the Israeli government’s occupation authority as legal groups in the Palestinian West Bank, Gaza and East Jerusalem.

“If the problem is over there, then (Israel) should take care of it,” Hahshan argued. “Why interfere with my civil rights, my right to choose, on my soil?”

“I’m not sure how much funding there is of Hamas coming out the United States,” added Michael Collins Dunn, editor of ‘International Estimates’. “I don’t think (Palestinian rebel) Abu Nidal is holding fund-raisers here.”

Kenneth Katzman of the Congressional Research Service agreed, saying that he thought Iran — not Muslims in the United States — was the central source of funding for Islamist funds to oppose peace with Israel.

But Dunn added that the legislation has been presented as crucial to keeping Middle East peace on track, thereby muddling the distinction between peaceful opposition to the 1993 Israel-PLO peace accords and terrorism.

He argued that Washington could be “using the peace process as a rationale for using extraordinary means” against U.S.-based Islamists opposed to U.S. foreign policy interests.

Dunn said that, as far as opposing the peace process was concerned, “I can think of a lot of members of the U.S. Congress who might want to do that, as well as the (opposition) Likud Party in Israel.”

But there is little doubt, in the legislation or in the media here, that Muslims are the primary target of the new initiatives.

The impetus for the executive order came after Palestine’s Islamic Jihad group executed a suicide attack in Israel, killing 29 people as well as the bomber. Several other attacks have helped stall the peace process, which was re-started Sunday in talks in Washington.

And the legislation comes at a time when several Muslims — including the newly captured Ramzi Ahmed Yousef, alleged mastermind of the 1993 World Trade Centre bombing in New York — are on trial here for terrorism.

In such a climate, Hahshan said, rumours about networks of Islamist terrorists operating within the United States sparks fear among Arab-Americans that a repeat of the 1970s persecution of pro- PLO Arabs is in the works.

“Frankly, the record of law enforcement in our community leaves a lot to be desired,” Hahshan said.

He added that many other features of the Omnibus Counter- Terrorism Act, including provisions for increased pre-trial detention, electronic surveillance and deportations of suspected terrorists, may harm Arab-American civil rights especially.

“Most of us who are first generation immigrants ran away from these things in the old country,” he noted. “To make it easier to deport people makes me nervous as an immigrant. The founders of this country meant for (deportation) to be difficult.”