By Ali Sawafta and Nidal al-Mughrabi

RAMALLAH/GAZA (Reuters) – Saudi Arabia, Egypt and other Arab states are piling pressure on Palestinian President Mahmoud Abbas to resolve divisions in his Fatah party and with the rival Hamas movement, amid growing concerns about whether Palestinian democracy is under threat.

Neighboring states, diplomats and major funders fear the festering divisions could lead to conflict, and say the lack of a clear transition process raises questions about what would happen if the 81-year-old Abbas, in power since 2005 despite his mandate expiring, were to die in office.

In a non-binding paper circulated last month, Saudi Arabia, Egypt, Jordan and the United Arab Emirates made recommendations for tackling splits that have deepened over the past year, while strengthening Palestinian leadership and trying to keep the stalled peace process with Israel alive.

“Efforts to unite Fatah and empower it are aimed at balancing the Palestinian internal arena and this falls under the responsibilities of the head of the movement, Abu Mazen,” the two-page paper said, referring to Abbas by his nickname.

Among the recommendations was the holding of “free and fair” elections for parliament and the presidency by July 2017, although there are no indications that will happen. They would be the first parliamentary elections since January 2006.

“The primary reasons are Abbas’s systematic mismanagement of such relationships, and a weakness of leadership that has opened greater opportunities for Arab and foreign interference in Palestinian internal affairs,” said Mouin Rabbani, a senior fellow with the Institute for Palestine Studies.

In a clear signal of its growing frustration, Saudi Arabia, which normally provides around $20 million a month to the Palestinian budget, has not made any contributions since April, according to the Palestinian finance ministry’s website.

Palestinian officials say Riyadh is withholding the funds because it first wants to see progress on unity within Fatah and with Hamas, the Islamist group that controls Gaza.

With the United States, the European Union and individual EU member states having already cut their contributions, the Palestinian budget faces a severe shortfall this year, which the World Bank puts at around $600 million.

Asked about the pressure from Arab states, Abbas’s spokesman Nabil Abu Rdainah declined to comment directly but said the focus of Fatah and the Palestine Liberation Organization, which Abbas also chairs, has always been on Palestinian unity.

“Any attempt to intervene in the independence of Palestinian national decision-making will fail, just as it has failed throughout the past 40 years,” he said. Abbas himself has said nothing in public about the political process in months.

POLITICAL JOSTLING

Rabbani said it was increasingly clear the race to succeed Abbas had begun, with a number of rivals positioning themselves for the day he is gone.

Abbas faces several challenges. Opinion polls show Palestinians have lost confidence in his leadership, and if parliamentary elections were held tomorrow, it is possible Hamas would win in both Gaza and in the West Bank, where Fatah and Abbas have traditionally been stronger.

At the same time, factions within Fatah are growing more agitated, with rival groups emerging ahead of a party congress set to take place next month, the first since 2009.

Mohammed Dahlan, a former Fatah security chief who fell out with Abbas and now lives in self-imposed exile in the United Arab Emirates, is a staunch Abbas critic who retains influence within Fatah’s revolutionary council and central committee.

Some senior Fatah figures want Abbas to reconcile with Dahlan, but the president shows no such inclination. At the party congress, Abbas is expected to push for the election of a new central committee and revolutionary council – the equivalent of Fatah’s parliament – that would be free of Dahlan loyalists.

Dahlan, 55, said that if Abbas did try to push such changes through, it would be “illegitimate”.

It “will represent the most dangerous split in the history of Fatah and will be regarded as a palace coup,” he told Reuters in written comments, adding that there were legitimate reasons to worry about a collapse in the democratic process.

“It is time to implement the will of the people and implement the law by electing a new leadership and not a new leader. There is a historical and national need to hold parliament and presidential elections,” he said.

In an analysis last week, the Carnegie Endowment for International Peace described Fatah, which has dominated Palestinian politics for more than 50 years, as “tearing itself apart”, with worrying implications for the future.

“It is likely that the split within Fatah will further widen if Dahlan is excluded from holding a leadership position,” it wrote. “Furthermore, the dispute between the Dahlan and Abbas factions could evolve into open warfare, which could mean instability or even violence – especially where Dahlan wields considerable power in the Gaza Strip, the northern West Bank and Palestinian refugee camps in Lebanon.”

This week has already seen unrest in some West Bank refugee camps where Dahlan has a strong following.

Diplomats say Dahlan has good ties with Egypt as well as the Gulf states. Cairo sees him as a helpful interlocutor with Hamas in Gaza, where Dahlan is from, and as someone with the energy and strength to shake up Palestinian politics.

Others, though, see Dahlan as the power behind the throne. Officials who have met him think he may act as a kingmaker, rather than a future Palestinian president, throwing his support behind another senior Fatah figure as leader.

A number of names crop up in both Palestinian and Israeli assessments, including Nasser al-Qudwa, the nephew of late Palestinian leader Yasser Arafat, Jibril Rajoub, a former security chief who heads the Palestine Football Association, and Majid Faraj, the head of Palestinian intelligence.

Yet the most popular Palestinian politician, according to opinion polls, remains Marwan Barghouti, a leader of the first and second uprisings against Israel who was convicted of murder by an Israeli court in 2004 and is serving five life sentences.

(Additional reporting by Luke Baker; Writing by Luke Baker; Editing by Giles Elgood)