The notion that there is a close link between the economy and security and political events has been put to the test by the current round of violence between Israel and Hamas. With the Gaza Strip economy strengthening despite the coronavirus pandemic and a wave of international infrastructures initiatives there, with Israel's approval, what made Hamas risk everything and start firing?
"Globes" has recently reported figures on the economic improvement in the Gaza Strip: a sharp rise in exports, chiefly of textiles, agricultural produce and processed food, a stable, if still high, unemployment rate, record numbers of trucks entering and exiting via the border crossings, and more. So why trigger a war?
As we have said previously, one of the main reasons is the internal conflict within Hamas between Mohammed Deif, head of the organization's military wing, and the political leadership headed by Yahya Sinwar. Deif has for some time opposed Sinwar's "civilian" approach to relations with Israel, and now, following the cancellation of elections to the Palestinian parliament and the heightening of the conflict with Fatah over the leadership of the Palestinian people, he has finally managed to impose his approach. Igniting the flare-up makes Hamas look like the defender of the Palestinian people and earns Deif points among the Palestinian public.
At any rate, the immediate result of the fighting is the halting of all those infrastructure projects that depend on Israeli consent and international funding. All the donor countries are delaying transfers of funds because of the violence, as is the World Bank. Israel meanwhile has closed the border crossings to people and goods, and closed the fishing area off the Gaza Strip coast. The Gaza Strip is under siege, and the cries for help from residents and organizations such as the chambers of commerce and the manufacturers are reaching the Palestinian Authority.
The economy does, however, still to some extent dictate how high the flames will go. In general, Hamas prefers to concentrate its fire on southern Israel (the barrage aimed at Jerusalem was a "mistake" from its point of view and crossed a red line) and to avoid a full-scale Israeli operation like Operation Protective Edge in 2014. It seeks to bring the event to an end within days in order to prevent destruction in the Gaza Strip and an economic reversal.
Another effect of the economic situation is on the West Bank. Palestinian residents of the Palestinian Authority in Judea and Samaria show little desire or readiness for another intifada. The events on the Temple Mount and in Sheikh Jarrah have been going on for weeks, and the street is still fairly quiet in Ramallah, Nablus and Jenin. There are demonstrations, but almost no clashes with IDF troops. The main reason for that is the lack of desire for any escalation that will hurt the reasonable economic situation of the Palestinians on the West Bank in comparison with the Gaza Strip. A military situation assessment source told "Globes" that Hamas was trying to set things alight on the West Bank as well, but that the result was a few more Molotov cocktails, perhaps attempts at terrorist attacks, but no mass involvement.
The Palestinian Authority has a great deal to lose from escalation, and it also has an opportunity to position itself as the antithesis of Hamas's destructive approach to the Palestinian economy. A senior associate of Palestinian Authority chief Abu Mazen (Mahmoud Abbas) told "Globes" that in the end the Palestinian street understands that Hamas's militant populism leads to harsh results. "That doesn't mean that we are stopping for a moment the struggle over Al Aqsa or Sheikh Jarrah, but it's not a suicidal struggle," the source said, referring to, among other things, the fear of a halt in the restoration of international grants and aid that has begun in recent months.
Kanthan Shankar, World Bank Country Director for West Bank and Gaza, who is responsible for a large proportion of the grants and the development plans, has been delivering exactly this message. Talking to "Globes", Shankar said that 60% of the Palestinian budget was made up of contributions from countries and from international organizations, and that the decline in contributions in recent years had hit the Palestinian economy hard. The year of the coronavirus pandemic made the situation even worse, and Palestinian GDP shrank 11.5% in 2020.
"The coronavirus crisis deepened the dependence of the Palestinian economy on foreign money," he told "Globes". "Exiting the pandemic through cooperation with Israel is the main key. There was good cooperation during the crisis, and it's critical that it should continue. The vaccination of the 100,000 Palestinian workers is welcome, but Israel should provide many more vaccinations from its surpluses. The result will be positive for Israel as well."
With the current round of escalation, it's a little difficult to talk about cooperation. At any event, the Palestinians have much to lose at the moment, and a halt in the flow of funds or damage to infrastructure as a result of the violence will put them back many months. "Our mandate is to build institutions that will provide the services necessary for growth. We are pressing the Palestinian Authority to create an environment conducive to international companies doing business in its territory."
Shankar points out that the number of young people joining the workforce is steadily growing, and many of them are university graduates in technological disciplines. Here too, the violence undermines progress. "We want to place an emphasis on technology and digital, because that's the present and the future. Education directed towards that is therefore very important. As a power in these areas, Israel can serve as inspiration, and through cooperation the Palestinians can provide the manpower that is lacking in Israeli technology companies. For that to happen, it is necessary to foster an atmosphere and an environment that will facilitate study and training for young Palestinians, so that they will supply this need for themselves and for the Palestinian economy." The World Bank has initiated a project in this area for training young people with a technological education.
The World Bank is one of the main funders of infrastructure projects in the Gaza Strip: energy, water desalination, sewage, and more. "We don’t work with the regime in the Gaza Strip," says Shankar, "but with the Palestinian Authority government. We have excellent ties with government ministries in Israel - Finance, Foreign Affairs, Energy, Water and others. These ties are especially necessary for us, and important for Israel. The confidence they have in us helps Israel a great deal to accept these projects, even though Hamas rules there."
What else is at risk? For example, an eight-year solar energy project with the cooperation of the US, and another power plant, fueled by gas.
On ensuring that the World Bank's money goes where it is intended, Shankar says, "The World Bank's money is strictly controlled. We don't transfer money to governments, but to special accounts opened for specific projects, bit by bit, according to the rate of progress, and the supervision is tight." In other words, if the security situation turns the wheel backwards and delays the projects, the flow of money to the Gaza Strip will stop until the wagon gets rolling again.
The events of the past few days put into question the renewal of US and other international aid to the Gaza Strip and the Palestinian Authority. US aid, which President Trump cut, is meant to be renewed, but the Biden administration has set conditions, the main one being calm.
A US administration official told "Globes" that the escalation harmed the restoration of aid and the renewal of negotiations. "It is clear that Hamas is trying to torpedo any negotiations," he said.
He described disputes in Washington between those who want to erase Trump's legacy almost entirely, to restore aid fully and return to negotiations along the lines set out by Obama, and those who want to take advantage of the changes that the policy of the past few years has brought about and to extract the Palestinians from their political fixation, as he put it.
The official explained that the decision to grant UNWRA $150 million at this stage was a compromise between the two camps. In 2016-2017, before aid was frozen, the US gave UNWRA $300-370 million annually. It was mainly the EU that covered the deficit caused by Washington turning off the tap.
US Secretary of State Antony Blinken more than hinted at the approach in his announcement of the restoration of aid. He said that the US would work towards reform of UNWRA to improve its efficiency and adapt it to US interests and values and ensure that the partnership with UNWRA would promote neutrality, responsibility, and transparency.
Following studies that found a tendency to extremism in UNWRA's educational materials, the US Congress is promoting legislation aimed at removing anti-Semitism and incitement from the educational program of UNWRA and the Palestinian Authority. Democrat congressman Brad Sherman who introduced the bill said, "it is necessary for Congress to request additional reports from the State Department to ensure US taxpayer dollars promote dignity and tolerance, and that the educational materials such schools employ do not incite hatred."
The EU parliament too is unhappy with UNWRA's educational curriculum. Two weeks ago, the parliament approved a resolution demanding that such materials should be removed immediately and stating that EU aid would be made conditional on educational content that promoted peace and tolerance.
Published by Globes, Israel business news - en.globes.co.il - on May 12, 2021
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