The economics of the Gaza blockade

Here's an article on Jnews on how Israel uses the Gaza blockade to benefit its economy by exploiting the captive Gazan market.  The article is based on a little publicised Wilikeaks document titled, "Shin Bet Talks Gaza Economics" written by David R. Burnett, Economic Counselor in the US embassy in Tel Aviv:

It describes a briefing given to Embassy officials by senior members of the Israeli Shin Bet*, on how Israel uses the banking system in Gaza to increase the political influence of the Palestinian Authority (PA) in Gaza, by attempting to starve the Hamas government of cash.

The Shin Bet informed the US embassy that banks in Gaza know that they must neither allow Hamas members to open bank accounts nor have salaries deposited into existing accounts. If the banks disobey, they will lose their stamp of approval from the Palestinian Monetary Authority (PMA), a branch of the PA that is under constant pressure by Israel and the US to prevent any dealings with Hamas members. The Shin Bet expressed satisfaction that the Gaza banking system has indeed been cowed into submission.

Meanwhile, the PA is allowed to continue to pay wages to its employees in the Gaza Strip, thus creating a privileged class in Gaza with reliable income as long as they do not cooperate with the Hamas de-facto government.

Ok, Israel prefers collaborators to resistance. Not much new there except the co-option of the Gaza banks. But here are some interesting stats, albeit provided by Shin Bet:

According to the leaked cable, Gaza’s de-facto Hamas government spends an estimated budget of US$290 million annually, on a population of approximately 1.5 million residents.

The PA’s budget is four times bigger, at approximately US$1.24 billion in 2010. The PAprovides services to about 2.4 million residents in the West Bank, as well as covering some of the costs of certain services for Gaza’s residents.

The Shin Bet estimates that Hamas uses US$40 million (13.8% of its budget) for military and security needs, and invests the remainder in administration and civilian projects.

Israel, by comparison, ran a budget of US$96 billion in 2010 (for a population of 7.6 million), and spent 18.6% of it on military and security purposes - so that, ironically, even according to Shin Bet estimates, Israel spends proportionately more on its military than Hamas spends.

But what about the currency situation?

The report further elaborates that the circulation of Israeli Shekels (NIS) in Gaza is increasing, while foreign currency supplies are dwindling. This is clearly a direct result of thealmost total ban on exports from Gaza (although Gazan merchants may still import certain products) – yet the Shin Bet kept silent regarding the reason for the shortage in foreign currency.

One wonders why Israeli officials feel more threatened by, say, vegetable exports from the Gaza Strip than by imports of materials into Gaza. What possible security justification can there be to keep Gazans from earning their living by exporting products?

The Shin Bet’s argument – and that of the Israeli government – seems to be that Israel should keep Gaza’s standard of living low, because Hamas somehow gains popularity when Palestinians are able to make a decent living.

However, the Shin Bet did acknowledge in their briefing that Israel’s policy is to maintain the predominance of the Israeli currency in the occupied Palestinian territory (oPt). This admission can perhaps shed light on another, undeclared reason for the ban on exports.

This document demonstrates that the Israeli government is in fact strangling the Gazan economy in order to turn Gaza into a captive market for Israeli products and maintain demand for the Israeli shekel – all in the name of “fighting terrorism.” It also demonstrates that the international community – and especially the US – have allowed this policy to continue.

So there we have it. The most powerful state on the planet and the state to which Palestinians are encouraged to look for the fulfilment of their aspirations is colluding with Israel so that Israel can make a few shekels at the expense of Gaza's 1.5 million people.

Still the news in from Egypt suggests that change may be on the way....