Analysts say Israel controls Palestinian economy

Jerusalem:

Analysts say the war in Gaza is accelerating Israel’s “annexation” of the Palestinian economy, arguing that Israel has been hampered for decades by agreements struck after the Oslo peace accords.
The war between Israel and Hamas that has wreaked havoc on large swaths of Gaza since October 7 has also dealt a blow to the public finances and wider economy of the Israeli-occupied West Bank.

Israel is tightening its grip on the Palestinian Authority, which rules parts of the West Bank, by withholding tax revenues it collects on its behalf, economist Adel Samara told AFP.

Palestinian livelihoods have also been affected by a ban on labor entering Israel and a sharp decline in tourism in the violence-prone region, including a Christmas quiet in Bethlehem.

“Technically, the Palestinian economy does not exist under Israeli occupation – our economy has effectively been annexed by Israel,” Samara said.

The Palestinian economy is largely governed by the 1994 Paris Protocol, which gives Israel sole control of the territory’s borders and the power to levy import duties and value-added tax from the Palestinian Authority.

Israel has repeatedly used this power to deprive the authorities of much-needed revenue.

But Samara said the war in Gaza has further tightened Israel’s control, with most tariffs being withheld since Gaza’s ruler Hamas launched the war on Oct. 7 with an attack on Israel.

“Without these funds, the Palestinian Authority would have difficulty paying civil servants’ salaries and operating expenses,” said Taher Rabadi, a researcher at the French Institute for the Study of the Near East.

It was reported that approximately $115 million was transferred from Israel to the Palestinian Authority in February after Norway reached an agreement with the Palestinian Authority to lift part of the tax freeze.

Nearly all Palestinian workers are also barred from entering Israel to work, driving up unemployment in the region.

Palestinian Prime Minister Mohammed Mustafa bemoaned an “unprecedented financial crisis” during which the Palestinian government’s deficit soared to $7 billion, accounting for 10% of the territory’s gross domestic product (GDP), according to the latest budget figures more than one-third of the total.

“Collective punishment”

The Paris Protocol, like the Oslo Accords signed in 1993 and 1995, is valid for five years until the Palestinian state is established.

But the lack of a long-term peace deal means it still dominates nearly every aspect of the Palestinian economy.

The deal also discourages investment, Samara said, explaining that Israel “controls the land, resources and water sources of the Palestinian territories.”

He said Israeli authorization must be obtained before any factories or shops that would use these resources could be built in the West Bank.

He said Israel’s stance had hardened under far-right Security Minister Itamar Ben Gvir and Finance Minister Bezaleh Smotrich, both West Bank settlers.

Critics accuse them of blackmailing Prime Minister Benjamin Netanyahu by threatening to withdraw support that gives him a slim majority in his ruling party.

Israeli political analyst Michael Milstein agrees.

“By not allowing Palestinian workers to enter Israel and withholding Palestinian taxes, Ben Gvir and Smotrich aim to overthrow the Palestinian Authority, which they view as their enemy,” he said.

“This is a way of collectively punishing the Palestinians, who they also view as their enemies.”

Milshtein said that according to Israeli data, before October 7, nearly one-third of the income in the West Bank came from the income of the 193,000 Palestinians working in Israel.

Today, he said, the number of Palestinians working in Israel has dropped to 8,000 to 9,000.

“Live with dignity”

But Mirshtein also pointed to another view in Israel, one held by centrist minister Benny Gantz and conservative lawmaker Gideon Sa’ar.

They want to allow workers to return to Israel to avoid anger sparking an uprising in the West Bank at a time when Israeli forces are already deployed between Gaza and the Lebanese border, where they are fighting Iran-backed Hezbollah.

Mirshstein said he believed Netanyahu might be closer to Gantz’s views.

Nasr Abdul Karim, an economics professor at the Arab American University in the West Bank, believes the Israeli prime minister is playing a power game.

“Netanyahu is putting pressure on the Palestinians and sending a signal to the authorities that the levers of the Palestinian economy are in (Israeli’s) hands,” he said.

“Netanyahu believes that when a peace deal finally has to be hammered out, he will weaken the authorities and make them accept political concessions,” he said.

Nasr said the strategy could be misguided because it is based on the premise that allowing the Palestinian economy to thrive will automatically bring peace to the West Bank.

“Historically, previous intifadas have erupted at times when the economy was not in difficulty,” he said, adding that ultimately Palestinians want a state as much as they want a healthy economy.

“Palestinians want to live with dignity, but for them it also means liberation and the establishment of a Palestinian state.”

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)