Israel holds Palestinian economy captive, say analysts
The Gaza war is speeding up Israel’s “annexation” of the Palestinian economy, say analysts, who argue it has been hobbled for decades by agreements that followed the Oslo peace accords.
While the Israel-Hamas war raging since Oct 7 has devastated swathes of Gaza, it has also hit the public finances and wider economy of the Israeli-occupied West Bank.
Israel is tightening the noose on the Palestinian Authority, which rules parts of the West Bank, by withholding tax revenues it collects on its behalf, economist Adel Samara said.
Palestinian livelihoods have also been hurt by bans on labourers crossing into Israel, and by a sharp downturn in tourism in the violence-plagued territory, including a quiet Christmas season in Bethlehem.
Samara said that “technically speaking, there is no Palestinian economy under Israeli occupation — our economy has been effectively annexed by Israel’s”.
The Palestinian economy is largely governed by the 1994 Paris Protocol, which granted sole control over the territories’ borders to Israel, and with it the right to collect import duties and value-added tax for the Palestinian Authority.
Israel has repeatedly leveraged this power to deprive the authority of much-needed revenues.
But the Gaza war has further tightened Israel’s grip, Samara said, with the bulk of customs duties withheld since Gaza’s rulers Hamas sparked the war with their Oct 7 attack on Israel.
Palestinian Prime Minister Mohammed Mustafa bemoaned an “unprecedented financial crisis” during which his government’s deficit had soared to US$7 billion, more than a third of the territories’ gross domestic product according to the latest budgetary figures.
The Paris Protocol, like the 1993 and 1995 Oslo agreements they were signed under, were meant to
be in effect for five years, until the creation of a Palestinian state.
But the absence of a long-term peace deal means it is still governing nearly all aspects of the Palestinian economy.
Investment is also being stifled by the protocol, said Samara, who
explained that Israel “controls the land, resources and water sources” of the Palestinian territories.
Arab American University economics professor Nasr Abdel Kareem said “historically, previous uprisings broke out” when times
were not tough economically, adding that ultimately Palestinians want a state as much as a healthy economy.
“Palestinians want to live with dignity, but for them this also implies liberation and the establishment of a Palestinian state.”