Israeli Security vs. Palestinian Economy

By Jamil Salman

Following 17 years of failure under the Oslo regime and 2 years of stalemate since the last round of peace discussions (Annapolis), this week saw the commencement of renewed peace talks in Washington under the watchful gaze of American diplomats.

Depending on what you read or hear, the talks seem to offer both a glimmer of hope and no abundance of pessimism. With a one year deadline having been publicly announced as a timeframe on agreeing a final peace settlement, the talks have reportedly already stalled around the issue of Israeli settlements. This in itself is not surprising considering that both sides would, reluctantly, need to accept hard compromises if any agreement is to be reached. This holds especially true for Israel, who will need to allow for various concessions when addressing the issue of rebuilding Palestinian economic structures that have been largely eroded by Israeli dominance during the Oslo era.

Recently, Iranian President Mahmoud Ahmadinejad criticised the peace talks as being “death” and elaborated that “the fate of the Palestinian people will be determined on the ground in Palestine not in Washington, not in Paris and not in London.” From an economic perspective this much is certain. A piece of paper drafted in Washington will not end several years’ worth of economic oppression by the occupiers. We have been through this before with the landmark signing of the Oslo Agreement which, in economic terms, was meant to represent the cornerstone in Israeli-Palestinian mutual relations, with a view to enhancing, comprehensive and lasting peace. Ironically, Netanyahu, who is representing Israeli interests in the peace talks, has long been an opponent of the Oslo Accords. Unfortunately, whilst Oslo itself contained many deficiencies, it is also true that the Accords where never given a proper chance to be fully implemented either politically or economically.

Various research groups (AIX Group; to name one) have claimed that there is an urgent need for a new-agreed upon structure based on a more sovereign trade regime, access to wider markets and efficient trading borders. Yet the problem lies in the harsh reality that not only did Oslo offer Palestinians few makeshift provisions regarding full control over their economic sectors; but on a more practical level, Israeli Security and the Palestinian economy are two concerns which are impossible to disentangle when evaluating the prospects of a suitable economic environment. The World Bank supports this assertion and makes it abundantly clear that security reasons have been largely responsible for the disappointing results in Palestinian trade (Country Economic Memorandum 2006).

How then, will these ongoing Middle East peace talks practically address security arrangements which have led to, amongst many things, violations of Article III (13) and (14) of the Paris Protocol (the Israeli-Palestinian economic framework arising out of the Oslo Accords). The former relates to a guarantee that shipments at the Israeli points of exit and entry from both Israel and Palestine are to be treated equally; while the latter infringement is a denial of Palestine’s right to execute full customs control at the Palestinian customs points of entry from Jordan and the Gaza Strip. Add to this the fact that one of the economic triumphs of the Oslo Agreement, the Joint Economic Committee, a collaboration initiative between Israel and Palestine on various economic issues, last met to discuss economic policy on the eve of the second intifada. Almost a decade has passed and the committee, which was meant to be a reflection of the cooperation between two adversaries, has now become an afterthought in the face of Israeli security fears.

The main concern here is that Israel approaches trading issues from a position of power. Invariably this has meant that the Palestinian Authority (PA) does not control a single import border, so traders are obligated to adhere to and utilize Israeli rules and procedures. Thus the dilemma Palestinians face at the moment is twofold. On the one hand, their desire to gain access to a wider market is impeded by high costs attributed to operating through Israeli channels. On the other hand, to even reach the abovementioned stage, traders have to first overcome the challenge of transporting goods within the West Bank and Gaza. Consider then that simple transit journeys, such as from Ramallah to Jerusalem, which would normally take 1 hour to pass through border clearances, could take up to 3-4 hours on a bad day. This entails dealing with, hundreds of Israeli roadblocks, random checkpoints, closures and a growing number of settlements within the territories which isolates one city from the other. These barriers all take place under the guise of security measures and have now become the modus operandi of the internal movement of goods. Palestinians wishing to ship or transport goods have to go through procedures known as back-to-back operations whereby Palestinian goods are unloaded at Israeli posts and then re-loaded onto Israeli registered trucks. Such operations are a security enforcement aimed at limiting the access of Palestinians into Israel due to safety precautions.

Inevitably, these precautions have created tremendous uncertainty amongst shippers, who in their commercial dealings are required to take into consideration the burden of extra costs from abiding by Israeli procedures, as well as the improbability of following through on delivery times. This means that Palestinian traders can never adequately predict exact delivery times of shipments, nor whether they will actually end up arriving at all (World Bank Statistics reveal that import and export points of entry are open for 7-9 hours daily, 5 days a week; an uncharacteristically small window of opportunity for shipments).

Israeli security was unequivocally the defining feature of the PA’s economy during the Oslo period. Unfortunately, this feature culminated in the Al-Aqsa Intifada (Second Intifada). In an effort to crack down on Palestinian violence during this period, Israel initiated security arrangements the likes of which had never before been experienced; these arrangements included halting labour flows, major closures and even curfews in certain cities. Evidently one of the major repercussions of the Intifada was the Israeli Government’s decision to construct the separation wall barrier between themselves and the West Bank; adding further strain on Palestinian traders who had to deal with the ensuing complex logistics. All in all, the United Nations Conference on Trade and Development (UNCTAD) has calculated that since the beginning of the second Intifada, Palestine has lost a potential income of $6.3 billion from diminished trading routes and internal closures. This is an astounding figure considering these calculations had taken place only 4 years (2004) following the outbreak of war.

Today, the impact of security measures, while not at its highest levels, still presents a significant challenge to Palestinian economic prosperity. It is difficult to imagine that an agreement on the above issues will be reached within a year’s time; especially when one considers that economic development is not at the forefront of current negotiations. Issues such as the status of Jerusalem, refugees, Israeli Settlements and the resolution of borders take precedent in the eyes of both state officials as well as the Palestinian people. They are symbols of the oppression Palestinians have suffered for countless decades. Yet there needs to be an eye kept towards the future. Are we really that much better off for having an independent Palestine with a defunct economy?

A balance has to be struck wherein despite Israeli security concerns, Palestinian traders can rely on the principle of "mutual respect of each other’s economic interests” as a building block towards formulating a healthy and commercial Palestine.

– Jamil Salman is an Advocate in training (Corporate/Commercial) in Amman, Jordan and has obtained his L.L.B and L.L.M from the United Kingdom. He contributed this article to

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