The 2005 Agreement on Movement and Access marked the end of Israel’s military presence at the Rafah Crossing on the border between Egypt and the Gaza Strip, yet allowed Israel to maintain substantial control over the terminal. This control was exercised via Israel’s continued control of the Palestinian population registry, which determines who may travel through Rafah, the ability to monitor individuals traveling through the crossing, and the power to decide when and if to close Rafah. The crossing operated routinely as per the Agreement on Movement and Access until June 2006. The circumstances that led to the end of this arrangement are detailed in a report published by Gisha and Physicians for Human Rights-Israel in 2009, entitled “Rafah Crossing: Who Holds the Keys?” The report also presents our position on the responsibility of each of the parties – Israel, Egypt, the Palestinian Authority, Hamas and external players – as a result of their influence on the ability to open the crossing.

In June 2010, Israel intercepted the Mavi Marmara, a ship headed for Gaza, resulting in the deaths of nine passengers and international condemnation. In the wake of that incident, Egypt opened Rafah Crossing for regular travel. The crossing was opened outside the context of the Agreement on Movement and Access and for limited categories of travelers including foreign nationals; Palestinians seeking medical treatment in Egypt; Palestinians with foreign citizenship, residency status, or a visa to a third country; students wishing to study abroad and individuals receiving special travel coordination from the Egyptian authorities. Between June 2010 and the end of May 2011, a monthly average of 15,700 passengers traveled through Rafah in both directions, representing some 40% of the monthly average in the beginning of 2006, before implementation of the Agreement on Movement and Access was halted¹.  In late May 2011, Egypt announced that Rafah Crossing would be opened for travel to all Gaza residents who hold a Palestinian ID card and passport, with the exception of males aged 18 to 40, whose travel would be subject to certain conditions. Between June and August 2011, the monthly average of travelers through Rafah increased to some 27,700. However, the Egyptian-imposed cap on the number of individuals who can exit Gaza per day has resulted in waiting periods of weeks.

The Agreement on Movement and Access prohibited the import of goods from Egypt to the Gaza Strip through Rafah, and although it permitted export of goods through the crossing, arrangements allowing for export were never made. Egypt still does not allow the transport of goods through Rafah, with the exception of humanitarian aid, subject to its discretion.

As has been the case since Rafah Crossing first opened, travel through it is subject to registration in the Israeli-approved Palestinian population registry. As such, Israel continues to have some, if significantly reduced, control over Rafah Crossing. Its continued influence over the crossing is also a result of cooperation with Egypt on security matters. Egypt continues to consider Israel as holding governmental powers in the Palestinian territory, in part due to the peace treaty between the two countries which stipulates that the international border between Israel and Egypt in the northern part of the Sinai desert is the border between Egypt and the Gaza Strip².

Movement of people and goods between Egypt and the Gaza Strip by land also takes place through underground tunnels on the Egypt – Gaza border. The tunnels are not new, but before June 2007, they were primarily used for smuggling contraband such as weapons and narcotics. When Israel began restricting the passage of civilian goods into the Gaza Strip in June 2007, commercial trade via the tunnels increased and began to include many consumer goods and industrial products whose transfer Israel bans through land crossings. The tunnels now serve as the primary route for transporting fuel and building materials, which are restricted for import into Gaza by Israel³.  The tunnels are also used for transporting cigarettes from Egypt, which are cheaper than the ones brought from Israel, as well as weapons, cash and narcotics. Israel occasionally bombs the tunnels from the air⁴.  The tunnels do not provide a dependable or satisfactory trade route, yet the transporting of civilian goods through them has allowed the government in Gaza to determine tax rates (which are different from the ones set by Israel) for goods such as fuel, cigarettes and building materials, as explained below.

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1. Press Release, Gisha, Gisha response to Egyptian announcement on the opening of Rafah Crossing: There is still a need to permit passage of people and goods between Gaza and the West Bank,( May 26, 2011).
2. Peace Treaty Between Israel and Egypt, March 26, 1979, 1138 U.N.T.S. 59, Article 2, according to which: “The permanent boundary between Egypt and Israel is the recognized international boundary between Egypt and the former mandated territory of Palestine, as shown on the map at Annex II, without prejudice to the issue of the status of the Gaza Strip.”
3. Based on visits to the area, telephone conversations and personal interviews with tunnel operators in the Gaza Strip (February 2011). See also, Gisha, Reconstructing the closure – Will recent changes to the closure policy be enough to build in Gaza? (Dec. 2010), (hereinafter: Gisha, Reconstructing the closure).
4. See for example, IDF Spokesperson press release, IAF Strikes Gaza Tunnel in Response to Rocket Fire (Feb. 2, 2011).

Israel continues to control taxation in the Gaza Strip, which forms part of a single customs envelope along with Israel and the West Bank. This means that Israel sets the customs and Value Added Tax rates collected for goods and in so doing influences product prices as well as Palestinian fiscal policy. To illustrate: a merchant in Gaza who purchases clothes from an Israeli manufacturer pays VAT at a rate determined by Israel, and Israel is responsible for transferring this amount to the Palestinian Authority. If the merchandise is imported, Israel sets and collects the customs for it and is responsible for transferring the amount to the Palestinian Authority. The VAT and customs rates set by Israel then affect the price the consumer pays for clothes in Gaza.

Israel continues to collect VAT and customs on behalf of the Palestinian Authority and has the power to decide whether or not to transfer this revenue. As such, Israel controls the Palestinian Authority’s ability to use this revenue to fund public services in the West Bank and Gaza Strip, such as electricity, health care, public service salaries, etc¹.

The exception to the rule whereby Israel controls the collection of taxes and hence the services provided to the Palestinian public is the taxes collected by Hamas on goods entering Gaza from Egypt through the underground tunnels. The volume of goods transferred via the tunnels significantly increased since Israel began restricting the entry of civilian goods to the Gaza Strip in 2007. The government in Gaza collects taxes for some of these goods, such as cigarettes, fuel, and occasionally building materials. For example, the Hamas regime in Gaza sets the tax rate for fuel transported through the tunnels and collects it from the merchants who import the fuel to Gaza from Egypt. In this way, the regime in Gaza influences local fuel prices, which are significantly cheaper than those in Israel or the West Bank. Having some goods transported into Gaza via tunnels rather than the Israeli-controlled crossings and the collection of taxes on these goods allow the government in Gaza to reduce its dependence on Israel for setting tax rates for these goods and for funding public services.

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Scale of Control: The project »
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1. See e.g., GISHA, DISENGAGED OCCUPIERS, supra note 1, p. 56, which provides details of the impact of Israel’s nonpayment of tax revenues to the Palestinian Authority from March 2006 until June 2007, a period in which Hamas presided in the Palestinian Authority along with Fatah and other parties. A similar measure was taken in May 2011, when Hamas and Fatah announced a reconciliation agreement. See: Israel Suspends Cash to Palestinians after Hamas Deal, BBC News (May 1, 2011).

Israeli Prime Minister Benjamin Netanyahu’s speech last week at the United Nations highlighted once again the centrality of the Gaza Strip to any understanding of the conflict between Israelis and Palestinians. It is impossible to discuss the impasse currently facing the peace process without addressing the Gaza Strip and, in particular, Israel’s “disengagement” from the Strip. Netanyahu expressed a position shared by many Israelis, who see in the Gaza Strip a nightmare scenario of what is liable to happen if Israel leaves the West Bank, and particularly if it does so without an agreement. We left Gaza, Netanyahu declared, and the radicals gained strength.

However, developments in Gaza in recent years would seem to impart a different lesson – one that Netanyahu failed to mention in his speech. Netanyahu linked between Israel’s “disengagement” and the strengthening of Hamas, but that is not where Israel’s policy towards Gaza ended. The closure policy that soon followed, and which is still in effect, has been the subject of growing criticism by Israeli journalists, commentators and researchers who have argued that rather than fulfilling its explicit objective of weakening Hamas, the policy has actually achieved the opposite outcome.

In a previous post, we presented a collection of comments from the past year supporting this conclusion. Additional commentators and public figures have since added their voices to this growing chorus. In the past, Ofer Shelah (Hebrew), Amos Harel and Dan Margalit (Hebrew) have called for the removal of the closure. Dr. Zvi Bar’el, a senior commentator for Ha’aretz, has been arguing this position for several years. Barel urged an end to the closure, arguing that it is not only ineffective, but also damaging to Israel’s foreign relations. The Institute for National Security Studies also published a position paper suggesting that Israel should negotiate with Turkey to permit the entry of ships to the Gaza Strip after security inspection.

While the closure is ineffective, the easings announced by Israel in 2010 have proven beneficial. As Danny Rubinstein demonstrated in an article in Calcalist, the easings have had a significant impact on Hamas rule in the Strip. Rubinstein argues that the closure actually improves Hamas’ standing, since the organization relies heavily on taxes and levies raised on the smuggling of imports through the tunnels along the border at Rafah. Accordingly, the easing struck a blow at one of the organization’s main sources of income. Rubinstein bases his assessment, in part, on a report by the Peres Center for Peace. The report finds that Hamas has leveraged trade restrictions imposed by Israel in order to secure economic benefits. As a result, the movement’s annual budget rose from $40 million in 2006 to approximately $500 million in 2010. A report published by UNRWA on the same day shows that the closure has helped strengthen the public sector in the Gaza Strip, which is controlled by Hamas, while at the same time leading to the collapse of the private sector.

Ironically, Prime Minister Netanyahu himself made this point cogently in an interview with Ayala Hasson on July 2, 2010 (Hebrew). “I think that the civilian closure will damage the security closure”, Netanyahu commented. “Instead of strengthening our position and our demands of Hamas, it has actually begun to erode our moral superiority”.

Netanyahu also claimed in the interview that Israel had removed the civilian closure imposed on the Gaza Strip. However, the easings do not entail the complete removal of the closure. Israel continues to prevent movement of people and goods from the Gaza Strip. This policy has exacteda heavy toll: over seventy percent of the residents of the Gaza Strip received humanitarian assistance and the unemployment rate is 25.6 percent.

Maybe the time has come to stop seeing the Gaza Strip as Israel’s doomsday scenario. The time has certainly come to stop regarding the situation in Gaza as an immutable fact. The closure imposed on the Gaza Strip has remained in place since 2007. During this period, the civilian economy in Gaza has collapsed, and Palestinians living in the Strip have been denied the right to visit their families, study or engage in commerce in the West Bank. To date, the closure has not helped stop the firing of rockets, bring back Gilad Shalit, or cause the downfall of the Hamas regime– objectives cited by the Israeli government to justify the closure. Instead, Israeli soldiers have found themselves discussing how many rolls of toilet paper should be allowed into the Gaza Strip, or confiscating smuggled tobacco. Clearly, Israel does not bear sole responsibility for the fate of the Gaza Strip, however, it can play its part by removing the civilian closure. It’s time to allow Gaza to be a different kind of example, for Israelis and Palestinians alike.

The Rafah border crossing opened last June, following the flotilla incident, after being closed for nearly four years. However, it was closed again in late January, until further notice, due to security concerns in the Sinai Peninsula. While Egypt and the Hamas government administer the border crossing by way of ad-hoc agreements, Israel also exerts partial control of the crossing through its control of the Palestinian population registry (in other words, Palestinians who wish to cross must be listed in the registry administered by Israel). Israel also exercises control through joint security arrangements with Egypt. According to reports in the Palestinian media, approximately 4,000 people are waiting in the Sinai Peninsula for the crossing to re-open so that they can return to Gaza. A number of Palestinian residents of Gaza were also being held at the airport in Cairo, since, according to Egyptian protocol, they can not leave the airport except to go directly to the Rafah border crossing, and this requires a police escort. Other residents of Gaza worldwide are also waiting to return home.

On the Gaza side of the crossing, 300-500 people in need of medical attention are waiting to exit the Strip in order to receive treatment.

Students who returned to Gaza for the vacation cannot return to their schools. Among them is Ahmad, a medical student studying in Egypt. He hesitantly agreed to return home after five years during which he had avoided making the trip, fearing that once in Gaza, he would not be permitted to return to his studies. His worst fears have now come true and he is missing out on his studies while waiting to leave: “We never could have imagined that the source of our problems in returning this time would be instability in Egypt”, he said. The exit of students through the Erez crossing, which is controlled by Israel, is limited to those with a scholarship for study in a “Western” country. So exit through Rafah is Ahmad’s and many other students’ only option. If the opening of Rafah last June indicated a partial solution to the movement restrictions faced by students seeking to study abroad, recent events show how easily this freedom can be undermined.

Petrol station in Gaza. Photo: Mohammed Azaiza, Gisha

Events in Egypt have also led to a rise in the cost of fuel and construction materials in the Strip as a result of a drop in activity in the tunnels and shortages in supply on the Egyptian side. Last week, the price of cement rose by more than 30%, while the price of gravel increased by about 20%. The rising fuel costs were checked following the government’s decision to set a fixed maximum rate, but shortages continue. Since Israel imposed restrictions on the transfer of these goods in 2007 (claiming that this would “weaken” the Hamas rule), the trade in fuel and construction materials has operated through the tunnels, where the Hamas government levies taxes on it. As events calm down in Egypt, tunnel activity is resuming.

Recent events in Egypt illustrate how the closure of Gaza and the dependence it creates on the border with Egypt make freedom of movement in Gaza as vulnerable as a leaf blowing in the wind.

]]> http://www.gazagateway.org/2011/02/meanwhile-in-gaza/feed/ 2 http://www.gazagateway.org/2011/02/a-different-kind-of-power-struggle/ http://www.gazagateway.org/2011/02/a-different-kind-of-power-struggle/#comments Thu, 03 Feb 2011 08:46:02 +0000 admin http://www.gazagateway.org/?p=1882 Continue reading →]]> Those following the weekly charts on Gaza Gateway might have been surprised to discover that the amount of industrial diesel transferred from Israel to the Gaza Strip has been nil for some weeks now. The fuel, needed to operate Gaza’s power plant, is usually transferred via the Kerem Shalom crossing, though lately, you would only find its low grade cousin, regular diesel, coming in through the tunnels in the Rafah area in the southern Gaza Strip, from Egypt and via coordination with the Gaza government, which collects taxes on it. The change of transfer point did not occur overnight but rather as a result of a, by now, three-year policy on the part of Israel and recently given a stamp of approval by the Turkel Commission, to reduce the transfer of industrial diesel to Gaza. The change also came about as a result of a funding dispute between the Palestinian Authority in the West Bank and the government in Gaza which caused suppliers to seek out more cost efficient methods to supply the fuel.

The transfer of diesel through the tunnels reduces the electricity shortage in Gaza but does not resolve the problem. The power plant still needs industrial diesel, which is mixed with regular diesel coming from Egypt in order to reduce the amount of sulfur emitted from the production process. In these new circumstances, power outages have shortened but still occur for an average of six hours a day, posing hardship for Gaza residents. True to today, the plant is producing about 60 MW of energy, while the total electricity deficit in the Strip stands at 80 MW.

As far as underground economies go, the Egyptian channel is not reliable. Last week there was a drop in transfer of goods from Egypt due to recent events there, casting doubt on the stability of the diesel supply to the Gaza power plant. When the tunnels are operating, the government in Gaza coordinates the transfer of fuel and collects taxes on it (NIS 0.60 per liter of diesel that costs the merchants bringing it in less than one shekel). Based on these figures one can only wonder about the conclusion of the Turkel Commission, which legitimized Israel’s restriction on diesel transferred to the power plant, stating that these restrictions were an instrument to promote Israel’s military objective of harming “Hamas’s capacity, including its military capacity, to continue attacking Israel”.

In late July, the Tawjihi post-high school exam results were announced to the dread or delight of Gaza’s 36,594 exiting high school seniors. Over the summer vacation, these youngsters are making plans for their future like young people elsewhere. Will they attend one of Gaza’s five universities, which don’t offer badly needed degrees in environmental science, medical engineering, veterinary medicine and occupational therapy? Or will they seek to travel abroad, since travel to West Bank universities remains banned? Will they join the ranks of Gaza’s 34% unemployed, or seek work elsewhere, perhaps underground?

Photo: Karl Schembri/Oxfam

In July, following the Israeli Cabinet decision to “ease” the closure, only 4% of the goods entering Gaza were raw materials destined for production, and of course, export remains banned. Under these conditions, it’s clear that the market couldn’t have suddenly bounced back and that not all is good and well.

The youth of Gaza continue to wait for the promised, renewed “economic activity” and hope for opportunities to begin building tomorrow’s future. A new resort or restaurant built from tunnel money can’t possibly employ them all.

The means: Economic warfare: “The transfer of goods into the Gaza Strip will be restricted“. 

Implementation: Erasing the customs code ascribed to the Gaza Strip from the computer system of the Israeli Customs Administration and forbidding the import of any goods that are not defined as “humanitarian”.

The significance: Gaza is closed to the import of goods. Theoretically, goods exempt from customs (such as goods from the West Bank and Israel) could be imported, but in practice Israel does not allow the transfer of goods that are not humanitarian.

Consequences: The business sector that existed in Gaza on the eve of the closure in 2007 is precluded from importing raw materials and commercial goods, and the Palestinian Authority cannot collect on the taxes that would be imposed on these goods. Not to mention that 1.5 million people are suffering from a punishing closure, which severely limits their access to goods and to employment options.

And meanwhile in Gaza: The emergence of a “parallel market” in the form of approximately 1,200 tunnels, through which more than 4,300 kinds of items are imported (as opposed to the few dozen items which Israel allows in). Recently, the Hamas government took another step to institutionalize the tunnel economy when it decided to impose official taxes on some of the goods transferred through the tunnels, in addition to the taxes already imposed on those who apply for licenses to dig and operate tunnels.

Indeed, despite indications that the Hamas government is facing a cash flow problem and has even confiscated money, the public service sector in Gaza is now estimated to employ and provide a source of income for 30,000 workers and an estimated 180,000 family members who are sustained, among other things, by the taxes that the government collects in Gaza, including from the tunnel industry. And thus a new business class has emerged in Gaza, fast becoming wealthy from the tunnel economy.

So who, then, is Israel actually weakening?

Indeed, the tunnels industry at the Gaza-Egypt border has become “one of the largest branches of Gaza’s economy”, if not the largest. Yet the industry’s success is directly linked to Israel’s closure policy, which allows for the passage of “humanitarian goods” only (“humanitarian goods” are yet to be defined). Ironically, this new economy is proving most profitable for the Hamas government, which oversees tunnel mining and operations, and which collects taxes from tunnel owners.  The hundreds of tunnels operating today in Gaza and the thousands of people employed in them account for about two-thirds of the goods entering Gaza.

Although there are a few making big bucks off of the tunnel trade, in contrast, most residents of the Gaza Strip face a grim reality. The industry, by its very nature, is a testament to this. Many young people are forced, because they have no alternative employment options, to work in the tunnels and sometimes remain working underground for days on end. Since the start of the closure, approximately 110 people have been killed on the job, among them 30 children. The total number of people wounded due to tunnel related incidents such as suffocation and entrapment as a result of explosions, air strikes and collapses stands at approximately 190.

A clip produced by B’Tselem endeavors to illustrate, if only a little, this reality.

Source: B’tselem

Perhaps the Israeli business sector understands something that Israeli politicians simply don’t comprehend – that the Palestinian economy in Gaza, which has collapsed due the 27-month-long closure imposed by Israel, has changed beyond recognition: hundreds of tunnels are currently operational in the Strip (between 600 and 1,000) and thousands of people are risking their lives to work in them. These tunnels are supplying about two-thirds of the goods required by the residents of the Gaza Strip. Thousands of dollars in permit fees and millions of dollars in taxes are being collected by the Hamas government. 

While in Israel they are saying that the last Gaza war gave Israel an economic boost, in Gaza, besides the other kinds of damage sustained, thousands of people who chose to invest in operating the tunnels blown up by Israel have sustained a financial loss.

Israeli security officials view the tunnels as a security threat, due to the concern that arms will be smuggled through them, and this is the reason given for their destruction. Palestinian traders would also prefer to avoid the high costs of transporting goods via the tunnels and resume overland trade, via the border crossings that have remained closed now for over two years.