Skip to main content

its military slaughtering peaceful Palestinian protesters.

By Dr. Leif Rosenberger
Chief Economist ACERTAS

On Friday 30 March thousands of long suffering Palestinians were peacefully protesting in Gaza. Israeli soldiers over-reacted to the peaceful protests with deadly violence. At least 17 Palestinians were killed and more than 1,400 were injured. And when the UN Security Council simply tried to criticize this horrifying over-reaction to protests, the US government blocked it. Think about how far American foreign policy has deteriorated. Not long ago retired US General John Allen was working as President Obama’s envoy and bending over backwards to be an honest broker for peace between Israel and the Palestinians. And now we have US Ambassador to the UN Nikki Haley turning a blind eye to a violent Israeli military over-reaction to peaceful Palestinian protesters. Policy advice to Donald Trump: Stop condoning Israeli bad behavior.

Not surprisingly, the failing Israeli government showed no remorse for its military slaughtering peaceful Palestinian protesters. That’s because Mr. Netanyahu has brained-washed too many Israelis into believing brute force and economic coercion are the only ways to treat Palestinians. But as the recent attack on peaceful Palestinian protesters has shown, Israel keeps winning battles but ending up with strategic failure. Instead, the Israeli government should use this strategic moment to rethink Israel’s economic coercion in Gaza. Regardless whether Israel ends up with a one state or a two-state solution, Israeli strategists will never achieve sustainable strategic success in their own country until they understand the strategic importance of social inclusion and shared prosperity with the Palestinians.


It’s important to understand that there is nothing new about Israeli economic coercion and violence against the Palestinians. In fact, since the turn of the century, Israel has progressively clamped down on the Gaza economy, allowing fewer and fewer goods, people and money to enter and leave.

After Hamas won the election in June 2007, Israel did everything it could to weaken this new democracy. Israel tightened its restrictions in Gaza and moved to halt the flow of all but the most basic humanitarian supplies. Businesses in what was a commercial and industrial hub folded at an alarming rate. 98% of Gaza industry was shut down, 40,000 farmers and 70,000 workers lost jobs due to Israeli economic squeeze. Israel’s long-running closure of Gaza starved companies of raw materials. Israel robbed businesses of a chance to ship goods abroad. Even small bakeries closed because of a lack of electricity.

Three-Week War

This economic coercion increased the demand for violence by setting the stage for the 3-Week Gaza War (27 December 2008-17 January 2009). 1,440 Palestinians were killed while 13 Israelis died. The war forced over 40,000 people to flee to UN shelters. The main university, mosques & most government buildings were attacked. Even the most basic infrastructure required for private sector activity lay in ruins. The results were nothing short of catastrophic.

There was particular worry about long-term damage to infrastructure. Power, water and sewage networks were all hit in the bombing raids. Five out of 10 electricity lines from Israel were damaged. Gaza’s only power station was closed due lack of fuel. Damage to the water and sewage systems triggered another crisis. Lack of drinking water was pervasive and raw sewage spilled into neighborhoods and fields.

With Israel barring the flow of all but basic humanitarian supplies, all promises of aid from Arab and western governments and private donations were impossible to translate into reconstruction on the ground. In addition, rebuilding homes and fixing Gaza’s broken infrastructure depended on Israel’s willingness to let in cement, bricks and machinery. Israel was adamant that it would not allow in such supplies. Israel feared a speedy reconstruction of the war-ravaged strip would benefit Hamas and enhance its legitimacy.

Financial Crisis

In addition, Israel blocked money coming into Gaza for two months. Payment of salaries to workers faced insurmountable obstacles. Long lines formed at banks and at cash machines, and people were hoarding what cash they could get hold of, as the liquidity crisis grew. In early December 2008 things went from bad to worse. Banks inside the Gaza Strip were forced to shut down because of a shortage of cash.

In a November 2008 letter, the Palestinian Monetary Authority warned the Israeli central bank that Gaza-based banks were facing “severe liquidity problems” and at the time had seen their cash reserves dwindle to a total of 47m shekels ($12m). The letter warned of a “huge contagious effect to the whole banking system in Palestine” if the request for the transfer of 185m shekels was not met.

The financial situation kept deteriorating. In early December 2008 customers reportedly stormed a bank branch in a town in southern Gaza after the bank ran out of cash. Fearing similar outbreaks of violence elsewhere and in light of the pervasive lack of notes and coins, almost all banks and cash machines in Gaza closed.

International organizations pleaded with Israeli authorities to allow the transfer of cash into Gaza as a priority. The cash crisis prevented payment of December salaries to tens of thousands of Palestinians in Gaza employed by the Palestinian Authority. To make matters worse, the lack of cash affected the work of international organizations. The United Nations Relief and Works Agency, which supplies aid to one in two Palestinians in Gaza, was forced to suspend cash distribution to 94,000 Palestinians.

This Israeli financial squeeze antagonized many Palestinians who once gave Israel the benefit of the doubt. The financial squeeze therefore played right into the hands of hardline Hamas recruiters and propagandists – who used the squeeze to “justify” their missile strikes.

Fifty-Day War

The 50 Day Gaza War (8 July 2014-26 August 2014) was even more destructive than the 3 Week War back in late December 2008/January 2009. In the 50 Day War, 2,205 Palestinians died and it appears that over half the Palestinian deaths were civilians. Israel lost 71 young soldiers, but for what gain? By any yardstick, the kill ratio was disproportionate.

Clausewitz reminds us that the first, the supreme, the most far-reaching act of judgment that a statesman and commander has to make is to establish . . . the kind of war on which they are embarking; neither mistaking it for, nor trying to turn it into, something that is alien to its nature.” He also stresses the relationship between political objectives and military objectives in war.

So what kind of war was Israel fighting? The Israeli government viewed these wars against Hamas as narrow military campaigns against a conventional military enemy. So Israel aimed to destroy as many Hamas targets as possible and reduce Hamas military capability to launch more Hamas rocket attacks in the future. In this way, Israeli leaders argued that they were protecting the Israeli people from Hamas terrorism. However, in essence Israel was only addressing the supply side of war. It focused on destroying weapons. Hamas rocket attacks on Israelis show that replacing old rockets with new ones can occur almost overnight. At best, this narrow operational approach to war can only bring temporary gains.

In addition, the Israelis targeted Hamas “terrorists” wherever they could find them. Inevitably this meant killing a handful of Hamas terrorists living amongst a multitude of Palestinian civilians. That accounts for why over half the deaths in the 50 Day war were Palestinian civilians. This toll in civilian casualties tends to turn their family members and friends into anti-Israeli Hamas “terrorists.” Instead of changing tactics, the Israelis double-down and become determined to bomb all these “new terrorists.” This vicious circle of new terrorists produces an almost permanent state of conflict against the Palestinian people rather than Hamas. After a while, the Israelis desensitize themselves and wrongly dismiss the deaths as “collateral damage.” Their thinking was short-sighted, ill-advised and conceptually flawed.

Why is the Israeli economic and military coercion a counter-productive strategy toward Hamas? While it’s always dangerous to over-generalize, Hamas certainly has its share of “true believers.” These true believers feel they do not fit into their societies. They quickly become frustrated and feel they deserve far better. Israeli coercion often fails because it feeds this Hamas frustration and confirms their very sense that they deserve better.

At best, Israeli launched wars can sometimes control Hamas, but violence will never eliminate Hamas. If the extremist ideas of Hamas are to wane, they will do so only at the hands of more attractive ideas, which the current Israeli leadership seems temperamentally incapable of creating. Thus it appears that Israel doesn’t focus enough on how to shape a web of economic integration and shared prosperity into durable peace and security for all concerned. It logically follows that Israeli leaders have a one dimensional view of economics. It fears Hamas economic power will invariably generate military power to reach military goals. In a similar way the Israeli government sees Hamas as a terrorist group that will never change its tactics. Therefore, the Israelis make no attempt to use serious diplomacy to address Hamas resentment or reduce the Hamas demand for counter-violence.

Finally, Israel dismisses the importance of the information war. No attempt is made to win hearts and minds. Not surprisingly, therefore, Israel lost this all important information war. It is difficult to exaggerate the damage to Israel’s reputation. The international community increasingly sees Israel’s war as more a war on the Palestinians in Gaza rather than a campaign against Hamas.

Damage and Reconstruction

The scale of the Israeli military assault was huge. With over 2,000 Israeli air strikes and daily pounding from land and sea, destruction in Gaza was significant. The losses to Gaza’s farming sector alone totaled $450m, and 350 businesses in Gaza were destroyed or damaged. Gaza’s sole power plant was also damaged three times in Israeli air strikes as were water tanks and wells and other infrastructure. 17,000 houses, mostly in northern and eastern regions near Israel, have been destroyed and half a million people displaced. Mosques, schools & police stations, the finance, education, interior, foreign, justice, public works, labor & culture ministries, the parliament and every public building of significance were damaged or destroyed.

Understandably, therefore, the 50 Day Gaza War in July/August 2014 once more focused the world’s attention on Gaza’s shattered economy. So in October 2014 the international community met in Cairo for the third time in five years to fund the rebuilding of Gaza. Back in 2009 the cost of fixing the damage and rebuilding Gaza was estimated at $1.3 billion. This time the cost of fixing the damage and rebuilding Gaza turned out to be over three times as big.

The Palestinians were initially seeking $4bn from the Gulf States, Europe and other countries to clear away rubble, rebuild destroyed buildings and infrastructure, and provide short-term assistance to Gaza’s 1.8m people affected by Israel’s 50-day summer offensive. But when all was said and done, the international donors pledged $5.4bn to help rebuild Gaza. Qatar pledged $1bn in aid to the Palestinians, Kuwait, Turkey and UAE each donated $200m. The US offered a further $212m.

Unfortunately, pledges of support are not enough. The promised reconstruction aid needs to be delivered. And that has not happened for a number of reasons. For starters, the Israelis show no sign of significantly ending the economic embargo. Even if that could somehow happen, the Palestinians cannot speak or act with a single voice.

Back in June 2014, the Hamas-backed government in Gaza was dissolved and a unified Palestinian Authority (PA) was created under the leadership of Palestinian President Mahmoud Abbas. The international community reached a consensus that Abbas was empowered to lead reconstruction in Gaza and make sure building materials were not diverted to make tunnels. Unfortunately, due to infighting between Hamas and Abbas’ Fatah party, Abbas has proven to be unwilling or unable to govern in Gaza. As a result, the money promised for reconstruction in Gaza has not been delivered.

But first things first. Donors are demanding that Israel (and Egypt) lift their blockade on trade and movement into and out of Gaza as a precondition for any future reconstruction plan. Donors want Gaza’s borders with Israel and Egypt opened, and travel and trade restored between Gaza and the West Bank. The Israeli blockade stunts Gaza’s economy by severing its natural trade routes, leaving most of its 1.8m population dependent on aid. Gaza’s few exporters cannot sell goods such as furniture or flowers in Israel or the West Bank – their natural market – because Israeli authorities prohibit this for security reasons, so goods must be sent overseas by ship or air.

Economic recovery in Gaza will simply not be possible without lifting restrictions on movement of goods and people, reopening trade with the West Bank, Israel and beyond, and repairing and rehabilitating damaged social and economic infrastructure. Therefore, there can be no security for Israel without socio-economic development for Palestinians and without respect for fundamental rights and freedoms. Even before the 50 day war started last month, Palestinian and foreign officials warned of a worsening humanitarian crisis in Gaza, with electricity and drinkable water in short supply. In a report published in 2012, UNRWA said that Gaza’s population would grow by another half million people by 2020, and its electricity, water and sanitation would struggle to keep pace. Gaza’s threadbare utility companies say they have been unable to undertake large investments in new facilities because of the Israeli import restrictions.

International aid to the power sector, for example, has focused on shipment of emergency fuel rather than investment in new capacity. Efforts to rehabilitate Gaza’s precarious water and waste system have also focused on emergency stopgap measures rather than investment in new plants because the approval process for construction materials takes so long.

Israeli Response

What has been the Israeli response? Have the Israelis relaxed their restrictions? To be fair, there have been glimmers of hope. The rebuilding of Gaza has begun. Israel has lifted the ban on construction materials. Israel has allowed trucks carrying construction materials to enter the Gaza Strip for the 1st time in a year, marking the start of a massive rebuilding task following its war with Hamas this summer.

While the Palestinians were happy to see Israel start to relax restrictions in order to rebuild Gaza, the Palestinians were frustrated with the slow pace of US sponsored direct negotiations with Israel on both the political and economic fronts. Confident that support from the UN and the rest of the international community is on the rise, the Palestinians opted to join the International Criminal Court (ICC) in the Hague. In retaliation for the Palestinians joining the ICC, Israel temporarily stopped paying the Palestinians the tax revenues it collects on their behalf (which covers most of the Palestinian Authority’s wage bill). For about two months, teachers, police officers and tens of thousands of other employees only received about 60% of their pay.

Finally, on 27 March 2015 Israel’s government said it would release tax revenues it had been withholding since January to punish the Palestinians for their decision to join the ICC. The government of Benjamin Netanyahu, said it made the decision on the recommendation of military and security officials. In a prepared statement, Israeli Prime Minister Netanyahu said, “Given the deteriorating situation in the Middle East, one must act responsibly and with due consideration alongside a determined struggle against extremist elements.” In short, there is another glimmer of hope that Mr. Netanyahu may be starting to see the connection between Palestinian frustration and Israeli security.

This paper has asked the following questions: Does Israeli coercion work? Do Israeli operational military actions get Hamas to cave in and surrender? Does it make Hamas submissive? Does it win over the Palestinians in Gaza? The answer is no. Hamas will not become more submissive and less violent and Israeli tactics do not win over the Palestinian people. The reason is simple. Hamas gets its political legitimacy from the Palestinians in Gaza by satisfying their socio-economic needs. While Israel has a legitimate right to curb the buildup of a Hamas weapons arsenal, destroying Gaza’s economy has caused Israel to further lose the war for the hearts and minds of the Palestinians in Gaza and many countries and populations around the world, and has strengthened Hamas as the protector of Palestinian people in Gaza. That said, Hamas and Fatah must also reconcile their differences and allow the donors to deliver reconstruction funds.

Advice to Washington

The US government should focus more directly on Israeli economic coercion of the Palestinian people and less on Israeli operational victories over Hamas. Senior US leaders should use key leadership engagement opportunities to speak out in both their private diplomacy with Israel as well as their public diplomacy. The real friends of Israel need to argue that Israeli actions are not only morally wrong, but they are increasingly turning other nations and peoples against Israel. These coercive actions are therefore counterproductive and result in a permanent state of strategic failure for Israel.

One thing is certain. Both sides to the conflict – Israelis and Palestinians – have to emerge with something that makes them willing to give peace a chance. The Israelis need reasons to believe that Gaza will no longer be used as a base for rocket or tunnel attacks on their country. The Palestinians need relief from the blockade that is imposed on Gaza by both Israel and Egypt. Any deal should be based around the idea of trading demilitarization of Gaza in return for an easing of the blockade, combined with the rebuilding of vital infrastructure.

The Israeli-Palestinian issue is a key confrontation that impacts directly into a critical strategic environment, thus it is important to discuss and debate it in President Trump’s policy circles. The UN could play a larger role in postwar Gaza. The roles that the two sides envisage for the UN seem very different – with Hamas emphasizing infrastructure projects and Mr. Lieberman seeing a larger role in governance and security. The question of whether Israel, in particular, has committed war crimes revolves around the issue of whether its military took all “feasible precautions to minimize harm to civilians” and whether the Israelis used “disproportionate” force in pursuing their military objectives.

The Vision of Jean Monnet

Given all the hatred and mistrust on both sides, negotiating a Palestinian/Israel deal – and then getting it to stick – will be extremely difficult. How can mutual hatred and mistrust be reduced? Perhaps lessons from history can help. A good example of the strategic vision that is needed in Gaza appeared after World War II when Jean Monnet called for a European Coal and Steel Community. The Realists ridiculed Monnet for being hopelessly naïve and idealistic. Didn’t Monnet know that France and Germany hated each other and had fought each other for centuries?

But Monnet correctly argued that an alternative future was possible. If given a chance, French and German businessmen would bond. What was needed was a strategic vision and unwavering moral courage to execute a viable economic strategy and concrete economic plans for regional economic integration. Shared prosperity would outweigh security concerns. Before long, French and German businessmen would reduce the demand for violence. And as France and Germany began to see mutual economic benefit, they turned from enemies into friends.

Like Jean Monnet, “Breaking the Impasse” is a group of Israeli and Palestinian business leaders who press their respective political leaders to use shared prosperity to foster peace in Gaza. It was initially put on hold because of emotions inflamed by the 50 day war. As a small first step, US strategic leaders should encourage Israeli and Palestinian businessmen to give “Breaking the Impasse” another chance to foster peace and stability.


In conclusion, Israel’s political right wing says Donald Trump’s surprising victory in the US Presidential election allows Israel to “reset and rethink everything” in regards to its conflict against the Palestinians. If so, why not rethink Israel’s economic coercion in Gaza?

Economic recovery in Gaza will simply not be possible without lifting restrictions on movement of goods and people, reopening trade with the West Bank, Israel and beyond, and repairing and rehabilitating damaged social and economic infrastructure. There can be no security for Israel without socio-economic development for Palestinians and without respect for fundamental rights and freedoms.

Real friends of Israel need to argue that Israeli actions are not only morally wrong, but they are increasingly turning other nations and peoples against Israel. These coercive actions are therefore counterproductive and result in a permanent state of strategic failure for Israel.

This Israeli coercive mindset against the Palestinians is self-defeating. The harsh socio-economic conditions which Israel has created in Gaza are now an incubator for violent extremism. Israeli coercion plays into the hands of Hamas. Palestinians needlessly see Hamas as freedom fighters and champions of Palestinian economic rights.

Instead of offering the Palestinians a worse alternative than Hamas, Israel needs to offer the Palestinians a better economic alternative. Israel needs to learn that there can be no durable security for its people without shared prosperity between Israelis and Palestinians. Israel needs to lift the economic blockade to help reconstruction in Gaza. But even if that happened, Palestinian infighting between Fatah and Hamas prevents the subsequent delivery of reconstruction money inside Gaza. Therefore, Gaza reconstruction cannot happen until there’s Hamas-Fatah reconciliation as well.

Toward this end, US strategists need to persuade their counterparts to support groups and initiatives such as “Break the Impasse,” a group of Israeli and Palestinian businessmen who want to work together to turn enemies into friends. One thing is certain. Both sides to the conflict – Israelis and Palestinians – have to emerge with something that makes them willing to give peace a chance.

Photo courtesy of Richard Ashurst