BICOM Strategic Assessment: Israeli-Palestinian economic relations

Key Points

• The Palestinian economy is stuttering in the West Bank, and is in a dire condition in the Gaza Strip. In both cases, whilst the causes are inseparable from the political conflict with Israel, they also relate to internal Palestinian political challenges and the role of third parties.

• Many Israeli officials recognise that improving the Gaza Strip and West Bank economies will reduce the chances of violence. Israel has recently taken steps to improve the situation, and there is support from the IDF for major infrastructure projects to transform the Gaza Strip.

• However, cooperation and development are hampered by complex factors including:

  • The security threat posed to Israel by Hamas;
  • The political division and rivalry between the Palestinian Authority (PA) and Hamas;
  • The resistance of Egypt to any steps which might help Hamas;
  • International concerns not to grant legitimacy to Hamas and thereby undermine the PA;
  • Tensions between Israel and the PA exacerbated by recent Palestinian violence and the PA’s policy of confronting Israel in international fora;
  • Political resistance on the Israeli right;
  • The deal to re-establish ties between Israel and Turkey, linked to Turkish demands to open up Gaza;
    Shortfalls in donor aid.

• Improving the Palestinian economy is a shared Israeli-Palestinian interest, and much can be done even in the absence of a broader shared political horizon. However, major changes require international support, which must come with a recognition of the complex factors involved.

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