Israel has almost absolute control over all aspects and components of the West Bank economy and possesses quick and effective tools of control that enable it to change the living conditions of thousands of Palestinians within a matter of days, which has put the Palestinians in a state of constant anticipation, fear of the future, and financial insecurity, with a deep sense that their living standards and incomes are linked to the political situation.
How did we reach this reality of economic dependence and subordination?
After the 1967 “setback,” a strategic debate took place in Israeli decision-making centers between the then Ministers of Defense and Labor, Moshe Dayan and Yigal Allon. The latter proposed annexing the West Bank and joining it to Jordan, while Dayan pushed for economically annexing the West Bank to Israel, a vision that prevailed over time and became a reality.
Under this vision, the occupation worked systematically – and through a comprehensive and complex system of violent, soft, economic and financial policies and tools – to undermine the foundations of the Palestinian self-sufficiency and production economy and to re-engineer the economy and thus society to be directed to serve the occupation economy and attached to it. The Oslo Accords and their annexes came to consolidate this dependency and strengthen the structures of power and domination in favor of Israel.
With the decline of the Al-Aqsa Intifada and based on basic concepts formulated by the former Israeli Prime Minister, Ariel Sharon, before he suffered a stroke, and completed by Ehud Olmert, who assumed the presidency of the Israeli government, the occupation worked on designing a plan to melt awareness and produce the “new Palestinian” in the West Bank. This plan consists of a security-military axis, a geographical-settlement axis, and an economic axis, which is what concerns us here.
In the economic axis The plan directed at the West Bank aimed to deepen the dependence of the economy and employ it to serve the economy of the occupation and the settlements, while creating an imaginary bubble of somewhat comfortable lifestyles and standards, while the keys to it remain in the hands of the occupation, which allows it to directly, quickly and effectively influence the living standards of the majority of Palestinians according to the principle of the carrot and stick. As a result of all this, a distorted, fragile and largely dependent economic reality emerged. It is characterized by the following:
1- Control of natural and basic resources
- Israel controls the security and civil affairs of Area C, which represents about two-thirds of the West Bank, and systematically prevents urban development and growth there by refusing building permits or expanding master plans, in addition to the continuous demolition of homes and facilities. These areas contain about two-thirds of the groundwater and the main agricultural basket, not to mention that the continued Israeli control over them makes Areas A and B like isolated islands swimming in the ocean of C.
- 100% of the oil and about 87% of the electricity consumed in the West Bank comes from the occupation.
- Israel controls about 80% of the water reserves in the West Bank and prevents Palestinians from digging or deepening wells or transferring water between communities and governorates, creating a reality of water injustice. The average Palestinian consumption is one-third of the average consumption in Israel and the settlements, and the rate drops to one-tenth in communities not connected to water networks, at about 26 liters per person per day, which is equivalent to the average consumption in areas classified as “disaster” globally.
Israel controls the Dead Sea, which is rich in natural resources, and prevents Palestinians from benefiting from it, and its policies threaten to dry it up.
- Two-thirds of Palestinians are deprived of daily running water, half of them receive running water less than 10 days a month, and 92% of them are forced to store water in tanks on the roofs of their homes. As a result of this reality, Palestinians were forced to purchase a third of their water consumption from the Israeli company “Mekorot” at high prices in 2022.
- Israel has complete control over international communications ports, the electromagnetic field (frequency spectrum), the telephone numbering plan and access lines in Area C, and the import of related equipment. It prevents Palestinians from obtaining 4G services in the West Bank and 3G services in Gaza, and the infrastructure of these sectors is completely attached to the Israeli infrastructure.
- Israel controls the Dead Sea, which is rich in natural resources, and prevents Palestinians from benefiting from it. Its policies also threaten to dry it up. It extracts from it strategic potassium and bromine, which are used in extractive, chemical, construction, communications, textile, oil drilling, water sterilization, and medicine industries.
2- Dependence of production and consumption
Through a combination of violent destruction, siege, isolation and free market policies, the occupation has succeeded in undermining the foundations of the Palestinian industrial and agricultural productive economy, tearing apart internal supply chains, fragmenting the internal link between the various local sectors and establishments and linking them separately with Israeli supply chains, so that industry does not depend on agriculture, and production inputs, tools and agricultural equipment do not depend on local industry, and the Palestinian consumer’s dependence on local products is eroded.
In general, policies and measures aim to prevent the Palestinian economic sectors from forming an integrated economic unit and appearing as scattered and fragile economic activities. The economy has witnessed a continuous decline in terms of the contribution of the industrial and agricultural sectors to the gross domestic product and the weakness of generating added value from industry.
Thus the West Bank turned into the following:
- A back market for the products of the occupation and settlements and dependent on them, Imports from the occupation amounted to about 62.4% of total imports, worth $4.4 billion during 2023.
- A production workshop aimed at providing intermediate, final and consumer goods to the Israeli market.The value of Palestinian exports to Israel amounts to about $1.3 billion in 2023, equivalent to 86% of total exports.
- A reserve human reservoir that provides the occupation with cheap labor on demand.as it employed about 200,000 Palestinians before November 2023, and their total monthly wages reached about 1.5 billion shekels ($414.6 million), which is equivalent to one and a half times the Palestinian government’s budget allocated for wages and the like.
3- Control of foreign trade and taxes
- Under the Paris Economic Agreement signed in May 1994, the framework governing the customs relationship between Israel and the Palestinian Authority is the “customs union” model, with the elimination of all economic obstacles and borders between the two parties, which deepened the reality of inequality and dependency and gave Israel the tools of complete control over borders, crossings and foreign trade. Under the agreement, Israel collects import and value-added taxes on behalf of the Palestinians and transfers them back after deducting 3% as an administrative commission for it.
- The agreement allows Israel to unilaterally change the tax regimes imposed on imported goods, and thus control the protectionist policies of its products in its market and in the Palestinian market.
- With regard to value added tax, Israel transfers the money it collects for goods or services sold in Israel and intended for consumption in the occupied territories according to a monthly accounting system.
- Israel often resorts to withholding tax money owed to the Palestinians, which constitutes two-thirds of the Palestinian Authority’s total revenue, for purposes of extortion or political punishment.
- Israel controls the granting of trade permits to Palestinians, the length of time imported goods remain in ports, and the time and mechanism for their delivery.
The West Bank has become a back market for the products of the occupation and settlements, a production workshop aimed at providing intermediate, final and consumer goods to the Israeli market, and a reserve human reservoir that provides the occupation with cheap labor power.
4- Monetary and financial control
The decline in the productive sectors was accompanied by the growth of the service and commercial sectors, which facilitated the internal migration of Palestinians from the outskirts of the West Bank and its countryside to city centers in search of jobs and contributed to the formation of a financial bubble that the occupation has easy and effective tools to explode at any time.
These tools include:
- The Palestinians are deprived of issuing their own national currency. Most daily cash transactions are based on and most wages and salaries are recorded in the Israeli shekel, which is issued by the Bank of Israel (the central bank), which controls the financial and monetary policies that are reflected in the economic indicators in the West Bank with negative and compounding effects, as a result of the weakness and fragility of the local economy and the decline in production capacity and the average monthly income compared to the occupation.
Through this reality, the effects of inflation and the high cost of living are seeping into the West Bank in a way that is not commensurate with the slow improvement in wage rates.
The occupation restricts the freedom of the Palestinian banking system by preventing it from carrying out international transactions without going through a licensed banking intermediary.
- The occupation restricts the freedom of the Palestinian banking system by preventing it from carrying out international transactions without passing through a licensed banking intermediary, and Israeli banks receive commissions for intermediary services, which strengthens Israeli control over the Palestinian banking system, deprives it of a package of development options, hinders its progress, growth, and openness to foreign markets, and raises the cost of managing and exchanging hard currencies.
- This reality has turned the Palestinian market into a backyard dump for the surplus shekel currency, such that Israel resorts to refusing to receive the surplus from Palestinian banks to control their cash liquidity rates, and has deprived the Palestinians of designing their own monetary and financial policies to combat inflation and promote development and investment.
Thus, the Oslo Accords and its annexes contributed to providing a legal framework to consolidate this economic reality in all its details, noting that it is a temporary agreement for a transitional period of 5 years (1994-1999), during which the Palestinian Authority will work to build its readiness and institutions to assume the remaining powers and responsibilities, including security and civil control over Area C.
Because of the imbalance in the power structure between Israel and the Authority, the temporary formula has become permanent, and with Israel’s continued liberation from the minimum conditions of Oslo, it seems that it is no longer an agreement between two parties and has turned into a one-way tool used by the stronger party to shackle the Palestinians’ political and economic ambitions and impede real development.
