Economy in Gaza edges toward crisis

By Steven Erlanger and Isabel Kershner (International Herald Tribune)

JERUSALEM: In the month since Hamas took over Gaza, routing Fatah forces there, the economy of the territory is slipping again toward crisis. With the main commercial crossing into Israel closed since June 12, only essential items of food and medicine are entering Gaza, and what is left of the commercial sector is shutting down.

On Monday, the UN agency responsible for caring for the nearly 70 percent of Gazans who are refugees or their descendants announced that it had halted all its building projects in the territory because it had run out of basic construction supplies, like cement.

The halt, to about $93 million of projects employing 121,000 people, includes new schools, water works, health centers and sewage-treatment plants, a major issue in Gaza, where the old temporary sewage reservoirs have already once broken their banks, said the agency, the United Nations Relief and Works Agency, or Unrwa.

Agency officials say they are rapidly running down their reserves of food and other supplies.

Regular Gaza factories and businesses, already hit hard by intra-Palestinian violence, are running out of materials they need to operate - and to provide jobs. A report last week by Gisha, an Israeli advocacy group, said that up to 75 percent of the 3,900 factories operating in Gaza on the eve of the closure of the Karni crossing have had to cease production, according to the Palestinian Federation of Industry.

Unable to import raw materials or export finished products, the factory closures are forcing as many as 30,000 more families to rely on aid to survive.

Ali al-Hayak, director of the Palestinian Federation of Industry, said that "Israel is not punishing the government; instead it is punishing the people."

At the heart of the issue is Hamas, the militant Islamic group classified as a terrorist organization by Israel, the United States and the European Union. They do not want to work with Hamas or see Hamas succeed in Gaza, and they are not in any hurry to reopen the Karni crossing to anything but emergency supplies.

That is also true of the Fatah leadership in Ramallah, where the Palestinian president, Mahmoud Abbas, whose Presidential Guards used to control the Karni checkpoint, is not eager to ease Hamas's problems.

It appears to some Israeli officials and Western diplomats that Fatah is continuing its efforts to squeeze Hamas by keeping Karni shut - just as Egypt has agreed with Israel to keep the Rafah crossing closed to limit the movement of individuals and money in and out of Gaza.

Some think that Abbas would rather see Karni stay shut for now.

"That is my understanding," said Representative Steven Israel, Democrat of New York, who recently spent time with Palestinian leaders in Ramallah, including the new prime minister, Salam Fayyad, and with Israeli leaders like Defense Minister Ehud Barak. He quoted one senior Israeli official who told him, "Let's see how Hamas feeds its children now."

So the anti-Hamas camp is grappling with a problem: opening Karni and Rafah, which could help revive the expiring economy of Gaza, could also help to strengthen Hamas and its chances of succeeding in Gaza.

All say they do not want ordinary Gazans to be punished for their leaders, but only Hamas seems eager to reopen Karni. Israel says it will work with the Palestinians once they organize themselves and come up with an internal solution. But there are those both in Israel and in Fatah who prefer to see Hamas try to cope with the pressures of its victory without helping a group that sees itself at war with both of them.

At the height of the fighting, Israel closed down Karni, the main cargo crossing on the Gaza-Israel border and the only one equipped for commercial imports and exports. The Palestinian Authority's Presidential Guards, who had previously secured the Palestinian side of the crossing and who are loyal to Hamas's rival, Fatah, fled their posts.

With them vanished the Israeli-Palestinian agreements for running the crossing, which had been designed to address Israel's deep-seated security concerns.

"We woke up one morning and found Hamas gunmen in ski masks on the other side," said Mark Regev, a spokesman for the Israeli Foreign Ministry.

Abbas has ordered his forces in Gaza, including the police, to stay at home, and what's left of Gaza's tiny industrial base is on the verge of collapse. Of the 1.5 million Palestinians who live in the impoverished Gaza enclave, 1.1 million already rely on food handouts, according to international aid officials, and they are concerned that the numbers will grow.

"It was the dynamic of poverty that took us to where we are in the first place," said John Ging, director of operations of the United Nations Relief and Works Agency.

Both Ging and Regev say they are waiting for the Palestinians to come up with some kind of internal agreement on how to administer the Palestinian side of the crossings in a way that will meet Israeli security requirements.

"There has been no decision in Israel to keep the crossings closed on political grounds," Regev said.

Yet when it comes to Karni, there seems to be a general ambivalence and little sense of urgency in either Jerusalem or Ramallah, the administrative capital of the West Bank, where Abbas has appointed an emergency government with no Hamas ministers.

"We need to differentiate between punishing the people of Gaza and weakening Hamas," said Nimr Hamad, an Abbas political adviser. "We don't want the people to suffer."

But when it comes to practical solutions for reopening Karni, Hamad refers the problem back to Israel. "The moment Israel is ready to discuss the issue we will see what solutions are possible," he said.

In a statement on Monday about the crossings, Hamas said: "The leadership of the Palestinian Authority tries to take advantage of the people's suffering to achieve political goals."

There are people in Israel who oppose reopening Karni, according to Shlomo Dror, spokesman for the Coordinator of Activities in the Territories, the Israeli military agency that deals with Palestinian civil affairs. "We are now discussing what constitutes humanitarian assistance," he said. "Some people feel we should be allowing in water, electricity, and that's it."

As for the mood of the U.S. Congress, which had earlier been asked to provide millions to help the Presidential Guard with training and to rebuild the Palestinian side of Karni, Israel, the U.S. representative, said, "There is no appetite to fund Karni, no interest there."

Congress does support helping Abbas and Fayyad in the West Bank, Representative Israel said, adding, "Everyone agrees that Fayyad is our last, best hope."

The Israeli military moved quickly in conjunction with international aid organizations to allow the passage of medicines and staples into Gaza, mostly through smaller, secondary crossings like Sufa and Kerem Shalom, in order to stave off a looming crisis of hunger and public health.

A UN report covering the week of June 25 to July 1 found that the emergency imports into Gaza had met 70 percent of the minimum food needs of the population there.

But Ging warns that at current levels, the assistance is a stopgap solution.

Since Karni is the only crossing equipped to handle containers, the process of bringing in tons of products through smaller crossings, where everything has to be transferred from Israeli trucks to Palestinian trucks, is painstakingly slow and expensive.

So far, Ging's organization has been drawing on its large reserves in Gaza to supplement the aid. But in less than six weeks, he says, "the stocks will be running out and we will start getting into big trouble."