Israel’s economic war on occupied West Bank

Palestinian teenagers were enjoying themselves on trampolines and hoops in a large tent on the outskirts of Ramallah, the financial hub of the occupied West Bank.

However, the school faced financial challenges when it came to purchasing the tent from Europe and trampolines from Asia.

Mohamad Rabah, the director of the Palestinian Circus School, explained the difficulties they faced in making international payments, which could cause delays of up to a month for equipment delivery.

Banking in the Palestinian territories is complex, with the Palestinian Authority (PA) facing obstacles due to concerns over terror financing, which affects transactions.

Israel has been occupying the West Bank since 1967, with economic ties that allow two Israeli banks to serve as correspondent banks in the Palestinian territory.

However, there is a possibility of a change if Israel’s far-right Finance Minister Bezalel Smotrich follows through on threats to cut off a vital banking route next month.

Since the Gaza war was triggered by Hamas’s attack on October 7, Israel has imposed economic sanctions on the PA, withholding tax revenues that it collects on behalf of the PA.

Smotrich recently redirected $35 million in PA tax revenues to families of victims of terrorism, a move that drew condemnation from the United States.

Following the recognition of Palestinian statehood by three European countries in May, Smotrich informed Prime Minister Benjamin Netanyahu that he would no longer protect banks transferring funds after June.

Israel’s Bank Hapoalim and Israel Discount Bank are in need of protection, which expires on July 1, to avoid sanctions for dealings with Palestinian lenders.

When contacted by AFP, Israel’s central bank and finance ministry declined to comment.

– ‘Humanitarian crisis’ –

The banking channel used for West Bank imports, including essential goods like water, fuel, and food, processes $8 billion annually.

Palestinian businesses receive nearly $1.7 billion annually for exports, as reported by the Palestine Monetary Authority.

Feras Milhem, the governor of the PMA, expressed concerns about the impact of the potential banking route cut to the West Bank economy, as it is heavily reliant on the Israeli economy due to border control by Israel and the collection of import duties and value-added tax by the PA.

Various factors such as bans on laborers entering Israel and a decline in tourism have also affected Palestinian livelihoods, including a quiet Christmas season in Bethlehem.

The United States has urged Israel to improve the situation, warning that severing the banking route would have severe consequences for the West Bank economy.

Western governments are worried that Israel’s economic policies could destabilize the West Bank, potentially leading to the collapse of the PA.

A European diplomatic source in Jerusalem, speaking on condition of anonymity, stated that the financial crisis could cause the collapse of the PA before August.

– Digital currency –

Palestinian businessmen have reported a significant decrease in their income since October 7.

Imad Rabah, a plastics company owner, noted a 50% decrease in net income in one year, while arak producer Nakhleh Jubran reported a 30% drop in his liquor business over the same period.

Jubran described the situation as a “traditional war in Gaza” combined with an “economic war in the West Bank.”

Musa Shamieh, a women’s wear company owner, believes that Israeli policies are aimed at forcing Palestinians to leave the West Bank by making it difficult to conduct business.

These harsh economic policies from Israel may prompt Palestinian policymakers to consider significant changes to the monetary system in the future.

Feras Milhem suggested developing a backup plan for trade relations in case of disruptions, while Yousef Daoud, a professor at Birzeit University, highlighted the possibility of transitioning from the shekel to a digital currency as a solution.

Daoud emphasized the importance of finding alternative solutions to reduce reliance on the shekel in the Palestinian territories.

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