Analysis: Economic Building Blocks in Palestine

Council on Foreign Relations

September 6, 2007
Prepared by: Lee Hudson Teslik

Tony Blair, in an interview about his new role as special envoy for the Middle East peace process, called himself a “wild-eyed optimist.” But Blair’s words at September 4 meetings with Israel’s Prime Minister Ehud Olmert betrayed a less heady perspective. Representing the diplomatic Quartet—the European Union, United Nations, United States, and Russia—the former British prime minister called for “practical steps” toward reconciliation, pointing specifically to the need to develop the fledgling economies (JPost) of the Palestinian territories. He and Olmert examined efforts to bring direct investment to the West Bank and stave off economic collapse in the Gaza Strip, all while preventing incoming funds from aiding Hamas.

The push comes at an urgent moment. Gaza’s already-faltering economy fell into a tailspin in June 2007 as the international community levied harsh sanctions following the breakdown of the Palestinian Authority’s unity government and Hamas’ seizure of power in the Gaza Strip. Some fear Gaza may collapse completely. United Nations officials recently issued a stiff warning (IHT) that the territory risks becoming totally dependent on foreign aid unless Israel and other countries loosen restrictions on incoming supplies. The BBC notes sweeping factory closures in Gaza since Israel clamped down on border crossings: All six hundred of Gaza’s garment factories and almost 90 percent of its construction industry factories have shut down, unable to import raw materials. This 2006 Backgrounder looks at the breakdown of international aid going to Gaza and the West Bank, and the impact of aid retractions on the Palestinian Authority budget.

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