Israel’s embrace of the paradigm of shrinking the conflict—interpreted by the Israeli government as taking steps to improve Palestinian quality of life and strengthen the Palestinian Authority, but without embarking on a political process or appearing to veer into the political lane—has plenty of detractors. Much of the criticism is centered around two primary drawbacks: one, the notion that you can develop a treatment for a political conflict that avoids anything that touches on the political dimensions of that conflict, and two, that the steps Israel is taking do not go nearly far enough to improve Palestinians’ situation and that there is far more that Israel can do. I agree with both of these critiques to varying degrees, and I think that any policy that actually seeks to shrink the conflict must grapple with them both.
But there is another problem with shrinking the conflict even on its own terms in the way that it is unfolding. The Israeli government is proud of the steps they have taken that contrast with the previous government, whose policies toward the Palestinians veered between inertia and actively inflaming tensions, and there has unquestionably been progress. From ministerial-level meetings, to increased worker permits in the West Bank and Gaza, to cancellation and suspension of settlement plans in the most sensitive areas, to loans preventing the collapse of the PA economy, the Bennett-Lapid government has been attuned to the dangers of a PA that has no legitimacy and cannot deliver basic services to Palestinians, and has thus taken the issue of strengthening the PA seriously. The problem, however, is that alongside many of these policies are countervailing policies that blunt their positive impact, and sometimes cancel out their impact entirely. Some of this is beyond Israel’s control, but in practice it means that the gap between Israel and the Palestinians on whether the conflict is being shrunk and the PA strengthened is significant.
Take, for instance, the issue of work entry permits. One of the measures taken by the Bennett-Lapid government to improve quality of life and the economy in Gaza was to issue permits to Palestinians living in the territory to enter Israel for work, something that has been severely limited since Hamas’s takeover of Gaza and was not expanded by the previous government for security reasons. The number of permits for Gazans has steadily gone up every few months, from 5,000 to 7,000 and now to 10,000, with it set to shortly rise to 12,000. While this is not enough to transform Gaza’s economy by any measure given its population of 2 million people, it does help the families of these workers by giving them a reliable income and inject much-needed cash into an economy that provides few jobs or wages.
The wrinkle, however, is that the entry permits are issued for merchants, whom Israel considers to be a lower security risk since they are involved in commerce between Israel, Gaza, and the West Bank, and those types of permits are therefore less likely to become a hot-button political issue. In reality, almost all of the permits are going to day laborers who work in construction and agricultural jobs, and Israel winks before looking away since the demand inside of Israel is for Palestinian day laborers. What this means is that Israel is tangibly helping 10,000 Palestinians enter Israel every day and work, but because their entry permits are for trade and not for the jobs they are actually working, they can only be employed illegally.
As with any worker who is employed illegally anywhere, it means that their Israeli employers are paying them in cash and at a reduced wage that is not subject to minimum wage laws or worker protections. Because it is the PA Civil Affairs Committee that is in charge of transferring the permit applications to the Israeli authorities—thereby effectively deciding who will get an Israeli permit and who will not—it is a good bet that these workers are forced to provide kickbacks to PA officials, and because they return every day to Gaza through crossings manned by Hamas, it is an equally good bet that the cash they are carrying is being arbitrarily taxed by Hamas. The result is a policy that Israel is proud of and points to as an example of its willingness to do more for Palestinians, but has far less impact than it could due to a variety of overlapping factors.
Another example is PA finances. The Israeli government is well aware of the PA’s precarious financial position, much of which lies directly at the PA’s feet due to its sluggishness on reforms, its alienation of donor states, and the large percentage of its budget that it spends on a prisoner and martyr payments system that the U.S., Israel, and the international community have demanded that it end. Nevertheless, the Bennett-Lapid government has advanced the PA tax revenues that it collects on its behalf, canceled some of the transaction fees and surcharges that the PA must pay, and reached deals with PA creditors such as Israeli electric utilities to enable services to continue.
Yet amidst all of these efforts to prop up the PA economy, Israel also places a quota on Palestinian cash transfers to banks inside Israel, which is a particular problem given how much of the Palestinian economy in the West Bank relies on cash. Since many of the approximately 140,000 West Bank Palestinians who have work permits are paid by their Israeli employers in cash, and all of the approximately 40,000 West Bank Palestinians who enter Israel illegally for work are paid in cash, it results in an estimated 2 billion shekels in cash entering the West Bank every month with only half of it able to be transferred out to Israeli banks or to pay Israeli vendors. Not only does this make it more difficult for the PA to pay its debts, it also creates security problems for banks that have too much cash in their vaults and no way to transfer it, results in higher insurance fees given the security problems that the cash creates, and encourages a bigger black market economy that is resistant to tracking transactions since so much is done through cash. Israel is trying to prevent a PA financial collapse with one hand while tying its other hand behind its own back.
This dynamic is at work nearly everywhere you look when it comes to policies designed to strengthen the PA or improve Palestinian livelihood, and it leads to a predictable breakdown. Israel views things as moving along the right path, even if the benefits to the PA have not yet emerged, and the Palestinians view the new Israeli policies as more of the same, not dropping their cynicism about Israeli actions and motives even one iota. As with so much of the Israeli-Palestinian conflict, both sides are partially to blame to varying degrees depending on the specific issue. Israel has good intentions and does not understand why those intentions are questioned, and the Palestinians view everything as part of an Israeli scheme to make them entirely dependent on Israeli good graces and do not understand why anyone views Israeli actions otherwise.
It is also predictable where this is heading. The notion of shrinking the conflict as a way of helping the Palestinians while avoiding difficult political choices is under attack from the right, which sees no reason to help the Palestinians, and it is under attack from the left, which sees anything short of a political process as whitewashing occupation. It is going to be very easy for both sides to point to shrinking the conflict or strengthening the PA as having failed the longer this goes on, and beneficial policies are deadened by harmful policies or by a legion of unintended consequences. This will be particularly true if the Palestinians do not believe that it has improved their lives or brought them any meaningfully tangible benefits, and if the PA’s situation remains as precarious as it is. Even if you support the notion of shrinking the conflict and strengthening the PA in precisely the manner in which the Israeli government has envisioned it, there is evidence that it is failing on its own terms, and when its opponents begin to use that evidence as a reason to end it entirely, the Israeli-Palestinian conflict is going to move to the next, and likely much darker, phase.