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Monday, June 27, 2011     FOR YOUR EYES ONLY

Hamas smuggling trade creating new wealth for Palestinians

WASHINGTON — The Hamas regime has produced a new wealthy Palestinian class in the Gaza Strip, a report said.


The Washington Institute for Near East Policy asserted that over the last three years Hamas has overseen the formation of a wealthy Palestinian class. In a report, the institute said the newly-rich included Hamas officials, tunnel operators and smugglers.

"The new wealthy class — many associated with Hamas — as well as established capital owners are concerned about keeping their money inside Gaza, preferring to move it abroad," the report, titled "Gaza's Economy: How Hamas Stays in Power," said.

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Authored by Israeli analysts Ehud Yaari and Eyal Ofer, the report said the newly-rich Palestinians benefited from the huge smuggling trade from 2007 until 2010. The authors said the more than 800 tunnels between Egypt and the Gaza Strip yielded up to $850 million per year at its peak.

"Much attention has already been devoted to the goods smuggled into Gaza, such as fuel and cement," the report said. "Less well understood is the fact that, in exchange for these goods, cash has been steadily exported out of Gaza through the tunnels, at a rate of roughly $750 million per year."

The report said new wealthy class has amassed a huge amount of cash in the Gaza Strip and was transferring funds abroad at an annual rate of $750 million. In February 2009, Israel Central Bank received a request from Gaza banks to deposit their excess cash reserves.

"Cash is also flowing out of Gaza — through the tunnels and via bank transfers — to safe havens in Persian Gulf countries and Europe," the report said. "The new wealthy class — many associated with Hamas — as well as established capital owners are concerned about keeping their money inside Gaza, preferring to move it abroad. And even with huge sums flowing out of the territory, there is still more cash than opportunities to invest it."

Hamas has formed an economic empire over the last four years. The report said Hamas has acquired a range of fronts, often by intimidating Palestinians to sell their businesses for cheap.

"Frequently, new Hamas businesses are registered under the names of straw owners or individuals from Hamas cadres," the report said. "The group has also taken over all the land belonging to the former Israeli settlement of Gush Katif, along with parts of the Gaza beachfront."

The report said an average of $2 billion per year was being transferred into the Gaza Strip from Palestinian banks since the Hamas takeover in 2007. The PA was said to relay $1.2 billion per year, which included salaries and pensions for 77,000 civil servants, to Gaza banks. PA Prime Minister Salam Fayad said 54 percent of the 2010 budget of $3.17 billion went to the Gaza Strip.

"Most of that figure appears to be salaries, although it also covers what the PA pays directly for electricity, fuel, and water provided to Gaza by Israeli firms," the report said.

Ofer and Yaari argued that Hamas has hardly been affected by the Western boycott. They said Hamas has managed the Gaza economy, including raising $250 million per year on taxes alone.

"This state of play demonstrates Hamas's major success in overcoming the system of blockade, boycott, and denial of recognition and assistance imposed by Israel, the PA, most Arab countries — especially Egypt — and the West," the report said.

"In addition to its own direct spending, Hamas has been able to tap into financial resources transferred by the PA and aid agencies, ensuring payments to supporters who have replaced Fatah loyalists in government jobs. In total, thousands of Hamas members, including many military personnel with fake civilian positions, are paid by outside donors."

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