Trump's Palestinian Aid-for-Peace Moves Face Tough Challenges

(Bloomberg) -- The U.S. thinks its emerging plan to settle the Arab-Israeli conflict will have a better chance to succeed if the teetering Palestinian economy is shored up, but that’s no easy task.

The Trump administration’s Middle East negotiators, Jared Kushner and Jason Greenblatt, will be discussing ways to avert a humanitarian crisis in the Gaza Strip and create jobs in the West Bank while in the region this week, said two Israeli officials, who requested anonymity to discuss confidential talks. The U.S. believes a stronger Palestinian economy could bolster peace prospects, a White House official said, requesting anonymity because the matter is sensitive.

While President Donald Trump strives to end the conflict with the “deal of the century,” there is no evidence that focusing on the Palestinian economy would boost his peace mission’s seemingly dim chances of success.

Aiding the Hamas-ruled Gaza Strip is complicated because of concerns among donors that the resources will be used against Israel. The Palestinian Authority says focusing on economics could hinder a political solution to the conflict with Israel. And while the Americans are painting investments in the West Bank and Gaza as key to peacemaking, at the moment they’re cutting aid, not increasing it.

Favorable Context

“I have no doubt the administration would like to be able to show that it’s affecting matters on the ground, because that would create a more favorable context” for presenting the peace plan, said Dennis Ross, a former U.S. diplomat who was involved in efforts to resolve the conflict. Still, “that doesn’t mean that you get the Palestinians immediately back to the negotiating table,” he said.

Eleven years after Hamas seized control of Gaza, its economy is in ruins. The territory is widely isolated over Hamas’s refusal to renounce violence against Israel, it’s blockaded by Israel and Egypt, and it has yet to recover from three wars with the Jewish state. The Palestinian Authority has deepened Gaza’s misery by withholding salaries to civil servants there and disrupting electricity supply.

Even in the more prosperous West Bank, per capita gross domestic product is $4,000 a year -- about 1/10th of Israel’s -- stifled by Israeli restrictions on land use, movement and access, and the rift with Gaza. The Palestinian Authority is also dogged by suspicions of corruption.

Not Talking

Complicating the peace push is the disconnect between the West Bank-based Palestinian government and the Trump administration. Palestinian officials have shunned the U.S. since Trump announced in December that the American embassy would move to Jerusalem, whose eastern sector the Palestinians seek as the capital of a future state.

A spokesman for Palestinian Authority President Mahmoud Abbas demanded that Washington address the political issues at the core of the Palestinians’ conflict with Israel.

“The talk about a new U.S. tour of the region to discuss what is called the ‘deal of the century’ or any other names is a waste of time and will be doomed to fail if it continues to bypass Palestinian legitimacy,” spokesman Nabil Abu Rudeina said. “The search for vague ideas to isolate Gaza under the slogans of humanity in exchange for waiving claims to Jerusalem and its holy sites will achieve nothing.”

Greenblatt scoffed at that argument. “Hamas & the PA, who have been fighting one another for over a decade, are each cynically claiming that the U.S. is trying to divide Gaza and the West Bank, instead of acknowledging that we are trying to help the Palestinians in Gaza,” he tweeted. “What hypocrisy.”

Reviewing Aid

As it seeks to drum up Middle Eastern investment in the Palestinian economy, the Trump administration is reviewing its own assistance package. Questions surround future aid “as policy makers try to evaluate whether it is effective,” the Congressional Research Service said in a May report.

In January, the administration said it would withhold about half of a $125 million tranche pledged to the United Nations agency that aids Gaza.

In slashing that assistance, President Donald Trump complained that other countries -- “some of them quite wealthy” -- aren’t doing their share. Saudi Arabia was one stop on Kushner and Greenblatt’s Middle East swing, and in their meeting with Crown Prince Mohammed bin Salman, they discussed humanitarian relief for Gaza and the Trump team’s peace efforts, the White House said.

The same conversation was held with the leaders of Egypt and Jordan.

Security Risk

Israeli officials say economic measures might build stability, but have been reluctant to allow international aid into Gaza for fear Hamas would siphon off materials and money to build weapons. The Shin Bet internal security service has opposed the military’s proposal to let thousands of Gazans work in Israel, seeing it as a security risk, one of the Israeli officials said.

The Palestinian Authority’s economic sanctions, meanwhile, are intended to crush Hamas, not help it.

“The question is, how do you help Gaza without helping Hamas?” said Dan Shapiro, the Obama administration’s ambassador to Israel. “But if you don’t help save Gaza from the abyss, you risk a humanitarian crisis and the threat of another conflict.”

Stalled Plans

Israel’s plans to assist the West Bank’s economy, announced before Trump’s May 2017 trip to Jerusalem, are moving slowly. It extended the hours at the crossing between the West Bank and Jordan, but little progress has been made on building joint industrial zones and approving more residential building permits for Palestinians.

No timetable has been set for the peace plan, which will be presented when it’s seen to have the best chance of success, according to the White House official.

Shapiro, who was the U.S. envoy when Israeli-Palestinian negotiations broke down in 2014, is skeptical that economic measures will produce a peace breakthrough.

“But that doesn’t mean the U.S. can’t help both parties take steps to keep the goal alive,” he said.

--With assistance from Fadwa Hodali.

To contact the reporters on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net;Margaret Talev in Washington at mtalev@bloomberg.net

To contact the editors responsible for this story: Alaa Shahine at asalha@bloomberg.net, Amy Teibel, Michael S. Arnold

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