The Gaza war may have cost Israel around US$3b, but the economy has not collapsed. And yesterday, it was announced that commercial quantities of gas have been found off the coast of Haifa. It could be enough to meet Israel’s needs for decades, as well as help to further a greener energy policy.

So what’s the connection to the Gaza economy?

Step back. Since 1993 and the Oslo Accords, the Palestinian economy has been bolstered by overseas support, particularly from Europe. On average, 25% of the revenue of the Palestinian Authority has come from taxpayers from overseas governments. Although the World Bank has called this the largest support per capita of a population since World War II, there has been little effective accountability and transparency.

The Gaza economy in particular is heavily dependent on agriculture and the public sctor. Unfortunately, the quality greenhouses left behind after the Israeli evacuation in 2005 were soon ruined and became training grounds for military recruits.

Interestingly, despite opposition from the World Bank and Hamas’s animosity with Fatah, it is the civil service payroll that has risen significantly in the past two years. How?  Dr Rachel Ehrenfeld, an expert on the funding in international terror, provides some answers. She notes that:

Despite Fatah-Hamas disagreements, the Palestinian Authority’s Fatah-led government announced on Jan. 15, 2008, its intentions to give Hamas 40% ($3.1 billion) of the $7.4 billion pledged in December 2007 by international donors. In October 2008, despite the crackdown on Fatah members in Gaza, the Palestinian Authority was paying the salaries of 77,000 “employees.” In December 2008, under U.S. and international pressure, Israel delivered between $64 million and $77 million in cash to Gaza.

In the past 2 weeks, Gulf States and UNRWA have promised around US$200m to repair Gaza. Yes, it is needed, desperately so. But will all the money go the the proper destinations? Given past experiences, that must be doubted.

There is an alternative to this economic waste. Step forward and recall what is now known about new gas fields near Haifa. In the summer of 2007, British Gas tried to reach an agreement with the Palestinian Authority to develop proven gas reserves in Gaza. The value to the local economy could be at least US$1 billion.

Since then, Hamas has invested in drilling and digging ……..tunnels, tunnels that smuggle weapons and contraband in order to satisfy their hatred against their enemies.