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Amid Escalating Tension, Gaza’s Economy Comes to a Halt

Closures and siege have paralyzed business activity, pushing people to dispatch fire balloons, locals say

Over the weekend, Qatar and Egypt pressured Hamas to stop the launching of rockets and incendiary balloons from Gaza, as Israeli Air Force jets attacked military targets there on Saturday.

A rocket-warning siren sounded in the city of Sderot, located just over half a mile from the Strip. The Israeli military subsequently announced that a rocket fired from Gaza had misfired and hit within the Strip. Also on Saturday, Gazan incendiary balloons ignited 35 fires in Israel.

On Friday, an Israeli army spokesperson said that the Iron Dome system intercepted nine of the 12 rockets fired from Gaza into Israel that day, without any casualties, adding that Israeli aircraft responded with strikes on Friday night.

Israeli Defense Minister Benny Gantz said that Hamas would suffer a severe blow if the escalation continued, adding that the army was ready for any scenario.

Mohammed al-Breem, the spokesperson of the Palestinian factions in the Gaza Strip, told The Media Line that their shared operation room had decided to respond to any Israeli attack.

He explained that months ago, indirect talks took place with Israel through several mediators, where many details were discussed regarding improving the economic situation in the Strip.

“The discussions were mainly linked to finding sustainable solutions for the economy and living conditions of Gaza, especially regarding electricity, where there was a detailed two-year technical plan to improve that sector,” he said. “In addition, there are other understandings that were agreed on over a year ago. However, only a few of them were implemented.”

The factions had realized that Israel was doing the minimum of what has been agreed on as the situation in the Strip became unbearable and problems piled up, “despite the fact that there was a known time frame set by the mediators [for implementation] regarding major issues in Gaza,” Breem explained.

The economic situation was extremely difficult, to the point that some families could not provide their daily sustenance, he said. “And so the very difficult financial situation that the people of Gaza are going through pushed the resistance to do its job and inform the mediators that the Israeli side isn’t committing to these understandings,” he added.

Breem clarified that the living conditions in the Strip obligated the factions to reconsider the understandings, depending on events on the ground, especially since the siege has not been lifted in any respect.

“We must differentiate between the fire balloons [on the one hand] and the other acts of popular resistance and the resistance movement. The first [the incendiary balloons] are linked to young revolutionaries who are protesting their unfair reality,” he said. As for other actions taken by the resistance, Breem pointed to Israel’s targeting of the resistance sites in Gaza.

“The resistance has controlled itself in the face of this aggression for several days, and then, the shared operation room decided to respond to any Israeli attack on any site, and that’s our job and right, to defend ourselves and our people,” he said. “Therefore, any Israeli attack against us or our people will be met by the resistance, as we agreed in the operation room.”

Israel closed Gaza’s offshore fishing zone on August 16, six days after closing the Kerem Shalom cargo crossing to the Strip because of arson balloon attacks. After rockets were fired into Israel, Israeli jets attacked several Hamas targets in various parts of the coastal enclave, and tensions rose to their highest level in months.

Ali al-Hayek, the head of the Palestinian Businessmen’s Association in Gaza, told The Media Line that there was “no economic situation in the Strip to start with, as it was completely dead.

“Gaza’s economy has completely collapsed, especially amid the latest escalation, where closing the Kerem Shalom cargo crossing and not allowing the entry of fuel and industrial materials led to an economic catastrophe,” he said.

The industrial sector has come to a complete halt, leaving thousands of workers without jobs, added to the already collapsing situation, Hayek said. “The private sector in Gaza is almost dead; we’re facing a serious collapse that is reflected in social issues because of the suspension of the economic system.

“Economic activity has completely stopped in Gaza,” he said.

Hayek said 2020 was the Strip’s worst year yet, with the current difficulties coming atop the problems suffered since 2007, when Gazans faced daily closures. “But today, we are talking about a complete stop [to economic activity] because of the previously existing crisis and the current halt of electric service.”

The only power plant in the Gaza Strip stopped operating on August 18, less than a week after Israel halted the flow of diesel fuel through Kerem Shalom. Electricity is now available only three or four hours a day, seriously affecting services especially in the health sector, as well as for environmental, drinking water and sanitation services, and causing great losses in the industrial, commercial and agricultural sectors.

Safwat Mushtaha, who owns several factories and a real estate firm, told The Media Line that his businesses were 100% affected. “The economic situation is very, very bad, at all levels.”

The economy in the Strip was frozen, Mushtaha explained. “The industrial and commercial sectors have completely stopped; everything is paralyzed here.”

He added, “I employed a large workforce, but I had to cut it by 5%. This has been going on since 2014 [when Israel and Hamas fought a seven-week war]; now we’re facing a sharp collapse. All businesses have stopped.”

In 2019, Israel eased restrictions on the flow of materials into Gaza – including tens of millions of dollars in Qatari cash – and it reportedly green-lighted additional development projects there. However, Palestinians say that Israel has not kept to all of the understandings reached under Egyptian mediation and a UN umbrella, especially in terms of easing the siege and building industrial zones and a port.

Lior Akerman, a political analyst and retired Israeli brigadier general, told The Media Line that the launching of rockets and incendiary balloons was not primarily a consequence of the economic situation in the Gaza Strip: “The Gaza Strip is ruled by a deadly and destructive and murderous terrorist organization with an extreme Islamic worldview, which considers it necessary to eliminate the State of Israel. … Rocket fire and attempts to infiltrate and send incendiary balloons continue unabated, all the time. Hamas has a clear goal and an unequivocal strategy: to continue to harm the sovereignty of the State of Israel and the well-being of its citizens anytime, anywhere.”

Akerman predicted that Hamas attacks would continue to be carried out against Israel regardless of understandings and agreements, as long as this organization exists. Still, economic and political pressures can make the situation worse. “The scope of Hamas’ activity and the intensity of its violence against Israel are a result of the financial distress in which it finds itself, of the civilian pressure of the residents of the Gaza Strip and of the desire to continue conveying the message to Israel,” he said.