How Israel could save the Palestinian Authority from collapse

Ahead of the 30th anniversary of the Oslo Accords, HAMADA JABER sets out how the remnants of the agreement could be an economic lifeline, before it is too late for the only Palestinian government still talking about a two-state solution.

Israel's security cabinet recently declared that it wanted to "prevent the collapse of the Palestinian Authority". Not surprisingly, it failed to mention that Israel is largely responsible for the PA’s perilous situation.

Without a political solution on the horizon and in dire economic difficulties, the PA and its leadership have lost legitimacy in the eyes of Palestinians, and a majority of the Palestinian public (52%) believes the collapse of the PA would be in their interest. About 80% of Palestinians want President Mahmoud Abbas, who was elected in 2005, to resign.

Abbas, who has threatened on many occasions to dissolve the PA or cease the security coordination with Israel, is not taken seriously by Israel nor by the Palestinian public. Palestinian support for the Oslo Accords – the two-state solution – is at its lowest (28%) since the beginning of the peace process. The decline of the PA is seen as inevitable by most Palestinians and an opportunity for opposition parties such as Hamas.

Benjamin Netanyahu has saved the PA from collapse on many occasions. He believes (as do the majority of Palestinians) that the PA’s existence is in Israel’s interests. Previous statements by the Israeli Prime Minister suggest he would like to see “economic peace” – a concept which stops short of statehood for Palestinians and is rejected by the PA. Former US President Trump made a failed attempt at this idea with his proposed “deal of the century”, boycotted by Palestinians.

But the PA has had no problem accepting Israeli economic lifelines. Netanyahu could prevent the collapse of the PA by implementing economic measures in the Paris Protocol.

The Paris Protocol was signed between Israel and the Palestinian Liberation Organisation in September 1993 to organise economic and trade relations between Israel and the new Palestinian Authority created under the Oslo Accords.

On the PA’s behalf, Israel collects customs and taxes on Palestinian imports, value added tax (VAT) on Israeli products sold to the Palestinian market, plus income tax and social transfers from Palestinian workers inside Israel and Israeli settlements. In total, these collected funds represent 60-70% of all PA revenues. According to the arrangements, Israel is supposed to transfer these revenues to the PA on a monthly basis, after deducting a 3% administrative fee.

But these arrangements have been used by successive Israeli governments as a punitive tool against the PA by deducting or withholding revenues.

Under the current Israeli government, revenue withholding has increased to 267 million shekels (about $A100m) a month, likely to deal a fatal blow to the PA’s deteriorating economic situation.

Signed as an interim accord for five years, the Palestinian understanding was that the Oslo Accords and the Paris Protocol were steps on the way to Palestinian independence and a state by May 1999. Based on this understanding, the Palestinian leadership accepted all Israeli conditions and restrictions. The PA viewed the short transitional period as a time to establish and build the institutions that could take on the responsibilities of an independent state within five years. Those five-year interim accords became permanent, lasting already for 30 years.

At the heart of the Paris Protocol is the Joint Economic Committee (JEC), which is a Palestinian/Israeli committee established to meet semi-annually to monitor and review the agreement’s execution and its articles. Even though the Oslo accords are still active de facto, the last official meeting of the JEC was in September 2000.

Israel unilaterally chooses what and how to implement the protocol, making an already bad agreement even worse for the PA and Palestinian people.

Why bad? The Paris Protocol entrenches a customs union and clearance revenue system that prevents any chance for an independent Palestinian economy, by allowing Israel to collect the main source (about two thirds) of the PA’s budget.

The disparity in the economies which share a customs union is at the expense of the Palestinian people. Israeli GDP in 2022 was nearly $800 billion and the minimum wage was 5571 shekels ($2280). The Palestinian GDP in 2022 was less than $20bn and the minimum wage was 1880 shekels ($781). The Palestinian economy is effectively dependent on and integrated into the Israeli one. In addition, Israel is the biggest employer of Palestinians, with about 200,000 Palestinians working in the Israeli market.

At the same time, Israel places severe restrictions on the Palestinian economy that prevents its growth and independence. Movement restrictions are foremost, but Israel’s control over 60% of the West Bank (Area C), which was also set up by the supposedly interim Oslo Accords, chokes Palestinian economic potential, as well as the residents of those areas.

Netanyahu’s coalition includes parties that openly oppose the existence of the PA and seeks to legalise full Israeli control over the West Bank, making impossible any hope of a political solution or independent Palestinian economic growth.

The Paris Protocol was never good for the Palestinians but it might be the only way for Israel to save the Palestinian Authority.

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