The 1993 Oslo accords gave Israelis and Palestinians a framework for peace and an opportunity to prosper together. But since two suicide bombers killed 14 Israelis in Jerusalem last month, Prime Minister Benjamin Netanyahu has tightened the economic screws on the Palestinians, demanding that they do something to stop terrorism. Even some Israeli commentators accuse Netanyahu of waging economic war on the Palestinians. Netanyahu’s critics also charge he is grandstanding on terrorism, by blaming Palestinian leader Yasir Arafat for violence he may not be able to control (there is still no proof the two suicide bombers came from Palestinian territory). Arafat did round up 173 suspects. But last week he also held two days of national-unity meetings with leaders of various Palestinian groups –among them Hamas and Islamic Jihad, which have sponsored terrorism. A photo of Arafat embracing Abdel Aziz al-Rantisi, a Hamas leader, enraged the Israelis. ““He says he is against terrorism,’’ said Danny Naveh, Israel’s cabinet secretary, ““and afterwards he runs to hug the killers of women and children.''
The success of the Oslo accords depended, in part, on securing better living conditions for the Palestinians. Instead, the West Bank and Gaza have been devastated. According to the United Nations, per-capita income in the territories has dropped 35 percent since the agreement was signed. This was supposed to be a period of managed development for the area. But according to Nader Said, who recently wrote the first U.N. report on human development in Palestine, ““What we’re actually seeing is managed deterioration.''
Once the Oslo agreement was signed, money poured into Palestinian areas. The development process wasn’t pretty. Top officials of the new Palestinian Authority enriched themselves and created slush funds that enable Arafat to govern. At first, Israel’s Labor Party government helped to maintain Arafat’s financial lifeline. When it had to close Israel’s borders to Palestinian workers after terrorist incidents, it continued to funnel tax revenue to Arafat, once advancing him $30 million to offset a border closure.
Netanyahu isn’t playing that game. After the bombing, he not only closed Israel’s borders to Palestinian workers and exports; he also froze the transfer of tax revenues that account for more than half of the authority’s income. The revenues don’t belong to Israel. They are duties paid by Palestinians on Israeli products or foreign goods imported through Israeli ports. Last week Israel finally handed over $12 million to the Palestinians, which it said represented 30 percent of the total tax revenues withheld. Netanyahu continued to demand a campaign against terrorists. ““Israel will not be toyed with,’’ he told his cabinet.
But Arafat is not strong enough politically for a frontal attack on popular militant groups. He accused Israel of trying to starve his people, and he warned that the long Oslo process could be aborted. ““Seven years. We can erase and do it again from the beginning,’’ he said. Arafat also attempted a feeble economic counterattack. He announced a partial boycott on the sale of Israeli goods in Palestinian markets, including soft drinks, cigarettes and toilet paper. But trade with the West Bank and Gaza amounts to barely 2 percent of Israel’s economy. Only Arabs are likely to get hurt in this war. ““If the Palestinians continue to be hostile, the economic price will be very high,’’ warns Yaacov Neeman, Netanyahu’s finance minister. These days the Oslo process looks like a wilting flower in the hot Gaza sun.
