Is a Palestinian state a fantasy?

IN THE diplomacy around the forever war between Israel and the Palestinians, it is customary to describe a Palestinian state as a necessity. Consider the latest Gaza ceasefire proposal, backed by America and all the other countries on the UN’s 15-strong Security Council bar Russia, which abstained. It outlines the global community’s “unwavering” commitment to a two-state solution “where two democratic states, Israel and Palestine, live side by side in peace”. It also insists that Gaza must be unified with the West Bank under the authority of the Palestinian Authority (PA). Most countries believe that Palestine should be recognised as a full-fledged state immediately, before any peace deal is struck between Israel and the Palestinians. On May 10th 143 countries at the UN supported this idea. On May 28th they were joined by Ireland, Norway and Spain.

Some visions of this new state are inspiring. Palestine Emerging, a study by 100 experts released in April, foresees Gaza and the West Bank by 2050 as a single entity of 13m people, up from around 5m today, connected by a railway, replete with nature reserves and an airport. The devastation in Gaza creates a clean slate on which a new city will be built, with a seaport on an island linked to the mainland by a causeway. Palestine would prosper as a trading entrepot, its currency pegged to the dollar, underwritten by the rich Gulf states. Yet when you look away from such hopeful blueprints, the gap between the dream and reality is crushingly large.

Palestinian statehood last seemed imminent a quarter of a century ago. The Oslo accords signed between Israel and the Palestinians in 1993 and 1995 created a semi-autonomous body, the PA, in Gaza and the West Bank. Had everything gone to plan, a final accord would have turned the PA into a sovereign state with fixed borders in 1999. But the assassination in 1995 of Yitzhak Rabin, Israel’s prime minister, by a Jewish extremist removed one of the most forceful advocates of peace. The process unravelled further amid a surge in bus-bombings and other terrorist attacks on Israeli and Palestinian civilians and a rapid expansion of Jewish settlements in the West Bank, which was meant to form the core of the new Palestinian state.

When talks brokered by America over a two-state deal broke down in 2000, a second intifada (uprising) erupted, which burned until 2005 and saw Israeli tanks return to Palestinian cities. Then in 2007, almost two years after Israel had dismantled its settlements in Gaza and withdrawn its troops, the armed Islamists of Hamas, who won a general election covering both territories in 2006, took control of the coastal enclave. Yet the PA has limped on as a political mutant, partly as a government and partly an instrument of Israeli occupation, its remit limited to the West Bank. Many countries recognise Palestine as a state, but the UN Security Council does not. Without clear borders or its own army and police in sole charge of security, it lacks some essential characteristics.

Since Oslo the Palestinian territories have changed a great deal, even before the destruction of Gaza. In some respects these changes make it a more credible state than it was in the 1990s. For example, Palestinians spend 2.4 more years in education than they did two decades ago, making them one of the most literate populations in the Middle East. In the early 1990s Gaza and the West Bank scored 0.53 on the UN’s Human Development Index (one is the highest), based on health, wealth and education. By 2022 it had climbed to 0.716, ahead of Morocco.

The share of imports that come from Israel has fallen from 79% in 1995-99 to 57% in 2022, making the West Bank less dependent on Israeli inputs. On the ground and at international forums like the World Economic Forum in Davos, the PA has acquired institutional heft. In May it marked 30 years in existence. Its tenacity in the face of adversity has heightened its aspirations. “The jacket [of Oslo] no longer fits us,” says Husam Zomlot, the Palestinian ambassador in London. But 30 years after Oslo, the would-be state faces glaring problems: a faltering economy, territorial fragmentation, lack of security and autocracy.

Start with the economy. With a GDP of around $18.6bn in 2023 the Palestinian territories are the world’s 127th biggest economy. In areas of the West Bank under the pa’s control income per person is 43% of the global average, on a par with Iraq. There are islands of prosperity. In Ramallah, the seat of government, gated communities and shopping complexes abound and plenty of new houses and apartment blocks have risen up. And however flawed the PA has been, its economic performance far exceeds Hamas’s in its besieged enclave of Gaza. On the eve of Hamas’s attack on October 7th, incomes per person in the West Bank were five times higher than those in Gaza. Unemployment in the third quarter of 2023 was 13% in the West Bank, compared with 45% in Gaza.

Yet for all that, the economy is fragile and dominated by Israel. In a report before the October 7th attacks the IMF described a “fiscal crisis” in which the PA was massively in arrears. The Palestinian territories recorded a current-account deficit of around 12% of GDP, with imports far exceeding formal exports.

The Palestinian economy depends heavily on Israel. Though the PA has improved its own tax collection, some 8% of its 15bn shekels ($4bn) of annual revenue comes from foreign aid and 67% comes from taxes that Israel gathers on its behalf. About 90% of exports go to Israel and more than 180,000 Palestinians, around 23% of the West Bank’s workforce, were employed there before October 7th. After the Hamas attack Israel cancelled almost all the work permits previously granted to Palestinians, suspended the transfer of tax revenue and tightly restricted movement out of and within the West Bank. “It’s the Palestinians’ worst economic crisis since 1967,” says Yitzhak Gal, an Israeli economist. To these immediate hits should be added the costs of rebuilding Gaza, which the UN reckons could be $40bn (estimates vary widely), and providing for its people. Foreign donors may pay for much of this. Even so, the PA’s finances might buckle if it were to assume responsibility for Gaza.

Security is just as bad. The PA has survived in part because Israel needs it to. In 1987, when the Palestinians unleashed their first intifada, Israel had to send in lots of troops to suppress the unrest. For most of the past three decades, however, the Palestinians have largely policed themselves and maintained order in the West Bank.

Unsteady state

Yet if one definition of a state is determined by whether it has defined borders and a monopoly on the use of force within them, then the PA may be further away from statehood than it was in the years after Oslo. The number of Israeli settlers living in the West Bank and East Jerusalem has risen from roughly 250,000 to about 695,000 today. Maps show the West Bank is far more densely peppered with settler outposts. Palestinians are cut off from East Jerusalem, their putative capital, and from Gaza. They are splintered by Oslo’s division of the West Bank into Areas A, B and C (see map), denoting differing levels of control by Israel and the PA. “They’re increasingly fragmented into bantustans,” says Alon Cohen Lifshitz, director of an Israeli planning watchdog, Bimkom, referring to the nominally self-governing territories under apartheid in South Africa.

Since the Hamas attack last October, Israel has killed over 500 Palestinians in the West Bank and Israeli checkpoints have stifled movement around Palestinian cities. Journeys that should take half an hour can take three. Israel has suspended security co-ordination with the PA. And increasingly Israel treats Area A, where the PA is supposed to have full control, as if it were Area C, where Israel has it. Israel regularly sends troops on raids into cities such as Ramallah and Jenin to suppress militant groups the PA has struggled to control, including those loyal to Hamas. Palestinians say these raids are intended to weaken the PA’s hold and erode public confidence in it.

Then there is the PA’s autocratic leadership. Superficially the political system is stable and looks more or less legitimate. “Of course partial occupation is better than full occupation,” says a Palestinian official. Many appreciate the sense of order that the PA brings. Yet there is a vast lack of accountability and the legitimacy is questionable. In November Mahmoud Abbas, the supine 88-year-old Palestinian president, will have ruled for 20 of the PA’s 30 years. Under Mr Abbas, Fatah, the main faction in the West Bank, forsook the violence of the second intifada.

Yet Mr Abbas has turned a fledgling democracy into a dictatorship. In 2006, a year after he was elected president, he held a parliamentary election which Hamas won (getting 44% of the vote to Fatah’s 41%). But he dismissed a Hamas-led government, dissolved parliament and has postponed all subsequent elections ever since. He has purged his institutions of critics and has repeatedly rejected proposals for a national unity government, which might have reunified Gaza and the West Bank, for fear that a deal with Hamas might cost him Western support. Detractors dub the PA “al-amila”, the agent [of Israel].

Years of autocratic rule have entrenched cronyism. “Fatah has become a company,” says a journalist in Ramallah. Corruption erodes public support. The PA pays its bills selectively and stuffs its administration with party cadres. Lamis al-Alami, a former education minister, says she sacked thousands of politically appointed teachers. After she left office, she says, they promptly resumed their posts.

Since the attacks of October 7th there have been changes. In March Mr Abbas appointed a new prime minister, Mohammad Mustafa, a former economics adviser. But America has backed away from trying to force Mr Abbas to surrender some of his powers to his prime minister and government. The prospect of elections is remote. Mr Abbas and his Arab and Western backers are wary of democracy in the West Bank. In a survey published on June 12th by PSR, a Palestinian research body, only 8% of West Bankers say they have been satisfied by Mr Abbas’s performance in this war; 94% want him to resign. Some 41% of respondents say they support Hamas, a notably higher share than before the war, compared with 17% who support Fatah.

The economic fragility, insecurity and political weakness of the PA suggest it would be able to play a limited role in Gaza if asked to take control immediately. It retains a presence in Gaza’s hospitals and runs its registry of births and deaths. It has 37,000 employees on its Gaza payroll, including 19,000 in the security forces, though most have stayed at home for almost two decades under Mr Abbas’s orders not to co-operate with Hamas. The PA mulls plans to train thousands of security people in Jordan and send them to Gaza. But neither Israel nor Hamas has included the PA in ceasefire negotiations or in providing aid. When the PA tried to distribute supplies independently of Hamas, six of its men were killed.

The bigger question for many Palestinians is not whether the PA can reimpose its rule in Gaza, but whether it can survive in the West Bank without a political horizon and faced with Israel’s intransigence. Israelis have steadily become more hostile to Palestinian rights. In May Pew, a pollster, found that only 26% of Israeli adults said the Jewish state could coexist peacefully with a future Palestine state, down from 50% a decade ago.

For some Palestinians the status quo is a lesser evil than provoking their foes. “It’s not the time for resistance,” says the owner of a new café in the West Bank city of Nablus who was once a militant. “We’d just give the settlers an opportunity to destroy what we’ve built.” For others, though, the attractions of violence are rising. “If the result of peaceful resistance is continued occupation, then we should reconsider our options,” says one of Ramallah’s biggest businessmen. “It’s the first time anyone forced Israel back from the border and got 200 soldiers to surrender,” says an Abbas loyalist of the Hamas attack. The target of violence could be Israel, the settlers or the PA. And the latest impulses of the Palestinian electorate are alarming. A recent PSR survey found that 62% of West Bankers favoured an armed struggle. Two-thirds of Palestinians thought the Hamas attacks were “correct”; 91% denied that Hamas had committed atrocities against civilians.

Some inside Fatah have considered marching on Mr Abbas’s fortress in Ramallah to topple him. Jihadist notions of takfir, or excommunication, are gaining ground, says a former member of Islamic Jihad, a militant faction, in Nablus. Some shabab (young men), he says, are swayed by the idea that the PA is an apostate regime. So they refuse to pay taxes and they clash with the security forces. Small groups are plotting attacks on Israel and its settlers.

If violence is one way for Palestinians to disrupt the status quo, another is diplomacy and, in particular, the calls for the immediate international recognition of a Palestinian state. Though three-quarters of the world’s countries have recognised Palestinian statehood, America and most main European powers have not. One argument for recognition is symbolic. Governments also argue that by signalling support for the two-state plan they can prevent extremists on both sides from killing off a two-state settlement. It is less plausible that recognition will have any immediate effect on the ground.

State of change

Michael Sfard, an Israeli lawyer, sees little changing. “Recognition of Palestine doesn’t end the occupation or change the validity of the Oslo accords,” he says. Yet others think it would have rapid effects, including on the settlers. “All nationalities including Israelis would have to apply to live in our state and abide by our laws. This can’t happen as a fait accompli,” says Mr Zomlot. “The resources—land, water, minerals—are taken from our state and must be taxed.” With clearer legal sovereignty, Palestinians could seek to tap their own resources, like offshore gas, and sign defence pacts. Some argue a new state could even seek to take control of the border crossings with Jordan and Egypt.

Yet the interconnectedness of Israel with its settlements and the West Bank means that a unilateral act of separation could be incendiary, provoking an Israeli response. “If the UN [Security Council] recognises a Palestine state, the Oslo accords would be rendered irrelevant because they deal with something less than a state,” says Itzik Bam, a settler lawyer and ally of Bezalel Smotrich, Israel’s ultranationalist finance minister. “We’ll stop transferring tax money that we collect for you, cancel all your VIP cards for freedom of movement and watch you collapse.”

As the war in Gaza drags on, the prospect of a Palestinian state is at once more relevant than ever and yet more distant. Trust on both sides has been shattered by the Hamas attacks and the Israeli response. The path towards statehood would require new leadership of the PA (or a successor organisation) and the rebuilding of its democratic credentials; a plan for what to do in Gaza when Israel’s invasion ends and for its reunification with the West Bank; and a new centrist government in Israel ready to negotiate an end to the conflict with the Palestinians. Outsiders would have to apply heavy pressure on both sides to work towards an agreement. Israel and the Palestinians would have to compromise. The notion of a democratic Palestinian state alongside Israel is still a dream. But the alternative, of ceaseless Palestinian atrophy, is one that offers the region only misery, extremism and war.

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