Skip to main content
Part of complete coverage on

Gaza conflict: Can economic isolation ever be reversed?

updated 10:16 PM EDT, Sun August 3, 2014
STORY HIGHLIGHTS
  • Blockade has brought Gaza economy to its knees
  • Tunnels have been used to smuggle up to 200 tons of goods a day into Gaza in recent years
  • Escalation of conflict in recent weeks could be sign of Hamas desperation, says Middle East strategist David Butter

Watch Marketplace Middle East every week on CNN International. Click here for the show times.

(CNN) -- The horrific loss of life from the three week conflict in Gaza can never be valued -- but the economic fallout from war is also devastating the local population.

In the case of Gaza, a seven year air and sea blockage imposed by Israel since Hamas came to power has isolated its economy.

The blockade has limited supplies of concrete and basic construction materials as well as medical supplies and food stuffs.

According to the World Bank, half of Gaza's 1.8 million residents live in poverty and one out of every three workers is unemployed.

Israeli economy undeterred by violence
Hamas: We don't use human shields
Millenials less supportive of Israel

As Gaza's official economy has contracted, the shadow economy -- also known as the tunnel economy -- blossomed.

Underground tunnels were built by Gazans to circumvent the blockade allowing goods to be illegally smuggled from Egypt.

But the tunnels have also been used by Hamas to bring in weapons and launch attacks on Israel.

CNN's John Defterios sat down Middle East strategist David Butter to ask what could reverse the isolation of the Gaza economy.

He started by asking how the situation has changed over the last six to 12 months.

David Butter (DB): What's changed in the last year is the closure of the tunnels by the Egyptian government

This was handling up to 200 tons of trade every day. Fuel was running through, cars (too). It was a thriving (entryway) for bringing things in and of course Hamas was collecting a lot of revenue from customs and licenses on these tunnels.

John Defterios (JD): What are the conditions on the ground for Palestinians today with the tunnels shut and before the strikes?

DB: About half of the Gaza population receive humanitarian support from the UN. There's also salaries coming in from the Palestinian Authority to its members of the civil service -- there's about 70,000 of those.

But without that trade coming in through the Rafah crossing from Egypt, the situation is becoming increasingly more subdued and desperate for the people on the ground.

JD: Grinding poverty and the desire by Hamas to strike at Israel. Would you say there is a direct link?

DB: Well, I think the timing of this escalation is linked to a number of things. Obviously we have the breakdown of the peace process. We have the reconciliation if you like, the unity government between Hamas and Fatah.

But certainly from the Hamas point of view, the desperation they were in may have driven them to risk getting involved in this escalation on the assumption that a major crisis would result in a major reappraisal of the entire economic situation.

Read: Answering Egypt's economic riddle

Read: Tehran's tsunami of tourists

Read: Where does ISIS get its money?

ADVERTISEMENT
Part of complete coverage on
Marketplace Middle East
updated 12:56 AM EDT, Mon September 15, 2014
Making wine in the Golan Heights is a surreal experience as war rages nearby.
updated 9:10 AM EDT, Tue September 9, 2014
On a man-made island in the Middle East, the world's newest super mall sits empty -- for now.
updated 10:25 AM EDT, Fri September 5, 2014
In spite of local unrest, luxury property development across the region is on the rise -- and so are prices.
updated 9:53 AM EDT, Fri August 29, 2014
John Defterios looks at how oil exports fuels the terror organization's growth.
updated 10:14 AM EDT, Fri August 15, 2014
A little over 26 years ago, Mohammad Reza Najafi started manufacturing auto parts in Iran.
updated 9:50 AM EDT, Mon August 25, 2014
Lana Del Rey performs at the Byblos International Festival in 2013.
The ancient town of Byblos in Lebanon has attracted some of the world's biggest music stars.
updated 10:33 PM EDT, Thu July 24, 2014
French baguettes aren't the traditional bread of choice in the Middle East, but a Saudi firm wants to change that.
updated 10:33 AM EDT, Fri July 18, 2014
Iran has seen a doubling of tourists visiting the country in the last year and hoteliers are rushing to accommodate them.
updated 10:41 PM EDT, Mon July 14, 2014
In a tiny car repair shop in the Jordanian capital of Amman, one can encounter the latest efforts to solve the country's sky high youth unemployment rate.
updated 9:12 AM EDT, Mon July 14, 2014
Youth unemployment is not a new subject to make the headlines (see Spain and Greece) but it is has become a particularly acute problem for Jordan.
ADVERTISEMENT