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2004-12-08 13:16:00
Embassy Tel Aviv
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						C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 006209 



E.O. 12958: DECL: 12/08/2014

Classified By: DCM Gene A. Cretz for reasons 1.4 (b) and (d)

C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 006209



E.O. 12958: DECL: 12/08/2014

Classified By: DCM Gene A. Cretz for reasons 1.4 (b) and (d)

1. (C) Summary: In their discussions of Israel's
disengagement plan, the World Bank continues to highlight the
Gaza Strip's border crossings as key to Gaza's economic
success. The international donor community has approached
the Israelis about humanitarian and economic problems that
arise from slowdowns and closures at Karni and Erez crossing.
The GOI acknowledges these issues and is taking steps to
improve the crossings regime. UNRWA, which imports some
2,500 containers annually, describes Karni terminal as a
hopeless case that has cost UNRWA some USD one million in
per-container costs, and says it believes increased container
capacity at Rafah crossing is the best solution. Gazan
businessmen dependent on imported raw materials are also
pessimistic, citing 20-day delays for goods at Karni, and
five-hour holdups for businessmen at Erez that make it
impossible for Gazans to do business in Israel or the West
Bank on 12-hour permits issued by COGAT. COGAT, in turn,
states that the GOI is fully committed to "increasing trade
with Gaza" by increasing capacity at Karni and Erez and by
"making sure businessmen can get out" of the Strip. GOI
interlocutors are confident that "technological fixes" at the
crossings will solve the problem, but say the GOI will need
substantial assistance from the U.S. and other donors to make
this work. End Summary.

UNRWA: Debacle at Karni Costing USD One Million
-------------- --

2. (C) Olaf Molander, who handles shipping of humanitarian
supplies for UNRWA and the several relief organizations under
UNRWA's shipping umbrella, told Econoff November 10 UNRWA has
been hit especially hard by the GOI's policy of enhanced
screening at Karni terminal for empty containers leaving the
Gaza Strip, which was put in place after March's suicide
bombing at Ashdod port. The change has caused Turkish,
Cypriot, and Israeli shipping companies to charge extra for
each day the containers are stuck in storage. Molander said
this delay has raised UNRWA's per-container costs from an

already high USD 300 during the intifida period to USD 600
since August. (Note: Pre-intifada per-container costs
averaged USD 150. End note.) Since UNRWA brings between two
and three thousand containers into the Gaza Strip each year,
Molander said, this figure has become unwieldy -- the
organization has paid out over USD one million in storage

3. (C) Ostensibly to alleviate this problem, said Molander,
the GOI fitted one of Karni's terminals with an x-ray machine
in August. The machine is supposed to scan empty containers
leaving Gaza at a rate of 500 per day, he explained, but
staffing shortages, technical problems, and what he terms "a
simple lack of will" have kept this daily output closer to
only 100 for months now. In Molander's view, bureaucratic
differences among the various GOI agencies has contributed to
Karni's "unacceptable" operation. While the semi-private
Israeli Airports Authority, who runs the terminal and makes
money off of each screening, would like to provide better,
faster service, the security concerns of the Shin Bet and the
Israeli police inevitably slow functioning at the terminal.

Rafah Should Increase Container Screening

4. (C) Molander said goods have been moving so slowly
through Karni that UNRWA has been considering the potential
of the Rafah crossing, on Gaza's southern border with Egypt,
as an alternative container terminal in the future. This
cannot happen soon, he explained, since at present Rafah only
has capacity to handle palletted cargo, not the container or
bulk packaging that UNRWA uses to import most of its
humanitarian supplies. He predicts, however, that within a
year following disengagement the Egyptian government will
begin serious maneuvering to "get in on" some of the trade
into and out of Gaza, which the Haifa and Ashdod ports
currently control. He argued that this is not a political
issue, but simple economic opportunity for Egypt. As such,
he posited that it can and will occur whether Israel retains
control over the Philadelphi corridor or not.

-------------- --------------
Gazan Businessmen: Goods Still Blocked at Karni...
-------------- --------------

5. (C) Gazan factory owners and other manufacturers who
depend on imports of raw materials for their businesses say
they have seen "effectively no" improvement at Karni or Erez
since the intifada began, and they remain pessimistic about
the future. In a December 2 conversation with Econoff,
Mohammed Yazgi, owner of Gaza's Pepsi bottling plant and
member of the Palestinian Business Association, conceded that
shipments of fresh fruit and concrete are not limited in
number and have indeed been moving somewhat more quickly
through Karni over the past several months, due in part to
the interest of the Israeli produce shipping giant Agrexco.
Essential materials like sugar, flour, bottles and other
packaging items, however, are still routinely held 20 days or
more at the border. For himself and other manufacturers,
Yazgi said, these are the goods that really matter.

6. (C) An average of 100 containers per week of these types
of commodities comes into the Gaza Strip, Yazgi said, whereas
before the intifada that number was over one thousand. This
delay is not caused by the Israeli Airports Authority staff
who man Karni -- recently the IAA agreed to keep the terminal
open until 11:00 at night, and Yazgi says he has often seen
employees working late -- but rather by the IDF and other GOI
agencies who have limited the number of trucks that can even
approach the terminal to only five or six per day.

... And Businessmen Still Blocked At Erez

7. (C) "Erez crossing is the real disaster," Yazgi said.
"Imagine that all of Gaza has to move through one
six-meter-wide lane, with a gate at the end of it allowing
one person through at a time." Yazgi described a regime in
which terminal staff accepts groups of ten to fifteen
individuals every two to three hours for extensive screening
procedures that take another hour and a half. Businessmen
are generally not a "priority group" and are called for
screening only after humanitarian cases, of which there are
frequently dozens, are cleared to cross. This means that
businessmen arriving at Erez 7:00 or 8:00 in the morning are
only able to enter Israel in the afternoon. Meetings in the
West Bank, Tel Aviv, or Haifa are then almost impossible, he
said, since permits are limited to one day. By the time a
businessman reaches his destination, he barely has time to
turn around and get back to Erez on time.

COGAT: GOI Committed to Better Crossings
But Needs Money

8. (C) Yitzhak Gurvitch, head of COGAT's economic division,
told Econoff November 20 that the GOI has adopted a clear
goal of increasing trade into and out of the Gaza Strip by
increasing capacity at the Karni terminal in tandem with
disengagement. Before the intifada, he said, Karni was
processing some 700 container-bearing trucks per day, and
sometimes up to 1,000. The terminal has the potential to
process between 1,000 and 1,500 containers per day with the
installation of two new movable container scanners and
complete utilization of a two-shift schedule. These two
scanners are in addition to the scanner the PA purchased and
the GOI installed at Karni in August. The GOI's November
response to the World Bank's report states that waiting time
at Karni can be reduced to as low as 24 hours, depending on
the establishment of a center for ordering and coordination.
There is only one problem, he said -- the GOI does not have
enough money for these improvements. It can be done only
with assistance from the U.S., the World Bank, or the
international donor community.

9. (SBU) In November meetings with USAID representatives,
Dr. Yair Hirschfeld of the Economic Cooperation Foundation
said that the GOI is considering investing USD 20 million in
a complete overhaul of the Erez crossing. The overhaul would
enable the terminal to accommodate a greatly increased number
of passengers, as well as serve as the primary terminal for
the import of container goods into the Gaza Strip. A
proposed rail line from Ashdod to Erez would bring imports to
the terminal much faster than they are currently arriving.
This would free up Karni to deal primarily with the export of
empty containers and Gazan products, and ensure redundancy in
the crossings regime.

10. (C) Gurvitch added that improved security technology at
Erez would enable the GOI to issue a much higher number of
business permits to Gazans, in principle "without limit,"
under similar standards as those used currently, including
references from Israeli counterparts or membership in a
chamber of commerce. "The important thing is not that
Israeli businessmen can get into Gaza, but that Gazan
businessmen can get out," he said.

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