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04TELAVIV6665 2004-12-30 14:39:00 CONFIDENTIAL 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 006665 



E.O. 12958: DECL: 12/26/2014

Classified By: Economic Counselor Bill Weinstein for reasons 1.4 (b) an
d (d)

1. (C) Summary and Comment: On December 15 Emboffs toured
the Israeli side of Karni Terminal, the site of a proposed
World Bank pilot program of technological and management
fixes that include replacing the current back-to-back
shipping system with free-circulating trailers. Situated on
the eastern border of the Gaza Strip between Gaza City and
the Nachal Oz settlement, Karni is an approximately 50-acre
fenced area centered around a covered warehouse-type loading
dock that runs the length of the facility and is cut in half
longitudinally by a 25-foot high concrete wall. The wall
ensures complete separation between Israeli and Palestinians,
and enforces the back-to-back system of shipping. Gazan
exports are removed from their containers on the Palestinian
side of the terminal, sent through the wall via one of eight
low-capacity scanners, and loaded onto Israeli trucks for
onward shipping. Gazan imports of raw materials and
humanitarian goods are passed through the wall into
restricted-access areas on the Palestinian side. Fruits and
vegetables are transferred via what general manager Yoni
Doton called "the lions' cages" -- vast warehouse-like rooms
that operate like an airlock, in which one door is sealed
when the second is open. Terminal staff employs a modified
2004 mobile scanner that can more quickly check empty
containers leaving the Strip, and terminal management hope
the addition of two more scanners will drastically increase
capacity. Both GOI and World Bank plans for further
technological enhancements, however, must be accompanied by
management strategies that take into account a civilian staff
under military authority, as well as a physical
infrastructure built more for security than economic
efficiency. End Summary.


Karni's Infrastructure of Separation


2. (SBU) On December 15 Emboffs toured Karni Terminal, the
Gaza Strip's primary trade gateway to Israel and the rest of
the world. Karni is the proposed site of a World Bank pilot
program of technological and management fixes that center on
replacing the back-to-back system of shipping with
free-circulating trailers that can move between Israel and
the Gaza Strip by switching drivers at the terminal. Some
GOI interlocutors have said Israel is willing to consider
this idea in principle, but as yet the GOI has taken no
concrete steps to actualize it. At present, Karni's physical
plant allows only back-to-back shipping. The terminal is an
approximately 50-acre fenced facility, its peripheral areas
primarily devoted to truck parking and queuing, and its
central focus a covered warehouse-style loading dock running
the length of the facility and divided in half longitudinally
by a twenty-five foot high concrete barrier. There is no
passage through the wall except via x-ray scanners and
conveyor belts. General manager Yoni Doton explained that
when the Intifada began, the original open-air loading docks
located at the terminal's southeastern edge were converted
into storage sheds, and its walled section was expanded for
exclusive use. It now "ensures complete separation" between
Israelis and Palestinians during cargo processing.


Current Capacity and GOI Projected Improvements



3. (C) Karni now handles shipments into and out of the Gaza
Strip in four versions of back-to-back:

Gazan exports move as paletted cargo through one of eight
x-ray scanners set into the wall that separates the Israeli
and Palestinian sides of the terminal.
Israeli exports of bulk items, raw materials, aggregates, and
some livestock pass through the wall via chutes and conveyor
belts into restricted-access areas on the Palestinian side,
where cleared lift operators then transport the cargo to
Palestinian trucks for onward shipping.
Fresh produce for import and export is off- and on-loaded in
airlock-style rooms built into the wall where only one door
is opened at a time, maintaining the wall's "security seal."
A mobile scanner located in a separate walled area checks
groups of empty containers and pallets leaving the Gaza

GOI sources and terminal management state that Karni's total
capacity for import and export using all four methods is
approximately 450 truckloads per day since the implementation
of stricter inspection measures following the March 2004
bombing at Ashdod port, with an overall average since 2000 of
approximately 500-550 truckloads per day. (Note: COGAT
figures are based on the number of 20-foot cargo bed trucks
the terminal processes daily, rather than on . End note.)
With a proposed increase in hours of operation as well as the
hoped-for addition of two new mobile scanners that will
reportedly be used to check an additional 800-1,000
containers per day, both empty and full, COGAT says terminal
capacity will skyrocket to over 1,500 truckloads per day.


The World Bank Proposal


4. (C) The World Bank questions these estimates, however,
asserting that better technology and additional working hours
will not result in significant capacity increases if
back-to-back, with its time-consuming and damaging element of
completely dismantling and repacking shipments, remains in
place. They advocate instead a free circulating trailer
system in which cargo is checked by a high-powered scanner
without being removed from its container or pallet, and
trucks are able to cross back and forth between Israel and
Gaza by exchanging only drivers at the terminal.
Drive-through saw-toothed loading docks, which the World Bank
asserts will take up less space and facilitate quicker entry
and exit for trucks, and an expanded terminal parking
lot/truck queuing area will also be necessary in order to
further address delays, the bank says.


Karni Operations Today


5. (C) Terminal management says it remains committed to
planned technological improvements that fit within the
framework of Karni's existing system, and is doubtful that
security can be assured under proposals that go beyond it, in
particular the replacement of back-to-back with
free-circulating trailers. General Manager Doton told
Emboffs he does not expect the GOI to significantly change
Karni's four primary methods of cargo transfer:

The Import Shed -- Gazan exports enter Israel via eight x-ray
machines that run through the wall. Doton noted these
scanners are nearly ten years old and can only process goods
stacked to a maximum height of one meter. This requires
staff on both sides to dismantle most shipments, handling
individual packages of fragile items like ceramic tiles,
eggs, and bottles, a process which Doton conceded often
results in product damage. Doton said the scanners' hourly
rate varies with types of shipments -- during a 15-minute
visit inside the import shed Emboffs did not witness any
shipments coming through the scanners.

"Direct Transfer" and "Direct Pouring" -- Imports into the
Gaza Strip, including wood, plastics, textiles, aggregates,
oil, grains and flour, present much less of a security risk
than Gazan exports, and are sent through the wall via chutes
or conveyor belts into restricted-areas on the Palestinian
side for reloading. This is the sole means of entry into
Gaza both for raw materials crucial to Gazan factory owners,
and for humanitarian supplies distributed by relief
organizations like UNRWA, OCHA, and ICRC. Lt. Col. Itzhak
Gurvitch, head of COGAT's Economic branch, noted what he
called an additional drawback to the system -- too few chutes
and belts means that every truckload of raw materials passing
through the terminal takes the place of a truckload of
humanitarian goods, and vice versa. He said that terminal
management must try to balance this "opportunity cost" based
on a daily stocktaking of economic and humanitarian concerns
within Gaza. (Note: Gazan businessmen point out one of the
negative effects of low capacity on Palestinian-side terminal
operations as well -- businessmen must pay baksheesh to
terminal management to ensure their cargo is not moved to the
end of a register whose order is consistently disrupted by
influential requests for precedence. End note.)

The Lion's Cage" -- Fresh produce is transferred via a series
of vast rooms approximately 25 feet high, 25 feet wide, and
100 feet deep, with bay doors that open to both the Israeli
and Palestinian sides of the terminal. These doors are only
opened one at a time during loading and unloading, Doton
said, "like a lion's cage." Israeli staff monitors the rooms
via closed circuit television when the doors are open to the
Palestinian side. Doton pointed out five feet of wire
netting that closes the gaps between the ceiling and the side
walls in each room, explaining that in 2003 a Palestinian
gunman entered one room while Palestinian staff were working,
climbed the wall, and opened fire through the gap on two
Israeli staff working in an adjacent room, killing one and
injuring the second.

The Mobile Scanner -- Doton showed Emboffs the terminal's
newest technological addition, a 2004-model mobile container
scanner that PA Minister of Finance Salaam Fayyad purchased
from China and that Israeli terminal management modified and
installed in August 2004. "The solution to the problem of
security is this kind of technology", said Doton. With the
scanner, terminal staff is able to check groups of five
trucks hauling 20-foot containers or pallets leaving Gaza in
less than ten minutes, with another eight to ten minutes for
analysis of the x-rays from the scan. Running without
interruptions the scanner could ideally process approximately
130 truckloads a day, a number that would drastically cut
waiting time for containers at Karni and address the problem
of high demurrage costs that Gazan businesses and relief
organizations currently pay the shipping companies to whom
the containers belong. (Note: Relief organizations state
that the GOI originally assured them and Gazan businessmen
that the scanner had a capacity of 400-500 containers per
day. They add that the scanner processes approximately 100
containers sporadically, with that number being much lower on
many days. Terminal and COGAT personnel cite frequent
IDF-instituted closures of the terminal, as well as
difficulties training new personnel on the scanner, as
reasons the scanner's reported inconsistent output. End


Karni's Management Quandary:
Civilian Staff in a Militarized Environment


6. (SBU) Doton is optimistic about the potential for more
and better scanner technology to bring Karni up to full
capacity. Technology is only one component of the terminal's
functioning, however, and an uncertain security situation as
well as a complex management structure also hinder
improvements. The semi-private Israel Airports Authority
(IAA) handles the terminal's daily operations, working on a
for-profit basis and therefore ostensibly committed to
efficient cargo processing. Yet an order from the IDF or
Shin Bet can shut down operations on a moment's notice, even
in the middle of the day, making it difficult for the IAA to
maintain consistency. (Note: IAA investment in Karni is NIS
30 million while revenues are closer to NIS 20 million. The
GOI finances any operating deficits. End note.)

7. (SBU) During the tour, the sounds of gunfire called
Emboffs' attention to an IDF tunnel-searching operation in
nearby Nachal Oz settlement. Doton noted that since all but
seven to ten of Karni's employees are temporary workers, and
the vast majority are young people drawn from isolated and
lower-income "development towns", many of them simply do not
show up to work when the security situation is bad. "These
kids make less than four thousand shekels a month. Their
families won't let them risk their lives for that kind of

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