GAZAN ECONOMY DISRUPTED BY KARNI CLOSURE

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000380

SIPDIS

E.O. 12958: DECL: 01/22/2014
TAGS: KWBG ECON ETRD IS GAZA DISENGAGEMENT ECONOMY AND FINANCE ISRAELI PALESTINIAN AFFAIRS
SUBJECT: GAZAN ECONOMY DISRUPTED BY KARNI CLOSURE

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


1. (SBU) Summary: The closure at Karni terminal, which has
been in effect since the January 13 attack that killed six
Israeli employees, has caused the agriculture, furniture, and
garment sectors within Gaza to lose some USD four million and
to lay off over 1,000 workers. In the Gazan marketplace,
prices of consumables like dairy products, flour, and grain
have increased by over 10 percent, while a glut of fresh
produce intended for export to Europe has caused strawberry
and tomato prices to drop by two-thirds. Optimistic sources
within Israeli and Gazan private enterprise say the total
closure will end shortly after the Eid holiday, but terminal
management claims they have no estimate of when Karni will
reopen. Others believe conflicts between Gazan farm workers
and agricultural collective leadership over the appropriate
response to Israel in the wake of the closure may linger
beyond the terminal's re-opening. End summary.

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Stalled Exports Mean Profit Losses, Layoffs
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2. (SBU) Karni Terminal, the Gaza Strip's sole trade gateway
to Israel and the rest of the world, has been closed since
January 13, when a bomb attack there killed six Israeli staff
and wounded many more. USAID reports that the attendant
cessation of Gazan exports to the West Bank, Israel, Europe
and the U.S. has resulted in a profit loss of more than USD
four million across the agriculture, furniture, and garment
sectors. Some 800 garment industry workers and several
hundred construction workers have been laid off since the
terminal closed, though industry contacts state they may be
re-hired once trade begins again in earnest and construction
projects are taken off hold. Israeli shipping company
Agrexco, which markets Gazan exports to Europe and the U.S.
under Israel's free trade agreements, reports that the 1.5
thousand tons of each Gazan product it usually ships during a
growing season has dropped to "zero" since the closure. As a
result, European clients have tired of waiting for shipments
to arrive and have turned instead to suppliers in Egypt,
Spain, and Turkey.

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Shortages and Price Increases
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3. (C) Gazan businesses dependant on imported raw materials
and relief organizations that bring hundreds of containers of
food and humanitarian supplies through Karni each month have
been especially hard-hit by the closure. Pepsi bottler
Mohammed Yazgi said product upheaval within the marketplace
is visible proof of the closure's effect -- "all kinds of
vegetables" meant for export to Europe now fill stalls and
adorn Eid tables. Kiosks hawk "mountains" of strawberries on
street corners for less than NIS 10 per 10 kilograms,
one-third their customary price. Cherry tomatoes, another
quickly perishable item, are also spoiling in the marketplace
or being "dumped" at slashed prices. Conversely, shortages
of consumables like dairy items, flour, and grain, which
generally enter Gaza through Karni, have resulted in price
increases of over 10 percent.

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Agrexco's Awkward Position
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4. (C) Agrexco marketing executive Rani Friedlander noted
that more than monetary loss, failure to deliver goods for
this extended period of time has severely undermined
Agrexco's credibility in the world marketplace and will
damage business in the long-term. As the primary shipping
and marketing arm for Gazan export everywhere in the world
besides the West Bank, Friedlander said, Agrexco has put
pressure on the IDF to reopen Karni quickly during previous
periods of closure. In this instance, however, it cannot
speak up -- the bomb attack took place at 10:50 pm only three
weeks after the IDF granted Agrexco's request to allow
terminal management to extend business hours from a 6:00 pm
closure to an 11:00 pm closure. The company is "in the
doghouse," Friedlander explained, and must stand aside as
politicians decide when Karni will reopen.


5. (C) Numerous Gazan and Israeli private sector contacts
said they believe the terminal will reopen immediately
following the Eid holiday, but terminal manager Yoni Doton
told Econoff he has heard nothing about a potential
reopening. The concrete wall that ensures separation between
the Israeli and Palestinian sides of the terminal is still
damaged from the blast, he said. Moreover, staffing is low
after casualties, injuries, and simple departures following
the incident, and it will be difficult to draw new workers
now that morale is so low.

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Striking Farm Workers Angry at Collectives
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6. (C) PalTrade project officer Hashim al-Hussaini (protect)
told Econoff that several hundred striking Gazan farmers
marched on the PA Ministry of Agriculture last week to demand
financial assistance in the wake of the Karni closure. Such
assistance may be granted, Hussaini said, but the conflict
that has arisen between farm workers and Gazan
export-oriented agricultural collectives over the appropriate
response to Israel after the closure could linger even past
the terminal's re-opening. When leaders from the Bayt Lahia
Cooperative, the Gaza Agricultural Cooperative, and the
Strawberry Farmers' Union -- also currently on strike --
recently planned to join PalTrade in a meeting with members
of the Israeli business community, the farmers demanded they
"not set foot" in Israel in protest of the closure. "(The
farm workers) didn't believe us that we were going to talk to
the Israelis about solutions," he said.


7. (C) "Complaining to the Ministry of Agriculture and
striking won't do them any good," Hussaini said. Instead, he
explained, farmers, union bosses, and Gazan business leaders
must demand the PA put a stop to terrorism. "The workers
don't realize it is these idiots (those who carried out the
attack) they should be angry at."

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