PALESTINIAN-AMERICAN BUSINESSMAN SEEKS HELP WITH

C O N F I D E N T I A L JERUSALEM 002606

SIPDIS

SIPDIS

NEA FOR FRONT OFFICE; NEA/IPA FOR
WILLIAMS/GREENE/WATERS/WAECHTER; NSC FOR
ABRAMS/DORAN/LOGERFO; TREASURY FOR NUGENT/ADKINS

E.O. 12958: DECL: 06/24/2016
TAGS: ETRD ECON KWBG IS
SUBJECT: PALESTINIAN-AMERICAN BUSINESSMAN SEEKS HELP WITH
PROBLEMS AT KARNI/AL-MINTAR CROSSING

REF: TEL AVIV 2301

Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d).

This cable was cleared with Embassy Tel Aviv.


1. (C) Palestinian-American businessman Zahi Khoury (please
protect) met with the Consul General and the Ambassador June
20 at the Consulate General in Jerusalem to discuss problems
at the Karni/al-Mintar crossing.


2. (C) As the Chairman of the Board of the Palestinian
Economic Development (PED) Company, a fully-owned subsidiary
of the Palestine Investment Fund (PIF) charged with managing
the former Gush Khatif settlement greenhouses, Khoury noted
that PED was forced to lay off, at the end of May, 4,000
agricultural workers in Gaza due to the closure of
Karni/al-Mintar to Palestinian agricultural exports. The
closure has made it uneconomical for PED to continue to
employ those workers past the end of the growing season.
Khoury commented that PED, which was to have been a strategic
investment company operating in the West Bank and Gaza for
the PIF, would likely be absorbed by the PIF at the end of
July because it had not been able to sustain the initial PIF
investment.


3. (C) Khoury is also the Chairman of the National Beverage
Company Ltd. (NBC),the West Bank/Gaza bottler of Coca-Cola
products. He described how Coca-Cola is re-evaluating
whether it should continue distribution of its products in
Gaza, given the delays and costs the company face at the
Karni/al-Mintar crossing. He said the company had shelved
for the time-being plans to open a USD 7 million bottling
plant in Gaza using environmentally and more cost-effective
returnable bottles due to concerns about getting inputs into
Gaza. Khoury noted that NBC products, currently produced in
the West Bank, faced significant transaction costs, including
a "special private tax" (i.e. bribes) at Karni/al-Mintar,
that "automatically put in the red" those companies that ship
lower-cost consumer products. He said that this "special
private tax" fluctuates depending on how long the crossing
has been closed but is usually at least NIS 1500 (USD 338)
per truck trailer. Khoury said he was not averse to paying
reasonable, transparent user fees at crossings but could not
sustain payment of this "special private tax."


4. (C) The Consul General noted that the U.S. Security
Coordinator is working with the Palestinian Authority's
Office of the President to improve security at
Karni/al-Mintar. He also noted that President Abbas appears
to be listening to private sector concerns about the crossing
and may take steps to privatize it. The Ambassador noted
that he is aware of the problems on the Israeli side and that
he is actively raising the issue with his interlocutors. He
said that one solution he is pressing is a transparent
registration system for trucks seeking to process their goods
through the crossing. Khoury noted that, if there is not an
improvement, companies will be forced to continue to make
investment decisions that negatively impact the Palestinian
economy, such as moving their operations and jobs elsewhere.
WALLES