POSSIBLE NEW ISRAELI-PALESTINIAN COMPANY ATTEMPTS

C O N F I D E N T I A L SECTION 01 OF 02 JERUSALEM 000529 SIPDIS SIPDIS NEA FOR FRONT OFFICE; NEA/IPA FOR WILLIAMS/SHAMPAINE/STEINGER; NSC FOR ABRAMS/DORAN/WATERS; TREASURY FOR SZUBIN/LOEFFLER/NUGENT/HIRSON E.O. 12958: DECL: 03/19/2017 TAGS: ECON EFIN ETRD PGOV KCOR KWBG IS SUBJECT: POSSIBLE NEW ISRAELI-PALESTINIAN COMPANY ATTEMPTS TO MONOPOLIZE ACCESS TO KARNI/AL-MINTAR CROSSING REF: A. 06 JERUSALEM 5031 ¶B. JERUSALEM 224 Classified By: Consul General Jake Walles, Reasons 1.4 (b) and (d). ¶1. (C) Summary: Palestinian truckers and businessmen allege that a new Israeli-Palestinian transport company is seeking complete control over goods transiting the Karni/al-Mintar crossing. The new company reportedly includes Israeli firms already involved in manipulating the crossing's current scheduling system to the detriment of Palestinian importers and producers. A Palestinian company allegedly involved is a subsidiary of PADICO, the largest company in the West Bank and Gaza. Palestinian truckers protested by barricading the Gaza side of crossing March 11-12. Despite some strike-ending concessions, Palestinian merchants still fear that the new "cartel," allegedly backed by senior PA officials, will eventually succeed. End summary. -------------- A "Cartel" is Formed? -------------- ¶2. (C) In early March, ConGen contacts began reporting that Israeli and Palestinian transport companies, backed by individuals on both sides of the Karni/al-Mintar crossing, had formed a new company to gain near exclusive control of shipments through the crossing. A total of seven Israeli companies are said to be involved, including those known to Palestinians as "the five gods" due to their long-standing manipulation of the crossing's current scheduling system by which Palestinians are charged exorbitant fees for timeslots needed to ship goods (See ref. A). ¶3. (C) On March 15, Palestine Industrial Estate Development Company (PIEDCO) General Manager Nedal Ismail confirmed to Econoff that a fellow PADICO subsidiary, the transport company Wassil, had joined the new "cartel," albeit via its Israeli-registered affiliate. (Note: Founded in 1994, PADICO, a Nablus-based holding company funded mainly with Palestinian diaspora investment, has become the largest and most influential company in the West Bank and Gaza. End note.) Ismail asserted that "60-80 percent" of the Palestinian goods transiting Karni/al-Mintar are from the PADICO group, and the Wassil company felt it deserved a larger share of the business. (Note: Palestinian Federation of Industries (PFI) Executive Director-Gaza Amr Hamdan told Econoff March 20 that the PFI had rebuffed an earlier solo attempt by Wassil to monopolize the transport of Gaza exports. End note.) -------------- Truckers Strike -------------- ¶4. (SBU) Believing the new Israeli-Palestinian company intended to drive them out of business, Palestinian truckers closed the Karni/al-Mintar crossing March 11-12 by blocking Gaza access points. Director General of the General Administration of Crossings and Borders (GACB) Nazmi Muhanna asserted publicly that the truckers were reacting to new procedures aimed at limiting their ability to collude with Israeli drivers. GACB Director General for Security Salim Abu Safiyah denied the existence of the new company, claimed that Israeli-Palestinian companies are not charging higher fees, and accused the truckers of taking bribes from Israeli transport firms. The Ministry of National Economy, however, announced that it had refused to register the new company and implied that the company was not being run in a transparent fashion. ¶5. (C) The strike ended the evening of March 12 after the truckers reached an agreement with the GACB and Presidential Security Advisor for Gaza Abed al-Razaq Mujahdah, according to ConGen contacts. The unpublished agreement reportedly denies the new company access to the crossing, grants Palestinian companies access to all Palestinian crossings, prohibits Palestinian truckers from coordinating shipments with their Israeli counterparts, requires that shipments be arranged by Palestinian merchants through the coordination office on the Palestinian side of the crossing, and establishes a committee with Palestinian merchants and GACB representatives to address transportation issues. -------------- JERUSALEM 00000529 002 OF 002 The Threat Remains -------------- ¶6. (C) Despite this agreement, Palestinian truckers and merchants have expressed fear that the cartel has the necessary clout to succeed. PFI Executive Director Hamdan, Construction Industrial Association (Gaza) Chairman Ali Hayek, and several other private sector contacts have recently told Econoff that it is common knowledge among Palestinians that Muhanna and Abu Safiyah are corrupt, particularly in regard to bribes and kickbacks from Karni/al-Mintar operations. Hamdan claimed that Abu Safiyah's home in Gaza is worth more than USD 1 million. Muhanna and Abu Safiyah's public comments against the truckers are perceived as attempts to deflect attention from their own corrupt practices and their likely ties to the new company. Hamdan, Hayek and others closely link both Muhanna and Abu Safiyah to prominent Fatah leader Mohammed Dahlan, who is also reported to have business ties to Abdel Malik Jaber, CEO of PalTel, another subsidiary of PADICO. On the other hand, Dahlan told Consul General that Muhanna is corrupt and should be removed. -------------- Comment -------------- ¶7. (C) GOI plans to extend the hours at Karni/al-Mintar by adding an extra shift next month may have prompted those currently benefiting from the broken scheduling system to try to consolidate their control now. The involvement of a Palestinian firm does not surprise Palestinian business leaders, who have long complained that "two mafias," Israeli and Palestinian, are ultimately responsible for corruption at the crossing. Nearly all Palestinians believe Muhanna is corrupt and benefits from the current stranglehold on the crossing by Israeli and Palestinian groups. Until a transparent and demand-driven scheduling system is adopted, corruption and inefficiencies will continue to plague crossing operations, with Palestinians and their already severely weakened economy bearing most of the cost. WALLES