GOI MOVES TO BLOCK PALESTINIAN MEAT AND DAIRY

UNCLAS SECTION 01 OF 02 JERUSALEM 001117

SENSITIVE
SIPDIS

NEA FOR FRONT OFFICE AND NEA/IPA; NSC FOR SHAPIRO/KUMAR;
TREASURY FOR AHERN; DEPT PLEASE PASS TO USAID FOR ANE/MEA:
MCCLOUD/BORODIN; JOINT STAFF FOR LTGEN SELVA

E.O. 12958: N/A
TAGS: ECON ETRD BEXP EAGR PREL KWBG IS
SUBJECT: GOI MOVES TO BLOCK PALESTINIAN MEAT AND DAIRY
PRODUCTS FROM EAST JERUSALEM


1. (SBU) Summary: Palestinian meat and dairy companies in
the West Bank have received notification from the Israeli
Ministry of Health that they will no longer be permitted to
"export" their products to East Jerusalem as of August 15.
Palestinian Authority officials and private businessmen
stressed the economic importance of the East Jerusalem
market, and characterized the move as "a politically
motivated effort." PA officials said that the PA will
respond with "reciprocal" measures on Israeli products
entering the West Bank. End summary.

Cut-Off Discussed and Averted for Several Months
-------------- ---


2. (SBU) ConGen sources said that wrangling over the
threatened cut-off of West Bank meat and dairy sales to East
Jerusalem began several months ago. The Israeli Civil
Administration (CA) notified Palestinian dairy and meat
suppliers in March that, as of April 1, 2009, their permits
to sell to East Jerusalem would be rescinded. According to
Palestinian business contacts, talks between Palestinian Food
Industries Association (PFIA) representatives and the CA in
April and May 2009 resulted in extension of the deadline
until August 15, 2009. In a follow-on letter dated May 21,
the Israeli Ministry of Health, citing Israel's Animal
Disease Ordinance of 1985, notified West Bank meat and dairy
companies that products of animal origin from the Palestinian
Territories will not be permitted to enter Israel, and past
permits will be invalidated. The implementation date is not
stated, but the letter set a July 1 deadline for companies to
respond in writing. (Note: Post has obtained copies of the
May 14 and 20 letters. End note.)

PA Threatens "Reciprocal" Response
--------------


3. (SBU) Minister of National Economy Bassim Khoury told
Econoff that he held an emergency meeting on June 20 with
Minister of Agriculture Ismael Edeiq, Minister of Health
Fathi Abu Moghli, and businessman Mazen Sinokrot to discuss
the PA reaction. He said he planned to contact the relevant
GOI ministries directly to explore what steps the companies
could take to maintain their connection to the East Jerusalem
market. If talks fail, Khoury said, the PA will impose
"reciprocal" restrictions on Israeli meat and dairy products
sold in the West Bank, to be enforced through the Palestinian
customs police and at the point of sale.


4. (SBU) PA Ministry of National Economy Advisor Saad
Al-Khatib told Econoff on June 26 that the GOI's move is a
"politically motivated effort to assert Israeli economic
dominion over East Jerusalem." Bader Rock of the PA's
Negotiation Support Unit (NSU) said the cut-off a "clear
violation of the Paris Protocol," of Article VII in
particular. Rock told Econoff on June 30 that the PA
requested a meeting of the Agriculture Committee (a
sub-committee of the Joint Economic Committee) on June 28.
If the PA does not receive a positive response, he said, they
will elevate this issue as a dispute to the JEC.


5. (SBU) NSU contacts said that it does not appear there are
new standards that Palestinian food exporters need to meet or
new permits to obtain; rather, this decision is a categorical
refusal of the entry of such products. Rock said that the
decision appears to be based upon a new reading of the GOI's
Animal Disease Ordinance of 1985, which treats the entry of
animal products from the Palestinian Territory into East
Jerusalem and Israel as "importation." Rock said that, since
the Palestinian Territories are not on the Israeli list of
"foreign countries," according to the Animal Diseases
Regulations of 1974, companies in the Palestinian Territories
cannot apply for an import permit -- and therefore cannot
receive permission to export into East Jerusalem or Israel.

Palestinian Businesses Rely on East Jerusalem Market
-------------- --------------


6. (SBU) Mashour Al Juneidi, CEO of Hebron's al-Juneidi
Dairy (the West Bank's largest),told Econoff on June 29 that
his dairy has had GOI licenses to sell in East Jerusalem
since 1995. He said that he wants to resolve this problem,

JERUSALEM 00001117 002 OF 002


but "we just don't know what they need, or what they are
asking for." Al Juneidi said he fears that the dairy will
soon lose the 12 percent of its revenues that it derives from
sales to East Jerusalem. Contacts in PFIA said that sales to
East Jerusalem account for as much as 20 percent of
Palestinian companies' dairy and meat sales, and added that
the new measure would deal a particularly harsh blow to meat
companies that have already lost the Gaza market, formerly
about 35 percent of sales, to the GOI blockade.
WALLES