Israeli occupation costs Palestine over nine billion dollars every year

Alistair Avon /PNN/ Bethlehem/

The occupation negatively affects almost every aspect of daily life in Palestine, imposing a annual huge economic cost.  Putting a price tag on the occupation is a difficult and imprecise task, but a report by the Applied Research Institute – Jerusalem (ARIJ) has come up with a figure: $9.4588 billion (about 33 billion shekels) in 2017, representing more than 74 percent of Palestinian GDP, which hit 14.5 billion USD  according to the World Bank.  

 This figure is likely an under-estimation of the true costs of the occupation, because the report only includes costs for which reliable and relatively precise estimations could be made.

The report splits the costs on the Palestinian economy into five categories and calculates the costs imposed by the occupation on each. The biggest share of the costs is due to lost infrastructure, representing 35 percent of the total, 28 percent are due to restrictions on access to natural resources, 17 percent due to human capital losses, 16 percent from the different Palestinian industries and services, and three percent as fiscal revenue leakage from the Palestinian Authority to Israel.


Since its occupation, Israel has targeted essential Palestinian infrastructure. Infrastructure is essential for economic development, as it creates an enabling environment for growth and increases the efficiency of investment and innovation.

The most severe damage to Palestinian infrastructure has occurred in Gaza, particularly during Israel’s three major attacks on the strip since 2008. The report only looks at losses due to the 2014 assault on Gaza and puts this cost at $2.76 billion.

The most affected areas are agriculture, health, housing, education, water, sanitation and hygiene, roads and transportation, electricity, PMA and banking, information technology and telecommunications.

The cost of electricity under the occupation is approximately $390 million according to the report. This is due to   the difficulties of constructing a power network in Israeli-controlled Area C of the West Bank as well as difficulties importing electricity because of Israeli control of Palestinian borders.

In the Gaza Strip, the destruction of a power plant in 2014 by Israeli forces and Israeli-imposed restrictions of the use of a Gazan marine gas field have added to the energy crisis.

The occupation’s restrictions on the movement of people and goods is estimated to cost $185 million, due in large part to the constraints this places on competitiveness and economic development in the West Bank. These restrictions result in substantial transportation delays and higher transaction costs, affecting the productivity of the public and private sector alike.

Finally, house demolitions, which are common in the West Bank, are estimated to cost $10 million per year. This figure does not include relocation costs or the social and psychological costs attributed to the demolition of homes.

Restrictions on access to natural resources

Lack of access to public and privately owned natural resources by the Palestinians also plays a part in the economic costs of the occupation. Restricted accesses to farms, olive groves, grazing lands and a lack of autonomy over access to water are some of  the numerous restrictions placed on those living in the West Bank overt the past 52 years.

The report estimates that restricted access to natural resources is costing Palestinians $2.63 billion per year. Limited access to water alone makes up $1.49 billion of this figure because of the cost of purchasing water from Israel, foregone agricultural production costs and health costs. Israel has appropriated the majority of the water supply, leaving Palestinians with access to only about 15 percent of the West Banks’ water system.

Economic losses due to land confiscation make up almost half, $1.00 billion, of the $2.63 billion, from lost land and lost agricultural revenue.

Reasons for land confiscation include settlement expansion, the construction of bypass roads through Palestinian territory and the construction of the separation barrier. 714,633 dunums of land have been confiscated in the West Bank, of which 239,011 are in East Jerusalem according to The ARIJ report.

Access to Gaza’s offshore natural gas reserves is also obstructed by Israel, costing $160 million. Lack of access to fishing zones, mainly off the coast of the Gaza strip, costs $18 million.

Human Capital

The $1.61 billion annual cost of the loss of human capital imposed by the Occupation is restricted in the ARIJ report to the imprisonment of Palestinians for political reasons and dedications from Palestinian workers in Israel.

The lost revenue from political prisoners is calculated using a figure from Addameer of 6,700 Palestinian political prisoners in Israel as of October 2015. This figure is relatively stable: War on Want estimates approximately 6000 political prisoners in 2018.

The PA provides families of these prisoners with a monthly stipend, estimated by the RAND report (2014) at $200 million. This figure reflects the potential contributions of these prisoners to the economy.

Secondly, because of the occupation of the West Bank and blockade of Gaza, Palestinian workers depend on employment inside Israel: in 2013, Palestinian workers in Israel constituted 11.2% of the Palestinian labour force. The Israeli government is stringent in making the same deductions from Palestinian and Israeli wages, but Palestinians do not receive the social welfare and other benefits that these deductions entitle them to. ARIJ calculations based on those calculated by Zohar & Hever (2012), suggest that Israel owes Palestinian workers in Israel $ 1.41 billion, comprising the annual deduction amount, in addition to the accumulating deductions from 1970 with an annual interest rate of 5%.

Palestinian industries and services

Growth in the industrial and service sectors is essential to economic growth and development. However, because of the risks of political instability, weak infrastructure and restricted access to natural resources, investment in the industrial sector in Palestine has been relatively low.

The report estimates the cost of the Israeli restrictions on the industrial and services sectors at $ 1.55 billion. Particularly affected are mining and quarrying ($1.16 billion), banking ($15 million), agriculture ($23 million), tourism ($56 million), and telecommunication ($48 million). The Israeli imposed restrictions on Palestinian exports and imports lead to two different types of costs: the lack of availability and higher cost of production inputs and the costs on the restrictions of handling processing and transporting exports. The total estimated cost of export and input restrictions is $254 million per year.

Israel’s Legal Obligation to Pay Reparations

 A second report, published by the UN committee of Trade and Development (UNCTAD), discusses Israel’s legal obligation to pay reparations to the Palestinian people for the costs of the occupation.  It is important to note that many of their losses – the loss of life, normal family and community life, neighborhoods, culture, shelter and homeland – cannot be assigned a cost so any reparations paid will only ever be partial. The report concludes that Israel has a legal obligation to make financial amends for the occupation. It notes that the Oslo Accords have significantly stifled economic growth in Palestine: if pre-Oslo Accords growth trend had continued, Palestinian real GDP per capita could have been at least double its current size.

As well as the costs discussed above, the UNCTAD report discusses Israel’s failure to promote economic development in Palestine: as Israel is a ‘belligerent occupier’ it has a duty not only not impede development but take affirmative steps to achieve it. In particular, Israel’s military operations are inconsistent with its duty to promote economic development.

The report cites several legal precedents of belligerent occupiers paying remedies ordered by international courts: for example, Turkey to Cyprus; Uganda to the Democratic Republic of Congo. It also cites peace treaties that have required belligerent occupiers to pay reparations following a war: notably, Germany after the Second World War. Finally, it cites the financial obligations imposed on Iraq by the Security Council for harm caused by Iraq during its occupation of Kuwait in 1990–1991.

The report concludes that the international community has an obligation to ensure Israel is accountable for the economic costs of occupation for the Palestinian people and that this is grounded in laws and precedents. However, the report does not suggest the best way to pressure Israel to pay Palestine economic compensation. The International Criminal Court (ICC) is currently investigating Israeli actions in the West Bank and Gaza including the demolition of Palestinian property and eviction of Palestinians from the West Bank and East Jerusalem. A ruling by the ICC will exert sufficient pressure on Israel but, perhaps, in the absence of this the best strategy is for the international community to support BDS.