The Palestinian plan for achieving statehood this September is not limited to a vote recognizing a state in the United Nations General Assembly. While several overseas trips in the past month by Prime Minister Binyamin Netanyahu and Foreign Minister Avigdor Lieberman have been focused on enlisting countries to vote against the expected UN resolution, Palestinians officials are discussing other measures to increase the PA’s sovereignty – either alongside the UN bid or in the case of its failure.

Last week, a senior Fatah official hinted at what other measures the PA is considering in its quest for statehood if efforts in the UN are stymied, among them, selling off the shekels in circulation in the Palestinian territories.

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“The Palestinian leadership will be pushed to take decisions with strategic dimension in dealing with this matter, including the use of the US dollar as the main currency in the Palestinian markets instead of the Israeli shekel,” Fatah Central Committee member and PA economic official Muhammad Shtayyeh was quoted as saying by the Ma’an news agency.

The effects of such a move could be significant, especially in the short-term.

There is a total of NIS 45.7 billion in circulation, a Bank of Israel representative told The Jerusalem Post. “The amount of Israeli currency circulating in the Palestinian Authority is about 8 percent of the total amount mentioned above,” the central bank said in a statement last week.

If the Palestinians were to “aggressively” sell off the entire approximately NIS 3.656 billion circulating in Palestinian markets without coordinating the move with the Bank of Israel, a surplus of shekels would be created, causing a devaluation of the shekel and possibly leading to inflation, Dr. Amos Nadan of Tel Aviv University’s Moshe Dayan Center for Middle Eastern and African Studies told the Post. In the long-run, however, the effects on Israel’s economy and the value of its currency would be negligible, he added.

From a political perspective, Nadan explained, “The logic is quite clear. If you declare independence, then one of the things you want to do as a Palestinian is to say, ‘We want to have our own currency.’”

Economically speaking, however, the move would only hurt the Palestinians.

Although the Israeli and Palestinian economies are intertwined, Palestinians are far more reliant on the Israeli economy than vice versa. Eight-seven percent of all Palestinian exports are to Israel and more than 73% of Palestinian imports come from Israel, according to the PA’s Central Bureau of Statistics figures for 2009.

In contrast, Israeli exports to the Palestinian territories in the same year – excluding goods imported from outside Israel, as well as diamonds – amounted to just over 2.5% of total Israeli exports, according to the Bank of Israel and the CIA World Factbook.

Considering the Palestinians’ heavy reliance on Israel, it would be detrimental to switch to an alternative currency, Nadan said. If, for instance, the PA adopted the US dollar as its primary currency, every time it carried out an transaction with Israel it would have to pay a transaction fee for an exchange between shekels and dollars. This would hurt Palestinians by increasing the cost of trade.

“If there is no significant change in the structure of [Palestinian] exports and imports, or in the dependency of the Palestinian economy on the Israeli economy, there is no economic logic to modifying the currency or changing the currency,” he said.

Even after the establishment of a Palestinian state, he added, the main Palestinian market for imports and exports “is Israel and will be Israel.”

But the economic illogic of such a move may be outweighed by political considerations, primarily ending Palestinian reliance on Israeli monetary policy set by the Bank of Israel. Moving to dollars would likely be seen as a move toward economic sovereignty regardless of continued trade ties with Israel. The PA may decide that the symbolic political benefit of ending its dependence on Israeli banks in a move toward statehood outweighs the economic consequences.

Another move being discussed as part of the larger Palestinian plan to move toward sovereignty in the absence of a negotiated two-state solution is one rooted in international law. PA President Mahmoud Abbas has discussed the possibility of turning to the International Court of Justice (ICJ) for an advisory opinion on the bid for statehood.

Adam Yoffie, a recent graduate of Yale Law School, writing in the Yale Journal of International Law, wrote that after decades of being failed by the UN, “Palestinians are adopting a broader view of international law that is not restricted to the United Nations.”

The emergence of international legal bodies such as the ICJ and the International Criminal Court offers new opportunities to use international law to advance the prospect of statehood.

Aside from seeking a UN General Assembly resolution recognizing Palestinian statehood, the PA can ask the GA to request an advisory opinion from the ICJ on the merits of statehood. The language of such a request, Yoffie argued, “could be similar to that presented following Kosovo’s declaration of independence: Are efforts by the Palestinian people to declare a state within the internationally recognized 1967 borders in accordance with international law?”

While neither a General Assembly resolution nor an advisory opinion by the ICJ would infer de facto statehood or sovereignty on the PA, he argued, it “would serve as another crucial, falling domino in the greater push toward statehood.”

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