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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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.”