Operation Rising Lion against Iran is over, but the Israel-Hamas War in Gaza is dragging on, and Hamas still holds hostages. Can anything be predicted? Here is our best guess: redevelopment financed by gas.
Building blocks
US President Trump and his special envoy to the Middle East, Steve Witkoff, both have extensive experience in developing real estate projects. Despite the rhetoric, Gaza will need redevelopment.
In his 1987 book The Art of the Deal, Trump recommends keeping half a dozen balls in the air, being that most deals won’t work out.
Trump has also shown interest in rare earth and other mineral resources in Ukraine, Greenland, and Canada (the Canadians disagree).
Wars usually end with an economic solution. After World War II, the Marshall Plan revived Europe, and Gen. Douglas MacArthur brought American cash and laws to Japan. The 1998 Good Friday Agreement brought a peace dividend to Ireland.
In the case of Gaza, the economy and homes need rebuilding to improve the welfare of the Gazans, without Hamas. And there is an ace up everyone’s sleeve: Gaza gas.
Gaza gas
Gaza Marine is a natural-gas field off the coast of the Gaza Strip. It is located about 36 kilometers (22 miles) offshore at a depth of 2,000 feet (610 meters). The field was discovered in 2000 by BG (British Gas) Group, and it is estimated to contain more than one trillion cubic feet of natural gas.
For many years after the discovery, security and economic negotiations delayed its development.
Israel’s position
As recently as June 18, 2023, the Israeli government gave preliminary approval for Gaza gas development (which makes the October 7 massacre even more deplorable).
The Prime Minister’s Office announced: “In the framework of the existing efforts between the State of Israel, Egypt and the Palestinian Authority (PA), with emphasis on Palestinian economic development and maintaining security stability in the region, it has been decided to develop the Gaza Marine gas field off the coast of Gaza. Israel seeks to maintain the security and diplomatic interests of the State of Israel on the matter.”
Who would administer it?
We propose that gas and business/financial managerial experts (i.e., technocrats) be appointed as trustees to help all concerned, i.e., the peoples of the region and the financial backers – perhaps the US, UK, Qatar, Saudi Arabia, Egypt, and others.
The trustees would be tasked with overseeing the development and exploitation of the Gaza gas and applying its proceeds. Most important, they would control the escrow bank account needed to invest in the gas field, receive gas-sale proceeds, pay salaries to ordinary Gazan gas workers, and invest in Gazan welfare projects.
Why trustees?
A trust is a common-law concept that is used across English- and Hebrew-speaking countries. In this case, the technocrats as trustees would be obligated under the trust deed to use the gas, equipment, and sale proceeds for the employment and welfare of Gazans, not terrorism. Hamas would have zero signatory powers and would be totally eclipsed.
Finance?
In principle, such a gas plan should be self-financing, i.e., no need for taxpayers’ money. Investment expenditure and working capital could be lent to the gas project, collateralized on the gas and gas production facilities.
Many details would need to be decided, but the above is a macro view of a plausible direction to consider after the war.
What’s in it for Israel?
A Gaza gas development project would offer many potential advantages to Israel. The biggest prize would of course be peace, while everyone gets on with the gas job in hand. There is a world demand for energy, partly due to the Ukraine war.
Just as Hong Kong serves as an entry/exit point to China, Israel would be an ideal access point to Gaza for international groups in the gas sector and their personnel.
The port of Ashdod would flourish. Israeli companies would supply support services and know-how. Israeli construction companies would accelerate the rebuilding effort.
Is there a tax side?
Israel would stand to collect substantial taxes from: the portion of gas support activities done on Israeli soil – corporate and personal; and activities done by Israeli businesses outside Israel, e.g., in Gaza or the Mediterranean.
There is also an indirect knock-on effect. Peace and reduced risks in Israel should encourage further business in or with Israel, thereby boosting economic growth and tax revenues generally.
Pros and cons
There would be plenty of each. The main pro is a potentially durable peace after a terrible war, using an available economic solution and at little or no cost to taxpayers. There is room here for cautious optimism and hope.
leon@hcat.co
Leon Harris is an accountant and international tax adviser at Harris Consulting & Tax Ltd.