+972 Magazine's Stories of the Week

Directly In Your Inbox

Analysis News
Visit our Hebrew site, "Local Call" , in partnership with Just Vision.

The profitable occupation, and why it is never discussed

An understanding of the profitable side of the occupation – way more considerable than most people imagine – could force us to change our entire political thinking.

Palestinian workers lining up at the Bethlehem Checkpoint, June 30 2011 (photo: Porter Speakman, Jr.)

Ami Kaufman (on his +972 blog) and Emily Hauser (Open Zion) join the debate regarding the financial burden the occupation puts on the Israeli economy. As Ami notes, this is something that goes hand in hand with the conversation on J14 (a.k.a the “social justice” protest). Terminating the occupation and the expensive settlement project, the saying goes, would benefit Israeli economy more than any other measure the protesters offer.

As both Emily and Ami note, there is something cynical about this argument: The occupation should be opposed on moral grounds, regardless of how cost-effective it is for Israel. I agree wholeheartedly, and this is the response I usually give to those advocating “the economic argument” against the occupation. Yet I feel a need to address the assumption in Emily’s text (and to a lesser extent, in Ami’s) according to which the occupation represents only a burden on Israel and its economy, as I think it is a part of a larger misrepresentation of the essence of the current status quo.


First, it should be noted that calculating the true cost of the occupation is extremely difficult, since the Israeli budget treats both sides of the Green Line as one unit. Plus, government ministers who were supportive of the settlements – including ones from Labor or Kadima – found over the years ways to integrate allocations of funds to the West Bank into “innocent” budget lines. The Ministry of Transportation, for example, subsidizes bus rides for settlers, making a trip longer than the Jerusalem-Tel Aviv line cost the same as a local bus ride in the Tel Aviv metropolitan area. The Ministry of Education allows smaller classes in settlers’ schools. Settlers comprise the Israeli sector with the highest rate of government employees – and all this without going to direct investments in the occupation, through the department for housing or the Ministry of Defense.

There have been several efforts to estimate the cost of the occupation. In 2011, Shir Hever concluded a study that estimated the annual cost at 9 billion USD – an average of $1,175 for every Israeli. In 2007, several economists gave a price tag of 50 billion dollars for (then) 40 years of Israeli control and colonization of the West Bank and Gaza. The Adva Center for socio-economical studies is doing the most extensive work on this front. While they don’t come up with a “bottom line” figure, their 2012 report had some interesting data (PDF, Hebrew) including the “special budget” the  IDF received for operations in the West Bank between the years 1989 and 2011 – around 13 billion USD (the annual Israeli budget is around 100 billion USD).

But even this partial data is rich compared to the other side of the budget – an estimate of the direct and indirect Israeli income from the occupation.

Nobody could seriously question the existence of such revenues: From the Israeli companies directly involved in excavating and selling natural resources from the occupied territories – the most prominent example being Ahava beauty products (report, PDF) and a recent Supreme Court ruling even allowed mining Palestinian land in order to satisfy the need of the growing Israeli real-estate market – to the captive market the Palestinian represents for Israel (household Israeli brands can be found anywhere in the West Bank and Gaza). Water is one of the much-needed resources in the Middle East: No less than 80 percent of the Mountain Aquifer – located underneath the West Bank – is used by Israel and the Israeli settlements, and only 20 percent goes to the Palestinian population. (The average Israeli’s water consumption is 3.5-times that of a Palestinian.)

Still, the main economic benefit Israel draws from its control over the West Bank is hidden in plain sight – we are talking the most expensive, most desired resource here: land.

As land prices rose in Israel in recent decades, the West Bank became a handy source for new housing projects serving the two large metropolitan areas – Tel Aviv and Jerusalem. New towns for Jews of less affluent background– especially, but not exclusively, the Orthodox – were built east of the Green Line. In the 1980s most of these projects were built northeast of Tel Aviv, near Qalqilia (“5 minutes from Kfar Saba,” the ads were declaring); the last couple of decades have seen rapid developments in the southeast, near the Modi’in area and highway 443. Parts of the West Bank literally became the new suburbs of Tel Aviv.

The last zoning plan that had Jerusalem expanding to the west was scrapped (also due to environmental reasons – trees are apparently more important that Palestinians); and with very few exceptions, Jerusalem is also expanding north, east and south, almost exclusively beyond the Green Line. Currently, half a million Jews live in the occupied West Bank, many of them in government-subsidized projects in the Jerusalem area. One could only imagine the cost of the same projects if they were to be located in proper Israel, especially if the proximity to the metropolitan centers was to be kept.

The control over Palestinian land has many more economic benefits which I won’t detail here. Think for example of the highways traversing the West Bank, while serving Israeli traffic outside it: Road 90, the north-south highway running along the Jordan River; Road 1 (east) from Jerusalem to the Dead Sea, and Road 443, which serves as the much-needed alternative to the constantly-jammed highway connecting Tel Aviv to Jerusalem. Imagine the cost if we had all the yellow license plated Israeli cars going on long detours west of the Green Line instead of using these roads, or if the Palestinians were allowed to collect tolls on those roads. And that’s but one aspect of control over land. The bottom line is that the control over the West Bank, East Jerusalem and to a lesser extent, Gaza, has substantial value to Israel, one that might even surpass the economic burden posed by the occupation.


The lack of a debate on the benefits of the occupation prevents, I think, a better understanding of the forces at play in this conflict. It could explain, for example, the expansion of settlements that went hand in hand with the Oslo Accord. In the early 1990s, land and real estate prices in Israel skyrocketed because of  immigration from the former USSR. One solution Israeli governments – including dovish ones – turned to was the West Bank, but by doing so they were undermining their own effort to separate the West Bank from the rest of Israel. It is also no coincidence that Palestinian resistance erupted in places like Bil’in or Ni’lin, whose land was confiscated for those very same projects, or that the ultra-Orthodox population that was sent to populate those houses is moving further and further to the political right, becoming almost one with the settler movement. Another important example is the Gaza blockade: As this expose in Haaretz showed, the logic behind the decision about which goods will be allowed into the Strip includes many economic considerations, ones that serve the needs of Israeli farmers and manufacturers. Yet we never hear about the way the blockade serves Israeli economical interests, only about the security needs.

Still, there is an even deeper level of meaning to the denial of the profitable aspect of the occupation, one that has to do with the way Israelis – even from the left – conceptualize this conflict: Ignoring the benefit to Israel from the occupation serves to blur its colonialist nature.

Understanding the occupation as a burden helps portray the current state of affairs as “a tragedy” in which both people are caught, while hiding the connection between the political persecution of the Palestinians and their economic exploitation (cheap labor is another “benefit” of the occupation which I didn’t discuss here). We are repeatedly told that the colonial theory, or even elements of it, couldn’t be used to explain the nature of Israeli control over the West Bank, and the cost of the infrastructure Israel has built in the occupied territories serves as proof. But colonialism always requires expensive infrastructure, which doesn’t mean that it couldn’t serve other sectors or interests of the occupying society rather well.

A third reason for ignoring the profitable side of the occupation is the implications it has on the legitimacy of sanctions against the entirety of Israeli society – a notion that even leftists (like myself) find very hard to swallow.

It’s not always enough to oppose the occupation – one needs to understand its appeal as well. I have written in the past on the Israeli addiction to the political status quo, especially on the Palestinian question. I think that an honest analysis of the cost and benefits of Israeli control over the West Bank would support the notion that the occupation represents an Israeli interest, and therefore would never come to an end as a result of an internal Israeli process alone.


Check it out: Who profits from the occupation?


Before you go...

A lot of work goes into creating articles like the one you just read. And while we don’t do this for the money, even our model of non-profit, independent journalism has bills to pay.

+972 Magazine is owned by our bloggers and journalists, who are driven by passion and dedication to the causes we cover. But we still need to pay for editing, photography, translation, web design and servers, legal services, and more.

As an independent journalism outlet we aren’t beholden to any outside interests. In order to safeguard that independence voice, we are proud to count you, our readers, as our most important supporters. If each of our readers becomes a supporter of our work, +972 Magazine will remain a strong, independent, and sustainable force helping drive the discourse on Israel/Palestine in the right direction.

Support independent journalism in Israel/Palestine Donate to +972 Magazine today
View article: AAA
Share article
Print article

    * Required


    1. the other joe

      I once spoke to a man who was trying to set up a strawberry export business from Gaza. At the time, the Israeli exporter (I think it was Carmel Agrexco) was successfully exporting.
      This man explained to me that he found it extremely difficult to get security clearance for his crops whereas Agrexco (if that was who it was) was able to easily clear them.
      Or look at Jerusalem Stone tile exporters from Hebron. There are no quarries in Israel, yet almost all of the stone is marketed internationally by Israeli marketing companies. This could be for a lot of reasons, including that the Palestinian quarry owners have trouble going to international fairs to get work, historical trading relationships and so on.
      But the point is clearly that the Israeli occupation both by design and by accident economically punishes the Palestinians and rewards Israelis.

      Reply to Comment
    2. the other joe

      I guess it is just worth underlining that if Israeli companies are exporting Palestinian products, they’re taking a cut.
      And I don’t actually think that is particularly illogical, but just goes to show that the whole paradigm of the occupation is set up in favour of Israel.

      Reply to Comment
    3. aristeides

      This is very important. Real estate developers know they can make more profit when they can steal the land for free.

      Reply to Comment
    4. Fawaz

      International law draws a line between occupation and annexation. In order to prevent states from “getting comfortable” with occupying a territory, international law forbids anything economically profitable under occupation, such as using resources (water, quarrying for limestone), or land (moving its population into occupied territory). Israel does everything to get comfortable with its occupation — in conflict with international law.

      Reply to Comment
    5. Fawaz

      There are several other ways in which the Israeli government budget and the Israeli economy is profiting from the occupation.

      For instance tax collection. By making it very hard to officially import goods from abroad to Palestine, most Importers choose to have their goods labelled with destination in Israel, even though it is for the Palestinian market. This causes all the customs revenues to end up in the coffers of the Israeli government. According to the study “the economic cost of the occupation” by Palestinian Ministry of Economy, these losses amount to 400 Million $ each year.

      Another example, look at the Mobile phone companies. Many Westbank and Gaza Palestinians are using Israeli SIM cards, because they are the only ones that offer 3G Internet, because the Israeli government doesn’t allow Jawwal or Watania to use 3G frequencies.

      Another example, by largely killing Palestinian agriculture, (depriving from water resources, and limiting access to their land), the trade balance for Israeli agricultural products is tilted in favour of Israel.

      Another example, import and export procedures between West Bank and Israel. It is damn hard and costly to bring stuff across the commercial checkpoint into Israel (check report of Palestinian Shipper’s Council), whereas the other direction goes virtually without any control. This again increases the competitiveness of Israeli companies over Palestinian ones under the trade regime of Paris protocol.

      Reply to Comment
    6. Lawrence Rosenwald

      A very important argument, lucidly made. Important because it makes clear that the Occupation isn’t, as is sometimes claimed, “unsustainable.” It’s all too sustainable, in fact – for Israelis – and anyone working to end it will do better knowing that.

      Reply to Comment
    7. Danny

      Israel has been able to profit from the occupation only because there is no cost associated with it (other than the nominal cost of building and securing them, as well as the human cost associated with physical harm to both settlers and soldiers, which in the last few years Israel has been able to minimize significantly, mainly due to draconian security measures). If and when the occupation starts to accrue a real cost in terms of a degradation of the quality of lives of ordinary Israelis (as a result of, for example, international boycotts of Israel’s economy, culture, academia, etc), there will be a complete reassessment of the occupation’s cost vs. benefit. As long as Israelis pay no direct cost for the occupation, it will go on.

      Reply to Comment
    8. AYLA

      Really interesting and depressing. Thanks?

      Reply to Comment
    9. Something that interests me is how many Israeli civilians draw salaries for helping to maintain the occupation. Now it’s rare to find IDF in the huge checkpoint at Bethlehem, even though their base is right next door – the checkpoint has been contracted out to a private company. So have several other checkpoints, such as the vehicle checkpoint just down the hill from Beit Jala. You sometimes see Magav there too, but not often these days. Presumably this ‘civilian-izing’ of the occupation also has an economic effect, as it’s creating extra jobs for Israelis.

      Reply to Comment
    10. Rachel

      You might all profit from the site and activities of Who Profits
      http://www.whoprofits.org/ associated with the Coalition of Women for Peace

      This article might be considered a nice contribution along the lines researched for years by Who Profits.

      Reply to Comment
    11. Nabil

      Excellent article and comments, only one thing I think is missing web links to reports, older articles and if possible some translation from Hebrew and Arabic
      Regarding private security companies, I think there are tow important aspects: 1- week real and effective security threats, in opposition to media and political propaganda
      2- They are an important product for export; they are using their activities in Occupied Palestinian Territories as a “Plus Value” when they propose them selves abroad and many countries take use of their services

      Reply to Comment
    12. sh

      “A third reason for ignoring the profitable side of the occupation is the implications it has on the legitimacy of sanctions against the entire Israeli society”
      Astute, necessary piece that makes me think we’d better brace ourselves.

      Reply to Comment
    13. Kolumn9

      Good article. In retrospect there was a missed opportunity to build several large cities just east of the green line in the TA area. It would have contributed significantly to lower prices for housing. I suppose this oversight could still be corrected but it would have made more sense to have put the infrastructure for large cities in place 30 years ago. Ariel was a stretch too far for most quality-of-life families.

      One thing that is missed is the likely economic benefits of continued control over Judea and Samaria for Israel within the green line. It is relatively safe to imagine that economic growth would have been significantly hampered by the occasional firing of rockets and missiles from the Samarian hills into the Tel Aviv area.

      Reply to Comment
    14. max

      That’s very interesting reading, though the point about real estate prices is crap any way you look at it, including B’tselem’s numbers of steady population growth in the WB since ’83, or a comparative behavior in later years (e.g. 2000 and on).
      However, the most interesting point is missing: all balanced, is Israel managing to recuperate – or even gain over – its security expenses related to the WB?
      Could it be that the numbers aren’t exposed because the Israeli government is ashamed of its economic miscalculations, a result that may lead to a call to stop the occupation?

      Reply to Comment
    15. Richard SM

      And then there are the various deductions from their wages that Palestinians pay to Israel but do not receive any benefit.

      Google this from The National (UAE):

      Israeli report claims $2bn stolen from Palestinians
      Jonathan Cook

      Feb 4, 2010

      “Over the past four decades Israel has defrauded Palestinians working inside Israel of more than US$2 billion (Dh7.4bn) by deducting from their salaries contributions for welfare benefits to which they were never entitled, Israeli economists revealed this week. A new report, “State Robbery”, says the “theft” continued even after the Palestinian Authority was established in 1994 and part of the money was supposed to be transferred to a special fund on behalf of the workers.”

      Reply to Comment
    16. Danny

      @RICHARD SM: Also, Israel “collects” tax revenue from Palestinians working in Israel, which it is supposed to hand over to the PA. Of course, it does so when and/or if it chooses to, which is to say – only after it is thoroughly prodded by the U.S. In the meanwhile, it can use the money for its own uses. This is essentially a zero percent loan from the PA to Israel.

      Reply to Comment
    17. max

      Ricard SM – you must be a very dedicated person, going all the way to UAE to collect facts about Israel!
      Were the allegation true, could it be that Israel learned this trick from the US? Further, could it be that these countries accept foreign workers just so that they can retain their social benefits?
      And what if the UAE newspaper published false allegations?

      Reply to Comment
    18. Richard SM

      Mr. Max
      This might come as a surprise to you, Mr. Max, but it isn’t necessary to go “all the way to UAE” when one has a computer, but that just happens to be where the article was published. It was written by Jonathan Cook, a British journalist based in Nazareth, Israel, and 2011 winner of the Martha Gellhorn Special Prize for Journalism.
      The authors of the report are Hannah Zohar, director of Kav La’Oved, and Shir Hever, a Jerusalem based economist.
      Pehaps you should have considerd why a report produced in Israel doesn’t appear to have been reported in the Israeli press. Go see if you can find it, Max.

      Reply to Comment
    19. Anthony

      Interesting article. But the big uncertainty to any cost benefit analysis is whether Israel might have had peace without the settlements. If, as those on the right argue, the settlements are a red herring in the peace process, that Israel offered to give back most land and were rejected, then you are right that the Settlements have been beneficial.
      If so then the cost has been enormous (who’s going to argue that Israel’s economy wouldn’t have benefited from significantly greater investment if the peace process had been successful?).

      Reply to Comment
    20. aristeides

      One question has to be whether the settlements have increased the tendency of Israel to oligopoly, or benefitted from it.

      Reply to Comment
    21. Aaron

      Well argued article, but I don’t think you can ever measure the net cost or benefit because it’s a deep political, military, and economic question of what you even define as a cost of the occupation. Maybe more to the point, I wonder how much effect the economic benefit or cost has on politics. I’m sure there are plenty of Jews (and Arabs) making a buck on the post-1967 occupation, and maybe the government is, too. I can definitely believe that money has something to do with whether a given housing project is built. But the substance of the 1967 occupation itself? I think money is politically irrelevant.

      Reply to Comment
    22. max

      @Sydney, thanks!
      @Richard sm: perhaps you should consider a bit less arrogance, as your assertion has been proven wrong? Irony is a dangerous tool 🙂
      The report itself, according to the JP, may or may not represent the truth. As – unlike the cited precedence – the case didn’t reach court, it’s quite likely to be based on errors

      Reply to Comment
    23. Boris

      I think Aaron is right but I want to go a step further.
      It’s kind of interesting that even ‘leftist’ Israeli are debating the economical pro’s and con’s of the occupation.
      As if the economical argument has any value whatsoever.

      In the end, it hasn’t at all.

      I could -for that matter- be discussing the economical implications of eating my neighbor alive.

      As Noam says in the second paragraph;

      The occupation should be opposed on moral grounds, regardless of how cost-effective it is for Israel.

      Some things you just don’t do.
      Basic human rights are a good starting point.

      Reply to Comment
    24. I totally agree with you. Terminating the occupation will drastically improve israel’s economy toward new future.

      Reply to Comment
    25. Click here to load previous comments