US embassy cable - 05TELAVIV380

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000380 
 
SIPDIS 
 
E.O. 12958: DECL: 01/22/2014 
TAGS: KWBG, ECON, ETRD, IS, GAZA DISENGAGEMENT, ECONOMY AND FINANCE, ISRAELI-PALESTINIAN AFFAIRS 
SUBJECT: GAZAN ECONOMY DISRUPTED BY KARNI CLOSURE 
 
Classified By: Economic Counselor Bill Weinstein for reasons 1.4 (b) an 
d (d) 
 
1.  (SBU) Summary:  The closure at Karni terminal, which has 
been in effect since the January 13 attack that killed six 
Israeli employees, has caused the agriculture, furniture, and 
garment sectors within Gaza to lose some USD four million and 
to lay off over 1,000 workers.  In the Gazan marketplace, 
prices of consumables like dairy products, flour, and grain 
have increased by over 10 percent, while a glut of fresh 
produce intended for export to Europe has caused strawberry 
and tomato prices to drop by two-thirds.  Optimistic sources 
within Israeli and Gazan private enterprise say the total 
closure will end shortly after the Eid holiday, but terminal 
management claims they have no estimate of when Karni will 
reopen.  Others believe conflicts between Gazan farm workers 
and agricultural collective leadership over the appropriate 
response to Israel in the wake of the closure may linger 
beyond the terminal's re-opening.  End summary. 
 
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Stalled Exports Mean Profit Losses, Layoffs 
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2.  (SBU) Karni Terminal, the Gaza Strip's sole trade gateway 
to Israel and the rest of the world, has been closed since 
January 13, when a bomb attack there killed six Israeli staff 
and wounded many more.  USAID reports that the attendant 
cessation of Gazan exports to the West Bank, Israel, Europe 
and the U.S. has resulted in a profit loss of more than USD 
four million across the agriculture, furniture, and garment 
sectors.  Some 800 garment industry workers and several 
hundred construction workers have been laid off since the 
terminal closed, though industry contacts state they may be 
re-hired once trade begins again in earnest and construction 
projects are taken off hold.  Israeli shipping company 
Agrexco, which markets Gazan exports to Europe and the U.S. 
under Israel's free trade agreements, reports that the 1.5 
thousand tons of each Gazan product it usually ships during a 
growing season has dropped to "zero" since the closure.  As a 
result, European clients have tired of waiting for shipments 
to arrive and have turned instead to suppliers in Egypt, 
Spain, and Turkey. 
 
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Shortages and Price Increases 
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3.  (C) Gazan businesses dependant on imported raw materials 
and relief organizations that bring hundreds of containers of 
food and humanitarian supplies through Karni each month have 
been especially hard-hit by the closure.  Pepsi bottler 
Mohammed Yazgi said product upheaval within the marketplace 
is visible proof of the closure's effect -- "all kinds of 
vegetables" meant for export to Europe now fill stalls and 
adorn Eid tables.  Kiosks hawk "mountains" of strawberries on 
street corners for less than NIS 10 per 10 kilograms, 
one-third their customary price.  Cherry tomatoes, another 
quickly perishable item, are also spoiling in the marketplace 
or being "dumped" at slashed prices.  Conversely, shortages 
of consumables like dairy items, flour, and grain, which 
generally enter Gaza through Karni, have resulted in price 
increases of over 10 percent. 
 
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Agrexco's Awkward Position 
-------------------------- 
 
4.  (C) Agrexco marketing executive Rani Friedlander noted 
that more than monetary loss, failure to deliver goods for 
this extended period of time has severely undermined 
Agrexco's credibility in the world marketplace and will 
damage business in the long-term.  As the primary shipping 
and marketing arm for Gazan export everywhere in the world 
besides the West Bank, Friedlander said, Agrexco has put 
pressure on the IDF to reopen Karni quickly during previous 
periods of closure.  In this instance, however, it cannot 
speak up -- the bomb attack took place at 10:50 pm only three 
weeks after the IDF granted Agrexco's request to allow 
terminal management to extend business hours from a 6:00 pm 
closure to an 11:00 pm closure.  The company is "in the 
doghouse," Friedlander explained, and must stand aside as 
politicians decide when Karni will reopen. 
 
5.  (C) Numerous Gazan and Israeli private sector contacts 
said they believe the terminal will reopen immediately 
following the Eid holiday, but terminal manager Yoni Doton 
told Econoff he has heard nothing about a potential 
reopening.  The concrete wall that ensures separation between 
the Israeli and Palestinian sides of the terminal is still 
damaged from the blast, he said.  Moreover, staffing is low 
after casualties, injuries, and simple departures following 
the incident, and it will be difficult to draw new workers 
now that morale is so low. 
 
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Striking Farm Workers Angry at Collectives 
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6.  (C) PalTrade project officer Hashim al-Hussaini (protect) 
told Econoff that several hundred striking Gazan farmers 
marched on the PA Ministry of Agriculture last week to demand 
financial assistance in the wake of the Karni closure.  Such 
assistance may be granted, Hussaini said, but the conflict 
that has arisen between farm workers and Gazan 
export-oriented agricultural collectives over the appropriate 
response to Israel after the closure could linger even past 
the terminal's re-opening.  When leaders from the Bayt Lahia 
Cooperative, the Gaza Agricultural Cooperative, and the 
Strawberry Farmers' Union -- also currently on strike -- 
recently planned to join PalTrade in a meeting with members 
of the Israeli business community, the farmers demanded they 
"not set foot" in Israel in protest of the closure.  "(The 
farm workers) didn't believe us that we were going to talk to 
the Israelis about solutions," he said. 
 
7.  (C) "Complaining to the Ministry of Agriculture and 
striking won't do them any good," Hussaini said.  Instead, he 
explained, farmers, union bosses, and Gazan business leaders 
must demand the PA put a stop to terrorism.  "The workers 
don't realize it is these idiots (those who carried out the 
attack) they should be angry at." 
 
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