In February 2024, Israel’s Finance Minister Bezalel Smotrich declared, “We are not a banana republic of the United States.” His defiant proclamation was prompted by the decision of two Israeli banks to freeze the accounts of two Jewish settlers who had just been sanctioned by the Biden Administration, pursuant to Executive Order 14115. The order, which had been introduced earlier that month, characterized “high levels of extremist settler violence” in the West Bank as a threat to the “peace, security, and stability of the West Bank and Gaza, Israel and the broader Middle East.” Initially, four people were designated under the order for assaulting and threatening Palestinians and Israeli peace activists in the West Bank, burning fields destroying property, and creating an “atmosphere of fear.” In mid-March, the United States designated another three people and two “outposts” (settlements that are considered illegal even under Israeli law) and, in April, it designated two entities that had raised tens of thousands of dollars on behalf of the settlers sanctioned in the original order.
In this post, I examine the vision of “peace, security and stability” that these sanctions purport to preserve by placing it in the longer history of the use of economic coercion by the United States in Israel/Palestine to bolster “economic peace.” The idea that economic relations are pacifying has long been a central plank of Zionist colonization of Palestine and then of Israel’s occupation. Ze’ev Jabotinsky, the founder of right-wing Revisionist Zionism, recognized early on that the belief that Palestinians could be “bribed in order to sell out their homeland for a railroad network” was a “childish fantasy.” This fantasy has nonetheless animated successive Israeli and US attempts to offer economic incentives to foster Palestinian submission to colonization. Yet visions of economic peace, and the forms of economic coercion mobilized to defend it, have shifted over time.
During the early days of the “peace process,” the United States used economic sanctions to punish those who deviated from its neoliberal conception of economic peace—a vision that downgraded questions of sovereignty and liberation in favor of a promise of economic growth. Today, belief in peaceful commercial integration is out of favour, and the world economy is becoming a site of friend-enemy relations. In this context, the United States has abandoned the moribund Israeli-Palestinian “peace process” in favour of an attempt to secure a peace deal between Israel and Saudi Arabia, relegating Palestinians to observer status. By the time Biden’s Executive Order 14115 was introduced to preserve the “peace, security, and stability of the West Bank and Gaza, Israel and the broader Middle East,” Israel’s bombardment of Gaza, using US-supplied weapons, had killed at least 27,019 people. The “peace” that the Biden Executive Order aimed to preserve was no longer that of the “peace process” or even the neoliberal dreams of global commercial integration. His administration has officially committed itself to “the enduring defeat of Hamas, a two-state solution…and a broader normalization of relations so that Israel also has peace with all of its Arab neighbours.” The settler sanctions bolster the pretence of the second (the two-state solution) to salvage the possibility of the third (normalization), while the US devotes its extraordinary military and economic force to securing an “enduring defeat” not only of Hamas but of Gaza and its people.
Oslo: Keeping the Economic Peace
An infamous photograph from September 13th, 1993 shows a beaming Bill Clinton, arms outstretched, supervising the handshake of Israel’s Prime Minister Yitzhak Rabin and Palestine Liberation Organization leader Yassir Arafat. In his speech marking the signing of the “Declaration of Principles on Interim Self-Government Arrangements,” usually referred to as the first Oslo Accord, the US President asked his audience to imagine that “all the energies the Israelis and the Palestinians have invested into your struggle can now be channelled into cultivating the land and freshening the waters; into ending the boycotts and creating new industry; into building a land as bountiful and peaceful as it is holy.”
The idea of economic peace played a central role in Clinton’s Presidency, as it did in the development of neoliberalism. In the wake of the Cold War, the globalisation of liberal capitalism was supposed to foster pacified commercial relations. In the Palestinian context as elsewhere, this neoliberal agenda required the crushing of any possibility of economic self-determination. The First Intifada had made the Palestinian economy, which had long been integrated into Israel’s economy on hierarchical terms, into a site of struggle. Through back to the land campaigns, absenteeism among workers employed by Israeli businesses, a tax revolt, and an economic boycott of Israeli products, Palestinians in the West Bank and Gaza had challenged the occupation’s economic domination. Israel responded with economic sanctions and siege, including by blocking food convoys and restricting electricity and water to areas under curfew; restricting movement, including between the West Bank and Gaza; and withholding import and export licenses.
The Oslo process marked the defeat of what UNCTAD had called the “beginnings of a conscious Palestinian policy for the revival of the national economy.” The vision of economic peace embedded in the Oslo process was most explicit in the Protocol on Economic Relations, signed by Israel and the PLO in April 1994 to regulate economic relations for what was supposed to be a five-year “interim period.” Under the protocol, Israel retained control of land, water, labour and capital, and external borders. Israel’s refusal to accept a Palestinian currency left the Palestinian economy dependent on Israel’s financial system and unable to make monetary policy or set interest rates. The protocol also allowed Israel to collect customs taxes and VAT on behalf of the Palestinians, which gave it a powerful instrument of economic coercion that it would not hesitate to use in the subsequent decades. The economic peace enshrined in the Oslo process required the deeply hierarchical integration of the Palestinian economy into the Israeli economy and the intensification of Israel’s economic domination. The Palestinian homo economicus it envisioned was deprived not only of political rights but even of private property rights and the freedom to engage in commerce.
At the White House signing ceremony, Clinton warned that “every peace has its enemies,” and four months later, he used what was then a novel weapon against those so classified. Declaring that “grave acts of violence” that disrupt the peace process constituted a national emergency, he introduced Executive Order 12947 “Prohibiting Transactions with Terrorists Who Threaten To Disrupt the Middle East Peace Process.” Twelve organisations, the bulk of them Palestinian factions that rejected Oslo’s “ghettoized sovereignty” without independence, were subjected to financial sanctions and visa bans. Along with Hamas, Palestinian Islamic Jihad, and the leftist groups the Popular Front for the Liberation of Palestine and the Democratic Front for the Liberation of Palestine, sanctions were imposed on the Lebanese Hizballah, two Egyptian Islamist organisations, and two far-right Israeli organisations, Kach and its breakaway group Kahane Chai (Kahane lives). The Treasury’s Office of Foreign Assets Control (OFAC) also blocked the assets of 18 individuals with leadership positions in the Palestinian and Arab organisations but did not name anyone associated with the Zionist organisations.
This list, as Darryl Li has noted in a report on the anti-Palestinian foundations of US anti-terrorism law, became the model for the subsequent counter-terrorism lists and expanded to include ever more enemies of the peace. In 1997, Hamas and other Palestinian factions were added to a new Foreign Terrorist Organizations list. In the wake of 9/11, in the context of a dramatic expansion of its use of financial sanctions, the United States added many of the same Palestinian organisations to a new list of specially designated global terrorists, no longer directly tied to the Middle East Peace Process. Defending the peace now required an endless financial war without spatial or temporal boundaries.
(Financial) Discipline and Punish
In 2006, following Hamas’ election victory in Gaza, the United States, the European Union, and Israel imposed sanctions on its government in Gaza. In a leaked cable, the US embassy in Tel Aviv said that Israeli officials had confirmed “they intend to keep the Gazan economy functioning at the lowest level possible consistent with avoiding a humanitarian crisis.” Central to the embargo was what Israel’s then-Foreign Minister Tzipi Livni called a “financial siege.” Israel suspended the transfer of VAT and customs revenue to the Palestinian Authority, Israeli banks severed their relations with Gaza’s banks, and electronic funds transfers to Gaza were cut off. Decisions about the number of shekels allowed into the territory were now made by Israel’s National Security Council following the principle that “Gaza should receive just enough money for the basic needs of the population” without ever returning to “a state of normal commerce and business” (even a “normal” structured by four decades of occupation).
In 2007, Israel declared Gaza a “hostile entity,” a designation that presumed a state of armed conflict as opposed to belligerent occupation. Israel now claimed it was not bound by the responsibilities of an occupying power, but only by the requirement laid out in Article 70 and Article 54 of the Additional Protocols to the Geneva Convention, which it interpreted as requiring it only to provide goods sufficient for “basic humanitarian needs.” This inaugurated the era of calorie counting, meticulous lists of prohibited “dual use” imports (among them chocolate and coriander) and the establishment of a “humanitarian” siege that an advisor to Israel’s Prime Minister described as “like a meeting with a dietician” that would make the people of Gaza “much thinner, but not enough to die.” According to John Dugard, United Nations Special Rapporteur on Human Rights in the Occupied Palestinian Territories, the Palestinian people were now “subjected to economic sanctions—the first time an occupied people have been so treated.”
The United States was an active participant in this financial siege. The US Office of Foreign Assets Control determined that Hamas’ electoral victory gave Hamas a “property interest in the transactions of the Palestinian Authority,” and it introduced sanctions to target the Palestinian Authority while introducing general exemptions to allow trade with those sections of it not controlled by Hamas. When former International Monetary Fund economist Salam Fayyad was appointed Prime Minister of the Palestinian Authority in 2007 with the support of Israel and the United States, OFAC issued a broad general exemption allowing transactions with the “Palestinian Authority government of Prime Minister Salam Fayyad and President Mahmoud Abbas.”
Fayyad’s appointment coincided with Netanyahu’s election, and the latter’s promise to downgrade any political process with the Palestinians in favour of economic peace. Netanyahu vowed to “strengthen the moderate parts of the Palestinian economy by handing rapid economic growth in those areas, rapid economic growth that gives a stake for peace for the ordinary Palestinians.” Fayyad’s neoliberal agenda bolstered Netanyahu’s economic peace. New York Times columnist Thomas Friedman – who famously distilled the idea of economic peace into the claim that there had never been a war between two countries with a McDonald’s – exuberantly described what he termed “Fayyadism” as “the most exciting new idea in Arab governance.” In reality, Fayyad’s agenda was basic post-Washington consensus neoliberalism, with a focus on “good governance” and “law and order” to create stable conditions for capital investment and accumulation. Its internationally-sponsored process of security sector reform oriented the Palestinian security apparatus to repressing Palestinian resistance, and embedded “authoritarianism into the Palestinian political process.” Economic peace, as a senior PLO figures commented at the time, was never a path to ending the occupation; it was a means to “normalize and better manage it.” In this context, the siege of Gaza provided what Raja Khalidi and Sobhi Samour call a “demonstration effect of the price of resistance.”
Sanctioning Settlers
In an address to the UN on September 23rd, 2023, Netanyahu stood before the United Nations holding a map of the “New Middle East,” in which Israel extended from the river to sea, and proclaimed his vision of peace. “I’ve long sought to make peace with the Palestinians,” he said. But we must not “give the Palestinians a veto” over peace agreements with Arab states. The Biden Administration, which had taken over central planks of the Trump Administration’s “Peace to Prosperity” iteration of the economic peace formula, had by then declared that the US had “a real national security interest in promoting normalisation” between Israel and Saudi Arabia. Yet while the Trump administration had been prepared to bury the moribund corpse of the two-state solution, Secretary of State Anthony Blinken insisted in 2023 that while it was increasingly “remote,” the US would work “to at least maintain a horizon of hope.”
Following October 7th, the Biden administration has pursued two tracks: funding and shielding Israel’s genocide in Gaza, on the one hand, while warning that violence in the West Bank was a threat to its preferred vision of regional economic peace on the other. Biden’s settler sanctions reflect his Administration’s attempt to separate the illegitimate “extremist” violence in the West Bank from what it depicts as Israel’s legitimate exercise of its right to self-defence in Gaza. Ironically, it was Israel’s Prime Minister Benjamin Netanyahu who most clearly challenged this dichotomy, rejecting the sanctions and noting that many West Bank settlers were currently “fighting as conscripts and reservists for the defence of Israel.”
Biden’s sanctions also masked the fact that settler violence in the West Bank is a state project, indissociable from Israel’s broader project of settler-colonialism, expropriation, and progressive annexation. By October 10th, Israel’s National Security Minister Itamar Ben Gvir – who was himself a youth leader of Kach, one of the far-right settler organisation sanctioned by Clinton – had ordered 10,000 assault rifles to be distributed to Jewish settlers in the West Bank. By the time Biden introduced EO14115, 372 Palestinians had been killed in the West Bank and East Jerusalum since October 7th. But even before then, 2023 was already the deadliest year on record for Palestinians, with at least 507 people killed, including 81 children. Many died at the hands of Israeli occupation forces in uniform, who had been regularly raiding the refugee camps of the Northern West Bank, killing multiple people each time.
By singling out the violence of a small number of “extremist settlers,” Biden’s executive order implicitly sanitised the unlawful settlements themselves and the Israeli State that sponsors them. And, as Maryam Jamshidi has noted, in targeting broadly-defined disruptors of the peace, the Biden order is highly likely to be used against Palestinians who resist the colonization of their lands. Indeed, the State Department’s press release about the order began by rejecting both “Israeli settler attacks against Palestinians and Palestinian attacks against Israelis.” As the International Court of Justice considered the legal implications of prolonged occupation, the Biden order conceptualized the harm of occupation as one perpetrated by violent individuals on “both sides” whose “extremism” cast them as aberrant.
Biden’s settler sanctions attempt to secure the ever-vanishing “horizon” of a two-state solution and with it the dream of Saudi-Israeli economic peace. Yet the refusal of Palestinians to accept progressive economic strangulation and annexation has made the price of this peace clearer than ever. As Israel carries out a genocide in Gaza with US-supplied weapons, and weaponizes starvation, Gaza has once more been turned into an exemplary site that demonstrates the price of rejecting the terms of “economic peace.” In Gaza, as Tacitus once put it, they make a desert and they call it peace.
