Gaza Struggles as Egypt Tunnel Blockade Takes Toll on Business

Intended to block smuggling of weapons, the tunnel clampdown's effects are being felt by all: many Gazans say they have never had it so tough.

Mohammed Al-Telbani, owner of one of Gaza's biggest food factories, is the sort of businessman plucky enough to thrive despite an Israeli blockade of the Palestinian coastal enclave, but even he says he is finally running out of answers.

With a new military-backed government in Egypt shutting smuggling tunnels that had kept Gaza alive, he now worries for the first time that the siege will choke off his business and consign his 400 employees to poverty.

Last month he was forced to pay 60,000 shekels ($17,000) for Israeli fuel to power his four generators. He shut down for 11 days but says he still hopes to keep the business going.

"We are suffering great financial losses but I cannot close my business. I need to maintain my customers even if that means sacrificing profits or taking some losses," he said. "We have to share the good times and bad times and stick together."

Under years of Israeli sanctions, Gazan businessmen cobbled together a smuggling-fueled economy that sustained the enclave under rule by Hamas Islamists. But with the overthrow of a sympathetic Muslim Brotherhood government in Egypt tightening the blockade, many Gazans say they have never had it so tough.

Short on fuel, the lone Gaza power plant has ceased to serve nearly half the 1.8 million population. Patchy alternative supplies of electricity from Israel's grid have meant 12-hour blackouts every day.

Night casts a pall over Gaza City, just 70 km down the Mediterranean coast from sparkling Tel Aviv. Shops close early to ration spare private generators.

Residents who live on upper floors feel trapped in their buildings. While the homes of those with means hum from private generators, poorer folk huddle in dark silence.

"No electricity. No power to heat the house when it pours with rain," said Ahmed Hamid, a taxi driver. "We blame everyone. Leaders in Gaza, in the West Bank, even Obama. Whoever sees us and does nothing is responsible for our tragedy."

Gazans say the economic trials loom even larger than the perennial fear of war with Israel. The last major fighting was more than a year ago and both sides appear to be keeping to a truce, which was brokered by Egypt's government, then led by the Muslim Brotherhood which has an historic kinship to Hamas.

The Egyptian military, which overthrew the Brotherhood in July, sees Hamas as a security threat and has since closed most of the 1,200 tunnels that used to run under the sandy frontier between Sinai and Gaza.

That has choked off supplies of weapons as intended, but also of commercial goods including construction materials, and, most damagingly, of cheap Egyptian petrol.

Closures and layoffs

Businesses such as bakeries, restaurants, hotels and even farms say they may have to scale back work or lay off staff to stay solvent. For a populace already suffering 32 percent unemployment, that spells deeper misery.

The Hamas government has lost revenue it earned from taxing the smuggling tunnels. Salaries for many of Gaza's 50,000 public servants have arrived late in the past three months.

For the first time since 1995, Hamas will not be sponsoring annual December 14 celebrations of its founding. The cancellation, Hamas said in a statement, was decided "in acknowledgment of the difficult conditions our people are living in."

In public, Gazans still tend to rally to Hamas, whose die-hard ethos of conflict with Israel is reinforced by the sense of siege. Hamas says it is seeking other sources of support.

"We are sparing no effort to help our people exit the current crisis. We are speaking to every country and every party in order to find a solution," said Ghazi Hamad, deputy foreign minister for the Gaza government. Talks were under way with Cairo over the fuel and power crisis, and Gaza had appealed to states further afield like Qatar for aid, he said.

Hamas also tried to mend ties with Iran, a former patron that scaled back funding for the Palestinian Islamists after Hamas quit its headquarters in Damascus out of opposition to Syrian President Bashar Assad, Iran's ally.

At home, Hamas has shown little tolerance for large-scale dissent. Human rights groups accuse its police of breaking up demonstrations under the pretext that organisers did not obtain proper licenses.

A Gaza group modelling itself on Tamarud ("Rebellion"), an Egyptian movement that agitated against the Muslim Brotherhood, abandoned plans for a mass rally on November 11 citing fears for participants' safety. Hamas sought to belittle the threats of a rebellion, and accused Israel and its Palestinian rivals of trying to "destabilise public order."

Muted criticism

"It's natural to ask Hamas to find solutions, but no one can be spared blame," Said Samir Mohammed, a 31-year-old public servant, naming the rival Palestinian Authority, which governs in the West Bank, and Israel as culprits too.

Before Egypt's tunnel crackdown, the Gaza economy had been recovering from the destruction of last year's brief war, according to local and international statistics. It grew at a rate of 12 percent in the first quarter of 2013, the World Bank said, in contrast to the Palestinian economy in the West Bank, which contracted by 0.6 percent.

Maher Al-Tabbaa', a Gaza economy expert, estimated that since Egypt closed the tunnels this summer, the enclave's economy had lost $450 million in potential growth.

"In simple terms, Gaza businesses are collapsing under the blockade and the shortages of power and fuel," Tabbaa' told Reuters. He predicted unemployment would reach 38 percent by the end of the year unless the crisis eased.

The construction industry, already slowed by Egypt's closure of the tunnels, ground to a halt altogether when Israel also stopped supplying materials in retaliation for the discovery of a Hamas tunnel under its border in October.

On the black market, the price of a ton of cement rose more than seven-fold since June to hit 2,900 shekels (more than $800), from 400 shekels.

Hamas says the government is trying to create new jobs. Some private business owners say they have been given access to government-held emergency fuel reserves. Police have been posted at petrol stations and cooking-gas depots in what Hamas calls a precaution against price-gouging and unfair distribution.

Meanwhile, people soldier on.

"Gaza is not going to die, whatever happens," said an elderly man, Abu Hassan. "First they fight us with planes and tanks, and now with darkness and blockades."