Ending The Israel-Gaza Conflict

Recognizing The Insanity Of The Status Quo

As we noted here on October 7th, the idea of keeping Israelis and Palestinians pressed up against each other in Gaza no longer made sense:  (A Moment Of Clarity In The Mideast): 

The Insanity Of The Status Quo

Under the Oslo Accords, both the Gaza Strip and parts of the West Bank are considered to be the territory of the Palestinian Authority, but Hamas took over the Gaza Strip in 2007. 

In the West Bank, although the peace process has been stalled for years, the old land-for-peace formula still at least has a pulse; in Gaza, Israel forcibly removed the last of its settlers in 2005. Some of those settlers ran high-tech greenhouses they used to profitably sell produce internationally. A group of American Jews, including former World Bank President James Wolfensohn, bought the greenhouses from the settlers and donated them to the Palestinians in Gaza. They were prompted looted. 

For the last 16 years there's been no hope of peace between Israel and Gaza, where 2.3 million Palestinians are boxed into a densely populated strip with Israel on two sides, Egypt on one, and the Mediterranean on the other. 

Who benefits from this arrangement? Certainly not most of the Palestinians or the Israelis. 

The Refugee Racket 

Palestinian refugees are unique in the world in two respects. For starters, they are the only multi-generational refugees. The descendants of refugees from other wars and partitions, such as the partition of India into India and Pakistan, are no longer refugees: they are citizens of countries where they live now. But Palestinians in Gaza who are descendants of refugees from the 1967 Six Day War, during which Israel captured Gaza from Egypt, are still considered refugees today. 

The other way Palestinian refugees are unique is that they have their own UN agency dedicated to them, UNRWA, The UN Relief And Works Agency, which employs a staff of 30,000. The rest of the world's refugees are served by UNHCR, The UN Refugee Agency, which has a staff of just under 19,000. Those 30,000 UNRWA staffers would be unemployed in the event Gaza became part of an independent Palestine, or Gaza's residents were welcomed as citizens in neighboring Arab countries, or elsewhere. 

Other Beneficiaries Of The Status Quo

Opponents of Israel (and of normalization of relations between Israel and Arab states) would also lose a political weapon against the country in the event every Gazan were settled elsewhere. 

The military industrial complex in Israel and elsewhere also benefits from continued conflict. Just last month, the U.S. House of Representatives approved another $1 billion for Israel's Iron Dome anti-rocket system. This is a flawed, high-tech solution to a low-tech problem: 2.3 million people who hate you living right next to you. 

Since then, others have made similar points: First Henry Kissinger, in what may have been his last ever interview, and now Bar-Ilan University Professor Joel Roskin. Below is his essay outlining why Sinai would make a better home for the current residents of Gaza (A drawback of this is it would be considered "ethnic cleansing", but it also may be a path to peace). Following that, we'll close with a note on investing in light of the risk that the current Mideast war escalates. 

Why moving to the Sinai peninsula is the solution for Gaza's Palestinians

The Sinai Peninsula comprises one of the most suitable places on Earth to provide the people of Gaza with hope and a peaceful future.

The 365 km² Gaza Strip has remained a hot potato in Israel-Egypt relations since its conquest by the Egyptian Army in 1948 as part of Egypt’s failed attempt to annihilate the newly-born State of Israel. Egypt invaded Israel along two main axes, reaching the outskirts of Jerusalem and only 20 km. short of Tel Aviv, but the Israel Defense Forces pushed off this offensive. These battles generated a wave of refugees that found haven in the Gaza Strip, which remained under Egyptian military control until 1967.

Since 1948, and up until the current partial release of some of the Israeli babies, children, and women taken hostage by Hamas terrorists, the Egyptians have been significantly involved in the politics and economy of the Gaza Strip. The Egyptians locked the residents of Gaza and the refugees of the 1948 War in the Gaza Strip, and, with the backing of the United Nations, still deny them the right to rebuild their lives in all Arab countries, including in the adjacent Sinai Peninsula of Egypt. This harsh policy was one of the major and long-term catalysts for the intensifying human stagnation of now circa 1.8 million inhabitants within the Strip.

Beyond the abduction, mutilation, burning, rape, and murder of 1,200 Israelis and other nationals, the Hamas terrorist invasion of Israel on October 7 destroyed many Israeli agricultural villages. This barbarian murder-fest led the IDF to conquer the northern Gaza Strip and the Hamas-infested Gaza metropolis as part of Israel’s goal to destroy Hamas terror capabilities. As civilians were ordered to move south, the southern Gaza Strip became a haven for most of Gaza’s residents.

The battles in the northern Strip generated significant damage and destruction of buildings utilized by Hamas. Damage to the immense terror-tunnel system further destabilized the metropolis’s substrate. Major portions of the metropolis are considerably incapacitated and cannot be simply fixed. Rather, the damaged and destroyed structures must be completely torn down. The tunneled – and consequently exploded and bulldozed – soil must undergo extensive environmental and engineering rehabilitation.

RELEASED HOSTAGES, who had been abducted by Hamas during the October 7 attack on Israel, board a bus at the Gaza-Egypt border on November 24 for the return to Israel. (credit: Al Qahera News/Reuters TV via REUTERS)

In other words, the metropolis has to be fully evacuated, redesigned, monitored, and only then rebuilt to provide habitable and economic conducive conditions. Such an effort requires unique expertise and immense funding and will take considerable time that cannot be calculated. Therefore, the war is anticipated to end with a unique humanitarian challenge of how to construct a better future for the people of Gaza.

Since Israel’s unconditional turnover of the Gaza Strip to the Palestinian Authority in 2005, Gazans have completely failed to generate a productive Palestinian-administered entity, despite generous economic support, mainly from America, Europe, Qatar, and the UN. This may be associated with the coupled effect of an intrinsic hatred-focused, fanatic, anti-Israel Islamic culture, and links with Iran, along with limited geographical conditions, poor natural and human resources, and a high population density. This situation raises serious doubts that any type of future self-sustainable efforts will yield a stable and free socioeconomic culture and promising future in the Strip. A creative solution is needed ASAP.

Sinai's promising characteristics

The adjoining Sinai Peninsula, in essence, is the exact opposite of the Gaza Strip, comprising one of the most suitable places on Earth to provide the people of Gaza with hope and a peaceful future. Covering 60,000 km² (165 times larger than the Strip), its population is barely around one-third of Gaza’s, making it one of the emptiest places in the Mediterranean region. Although under Egyptian governance, it is an integral geographic-geological continuation of Israel and the Gaza Strip, with which it shares a 200 km. and 14 km. long border, respectively.

Therefore, the geographic setting of the Mediterranean coast of northern Sinai is also a physical continuation of the Gaza Strip with ample, shallow groundwater in the northeast. Here, due to the intensive smuggling of arms to Hamas via Sinai in the last few years, Egypt fully destroyed the residential infrastructure bordering the Gaza Strip, and expelled the local population.

In northwestern Sinai, Egypt has invested immensely in building for agriculture, including freshwater canals. Furthermore, Egypt has surprisingly wired Sinai with excellent infrastructure, overshooting its civilian and industrial needs. These include an array of paved roads and highways connected by tunnels beneath the Suez Canal to mainland Egypt.

The facts demonstrate that the northern Sinai Peninsula is an ideal location to develop a spacious resettlement for the people of Gaza. Its open areas, along with the existing infrastructure, can easily host large-scale development projects that, if led by the Chinese and supported by local labor, for example, can easily mature in just one to two years.

Firm American and international guidance lined with financial and operative support can surely pave the way to this creative and prosperous solution and jointly help Egypt’s dire demographic and economic situation that is challenging its political authority. Israel will also be cooperative in sharing its hi-tech-oriented agricultural capabilities with Egypt as it did following the Peace Treaty in the early 1980s.

If Egypt bravely chooses to change its rigid, old-fashioned policy of keeping Palestinian Gazans in constant distress and consents to such an endeavor, its geopolitical gains will be threefold: It will be hailed by the international community as the savior of the dire plight of Gazans; it will strengthen its status as a leader of the Arab world; and it will finally fulfill its 30+-year-old plan to settle the Sinai and strengthen its control of this zone.

However, history has taught us that Gazans, despite their complaints about their humanitarian situation, may object towards genuine rehabilitation programs. This stubbornness substantially relies on their desire to destroy Israel, which repeatedly comes at their own expense. The ongoing obliteration of Hamas, which terrorizes Palestinian Authority officials and many Gaza residents, may pave the way to the emergence of the proposed Sinai solution, if presented in a wise and discrete manner that conforms to the Middle East mentality.

In Case The Current Mideast Conflict Further Escalates 

Although other states haven't entered the Israel-Gaza conflict directly, we've had an escalation recently with the Houthi attacks on shipping in the Red Sea. In a post shortly after the current war started, we showed how our hedged portfolio method can generate competitive returns while limiting risk given the uncertainty of war. 

Here is another example of our hedged portfolio method in action. On June 15th, this was the hedged portfolio our system presented to an investor with $3,000,000 to put to work, who was unwilling to risk a decline of more than 6% over the next six months. 

And here's how that portfolio performed over the next six months, net of hedging and trading costs: It was up 7.91%, versus 7.25% for SPY, despite being hedged against a >6% decline. 

You can see an interactive version of that chart here. 

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