Israel Matzav

Gaza's Ponzi scheme

Sunday's Al-Guardian (called the Observer) reports on the schemes and machinations that had led to the loss of $100-500 million invested by Gazans in smuggling tunnels between Gaza and Egypt.

The tunnels are not supposed to exist at all. As the war in Gaza ground to a close in January, Israel insisted on a ceasefire condition that the subterranean network be closed.

Yet there are now scores of them - more than ever before - snaking ever closer to each other. On the Egyptian side, bribes and an unwillingness to close off Gaza keep open the tunnels and smuggling routes. Analysts say that Israel knows this full well, but finds their existence convenient because they take pressure off the argument for reopening the Gaza crossings.

What comes through the tunnels is what keeps Gaza afloat economically. Metal ladders lead down brick-lined shafts into layers of shored-up sandy tunnels through which are winched bags of cement, cigarettes, cheese, children's bicycles and car parts. Even herds of lowing cattle are led through the larger workings.

Above ground, amid the Israeli bomb craters and ruined houses where the tunnels begin, their entrances are patrolled both by their owners and black-clad men from Hamas.

It is easy to see the smuggling routes as a heroic resistance to a crippling economic blockade. But many Gazans now reject the tunnels' status as an indispensable lifeline. In the most recent incident, investors in a tunnel scheme being promoted by one Ihab al-Kurdi were informed that their money was "gone" - without explanation.

To add insult to injury, they were pressurised last week into signing confidential contracts with Kurdi's "company" offering them 16.5% of the money they put in, in exchange for not complaining, an offer many investors apparently felt they could not refuse.

If Jawad Tawfiq has not been bankrupted, his frightened neighbour, who asks to be identified only as "Umm Mohammed", is in a different situation. She sold all her gold and jewellery, which she had bought after working abroad, to add to a pot of money collected by her family, totalling $17,000. Now she will also have to find money to repay what she borrowed from her son's fiancée.

"I trusted them," she said last week. "The middleman we dealt with seemed so honest. He was a religious man. He seemed so nice. I lost everything and now I'm poor. If it wasn't for the salary I receive from the Palestinian Authority, I would be begging now."

It has not only been Tawfiq and his neighbour who have lost out. The same stories are being repeated from Gaza City down to Khan Younis and up to Beit Hanoun: of people who sold their houses and cars, borrowed against dowries and from relatives to invest in tunnel schemes and got burnt.

And while some victims insist they know those who made large sums - mainly relatives of those managing the investments - they are angry that there appears to be no opportunity for restitution, and no proper explanation of what occurred.

What's strange about this is if Gaza is so 'impoverished,' where do these people get $100 million - let alone $500 million - to invest? (We all know the answer: Gaza is not so impoverished and that money is Western aid money - including from Israel - that is funneled to Hamas by the 'Palestinian Authority').

But you can probably all guess by now where the money actually went:

The Observer has established that some money has been funnelled into charities and a religious foundation as a cover for the activities of some of those most heavily involved. Other money, it appears, was diverted to officials, while large sums were spent on houses, cars, land and other luxury items in a place where a 10-year-old Daewoo can cost $12,000.

It also doesn't sound like getting into the tunnel business takes that much money:

A big tunnel costs $120,000 to construct and run; an average-size one that is little more than a crawl-way about $90,000. Then, in addition to the taxes, a tunnel owner must pay $3,000 for a permit from the municipality.

On top of that, there is the blood money for the families of the children and youths who are killed.

We are ushered in to photograph two tunnels quickly. The speed, we were told, was necessary to avoid Hamas officials seeing pictures being taken.

"Someone was working on one big enough to bring through cars," says one tunnel worker. "It was 90% finished before it collapsed." They tell the story of the "princes of the tunnels", the nickname for three Hamas men they say became hugely rich from their involvement, who brought through cars in pieces for themselves.

"The people who run the tunnels are just ordinary people," says one tunnel operator. "But then people saw the money to be made. Hamas figures invested in some of the tunnels. They have their own one for moving money and wanted people, but no one is supposed to talk about that. People thought they could make money out of it. And people got greedy."

Read the whole thing. Isn't it amazing that these 'poor Palestinians' have more money to invest than most of the Israelis I know?

posted by Carl in Jerusalem @ 3:40 PM