Financial Transparency Coalition

What do medieval moats and iron curtains have to do with 21^st century security policy in Israel? The answer is everything.

The 1979 Israel Egypt Peace Treaty may have ended war between Egypt and Israel, but it created a land port for terrorist infiltration, weapons smuggling, and a haven for illicit financial funds. The point of weakness in the treaty was a “controlled” boarder drawn through (and not around) the city of Rafah, which created an Egyptian-side of the city and a Gaza-side. This demarcation had the unhappy consequence of dividing extended family networks, but not for long.

If the movie “Heavyweights” has taught its viewers anything, it should be that people, when divided from something they love, (be it candy, Kalashnikovs, or cash) can muster incredible resourcefulness to get around any obstacle put in their path. In the case of Rafah, this path went underground in the form of tunnels, effectively making the controlled border obsolete. In fact, there are literally hundreds of tunnels running beneath the Sinai Peninsula.

Tunnels originally financed by wealthy families turned out to be a lucrative enterprise. Goods smuggled from Egypt could be sold in the Gaza-side of the city for several times their fair market price. Weapons brought even greater profits. It didn’t take long for families to begin leasing tunnel entrances to Hamas and taking a cut of their profits. It is estimated that nearly $1 million in goods is moved daily through the tunnels between Egypt and Gaza. According to a report in the UK’s Sunday Times:

“The profits are huge. A Kalashnikov sells for $200 on the Egyptian side, but fetches $2,000 on the Gaza black market. A good night’s delivery is 1,200 Kalashnikovs – a profit of more than $2 million. Bullets – 50 cents in Egypt, $8 wholesale in Gaza – are even more profitable. A standard one-night delivery returns a profit of $750,000.”

The flow of weapons, goods, cash into Hamas controlled Gaza was immediately recognized by Israel as a security threat. However the international response to stopping the flow has been archaic at best. In 2004, Israel proposed building a moat around the Gaza-Egyptian border; however this idea was overturned based on the risk of contaminating the water table with seawater. Instead, Israel, the U.S. and Egypt have settled on (as irony would have it) building an iron curtain (or steel wall), under the desert to interrupt tunnel operations.

While an underground wall might stymie the flow of goods, it does nothing to stop the flow of money into the coffers of Hamas. Underground walls might make weapons more expensive, but so long as Hamas, or any other terrorist organization in any location has funding, they will find a way to arm themselves. There are a limited number of ways to smuggle goods across borders, however because of a lack of transparency among governments and banking systems, illicit financial flows are only limited by the imagination. As long as there are places like the Cayman Islands and Jersey, willing to rout illicit funds over the internet with no record of the source of the funds or its owner, a physical wall will do nothing to solve this massive problem. Trying to control the flow of goods with a wall is like trying to divert a waterfall by putting a stick in the middle of a river – and in this world the river is the flow of IFFs.