Sunday, March 27, 2011

The Palestine Papers: NSU Policy Paper - The Business of Colonization


NSU report entitled "The Business of Colonization, Background Brief," dated July 2009. Policy paper that discusses in detail the business side of Israel's settlement enterprise, including: nature of business; impacts of business; legal implications; and legal and policy implications for third states. The paper also discusses foreign investment activity, exploitation of Palestinian resources and offers case study comparisons in other countries as well.


Updated July 20091

Settlements are usually thought of as residential communities that Israel has established within the Occupied Palestinian Territory (OPT) to accommodate parts of its civilian population.
What is often overlooked, however, is the business side of Israel's settlement enterprise, that is, the factories, farms, service providers and other commercial enterprises operating in the settlements, as well as the developers involved in their construction. These business entities are an integral part of the Israeli settlement enterprise, benefiting from land and other resources illegally confiscated from Palestinians, and sustaining the expansion of the settlements and settlement-related infrastructure and the growth of the settler population.
Regrettably, Israelis are not the only ones who are involved in the business of colonization. Foreign businesses also operate in the settlements or are involved in their construction. Foreign entities also import, distribute and sell goods and services produced by settlement businesses.
Foreign companies should not be allowed to continue with these kinds of business activities, as they profit from, and allow Israel’s economy to benefit from, Israel’s settlement project and the exploitation of Palestinian resources. They also contribute to Israel’s illegal settlement project itself. For their part, third states can take measures to ensure that neither they nor their nationals contribute to Israel’s settlement activity.

Like the rest of the Israeli economy, settlement businesses span many sectors, including
construction, manufacturing, agriculture and tourism. Regrettably, many foreign companies
and/or their Israeli subsidiaries operate within the settlements, from telecommunications, to
building material suppliers, to food and video retailers.2
Many are even involved in the development and construction of settlements, settlement-related infrastructure and the Wall. The most well-known example is that of two French companies that are involved in the construction of a light rail that will connect settlements in Palestinian East Jerusalem with West Jerusalem.
Moreover, goods and services that are manufactured, grown or provided by settlement
businesses often make their way to foreign markets. While there are no publicly known figures
for the total annual value of settlement exports, estimates put the annual value of settlement
goods imported by the European Union at around US $200 million3 or €100 million4. Exports to the EU have accounted for roughly 30 to 40 per cent of total Israeli exports in recent years, and for 75 per cent of total Israeli agricultural exports.5
Construction. Israeli colonization of the OPT has meant good business for the Israeli construction industry. Over the past ten years, the population growth rate of Israeli settlements in the OPT has been three times greater than that of population centres in Israel.6 Still, land development and settlement construction in the OPT has outpaced settler population growth. For example, and despite Israel's renewed Road Map commitment to freeze settlement construction, construction is currently ongoing in at least 101 settlements (not including those in East Jerusalem).7 Construction of 2,122 housing units in the OPT (not including East Jerusalem) began in 2008, while 1,584 units were completed in that time. Some 3,229 units were under active construction by the end of the year.8 In the same period, Israeli authorities published 1,553 tenders and issued 2,020 building permits.

July 2009



Manufacturing. While most land in the settlements is dedicated to residential use, a significant amount is allocated for commercial and industrial purposes. By way of example, 6.6 per cent of the land in 16 large settlements9 is allocated for commercial purposes.10 There are four major industrial settlements Atarot, Ariel, Barqan and Mishor Adumim as well as several smaller industrial zones.11 Settlement businesses produce a wide variety of goods: chemicals, plastics, wine, nylon bags, furniture, carpets, camping equipment, door locks, health products, cosmetics, paper goods, leather, aluminium, electronics, cement, computers and more.12
 Agriculture. Agriculture also thrives in the settlements. Some 90,000 dunums of Palestinian land are cultivated by settlements.13 Some 34 per cent of the land in 16 large settlements is allocated for agriculture.14 In particular, settlements in the Jordan Valley depend mainly on agriculture.15
 The outline plans of many of them define most of their areas as agricultural land, and large areas of land farmed by the settlers often extend beyond the municipal boundaries of the settlements.16 Consequently, the water consumption of the population of the Jordan Valley (approximately 9,600) settlements is roughly equivalent to 75 per cent of the water consumption of the entire Palestinian population of the West Bank (approximately 2.3 million) for domestic and urban uses.17 Settlements produce maize, onions and potatoes for the Israeli market, and aubergines, avocados, cherries, cucumbers, dates, flowers, grapefruit, grapes, herbs, melons, peppers and tomatoes for export.18
Tourism. In recent years, the Israeli government has invested millions of dollars in developing
archaeological heritage sites, which form a part of Palestinians’ national patrimony, and other
tourist projects in the settlements and throughout the West Bank. Examples include the
Herodion near Bethlehem, the Al-Ibrahimi Mosque in Hebron, and of course, the Old City of
Jerusalem. In many cases, only Israeli, and not Palestinian, tour operators, can access these sites. Furthermore, the Israeli government and Israeli tour operators market Israel and the OPT as a single tourist destination.

Businesses contribute to Israel’s settlement project in numerous ways. Settlement businesses profit from the exploitation of Palestinian resources. Factories, farms and service providers all require a physical space for their operations and, therefore, sit atop and/or use land that has been illegally confiscated from Palestinians and that otherwise could have been productively utilized for Palestinian agriculture, industry, urban development or other economic activities. Agricultural entities, in particular, demand relatively large tracts of land and are a drain on Palestinian water resources. At the same time, many settlement industrial entities, which are not held to the same environmental standards as those in Israel, directly pollute Palestinian land, water and air.
Settlement businesses also help promote Israeli settlement expansion. Settlement businesses both depend upon and encourage the development of basic infrastructure, such as roads for
distribution and water, electricity, telecommunications and sewage infrastructure for production. In addition, they encourage Israeli migration into settlements by providing employment opportunities and services to settlers and by otherwise contributing to the economic sustainability of the settlements.
Of course, some businesses contribute even more directly to settlement expansion. Land
developers and construction companies are intimately and organically involved in Israeli
settlement activity, actualizing Israeli government settlement plans and tenders into concrete
realities that permanently alter the character of Palestinian land and deny Palestinians control, use and access to that land, and that change the demographics of the OPT.

July 2009



Companies in other countries also import, distribute and sell settlement goods, enriching the
settlement businesses that produce and grow the products, which encourages these businesses’ growth, as well as benefiting Israel’s economy as a whole. In some cases, settlement exports get preferential tax treatment under trade agreements between Israel and the importing country, which means that public funds from those countries benefit settlement products.

Regrettably, settlement businesses operating in the OPT act in a manner that is contrary to
international law.19
A part of settlement activity. Settlements are outlawed by Article 49(6) of the Fourth Geneva Convention, which prohibits Israel, an occupying power, from transferring its civilian population to the OPT.20 To similar effect, Article 8(b)(viii) of the Rome Statute of the International Criminal Court of 1998 defines “the transfer directly or indirectly by the Occupying Power of parts of its own civilian population into the territory it occupies” as a War Crime.21
Part of the reason for prohibiting the transfer of settlers is to safeguard the occupied
population’s right of self-determination. Settlements interfere with an occupied people’s ability to freely pursue its political, economic and social development. According to Pictet’s commentary on the Fourth Geneva Convention, the prohibition on the establishment of settlements is “intended to prevent a practice adopted during the Second World War by certain Powers, which transferred portions of their own population to occupied territory for political and racial reasons or in order, as they claimed, to colonize those territories.”22
Exploiting Palestinian resources. An occupying power does not gain sovereignty or title over
occupied territory. Article 55 of the Hague Regulations only permits an occupying power to
administer and use state land in a manner that preserves the capital.23 Article 46 requires an
occupying power to respect private land and to not confiscate it. Article 49 of the Hague
Regulations further provides that the occupying power can only use the resources in the occupied territory “for the needs of the army or for the administration of the territory in question.” Seizures or uses of property meant to serve the broader interests of the occupying power or its inhabitants are not permitted.24
This is consistent with principles of international law that all states and peoples, including those under occupation, enjoy permanent sovereignty over their natural resources.25 Indeed, part of the rationale for prohibiting the transfer of an occupant’s civilian population is that “such transfers worsened the economic situation of the native population.”26 In fact, the United Nations General Assembly (UNGA) has reaffirmed in a number of resolutions the application of this rule to Israeli-occupied territories.27

Some of the international obligations that Israel has violated during its occupation of Palestinian territory fall within a special category of obligations called peremptory norms of international law. They include the obligation to respect the Palestinian people’s right of self-determination28 and certain obligations under international humanitarian law.29 As “[a]ll States [are] held to have a legal interest in their protection” in light of the importance of the rights protected by those obligations,30 such obligations impose separate obligations on third states:
a duty of non-recognition Third states must not recognize as lawful a situation created by a gross or systematic failure of another state to fulfill one of these obligations.31 The duty extends not only to the formal recognition of these situations, but also to acts which would imply such recognition.32

July 2009



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