As international recognition of the State of Palestine grows, a critical economic question emerges: how effectively can this diplomatic legitimacy translate into tangible economic opportunities, given the ongoing restrictions imposed by the Paris Protocol signed with Israel? nnThe financial agreements established under the Paris Protocol have governed the economic relationship between the Palestinian Authority and Israel since 1994. Under its terms, Israel collects taxes and customs duties on behalf of the Palestinian Authority and subsequently transfers these revenues after deducting its own claims. This arrangement grants Israel significant leverage, allowing it to delay or withhold funds, directly affecting the Palestinian budget and limiting fiscal flexibility for development initiatives—even when external aid or foreign investment increases. nWhile international recognition could enable Palestine to enter into preferential or free trade agreements, it does not automatically lift Israeli restrictions on border crossings and movement of goods. Such recognition may reduce perceived risks for foreign investors by reinforcing legal status, potentially boosting interest in sectors like technology, renewable energy, and smart agriculture. However, structural barriers remain deeply entrenched. nThe reality on the ground shows that the Paris Protocol continues to constrain Palestine’s ability to fully benefit economically from growing diplomatic recognition. As long as Israel retains control over revenue collection and clearance systems, the Palestinian Authority remains restricted in its capacity to independently manage its economy and meet population needs—highlighting a gap between political achievements and economic limitations. nOne major consequence is restricted liquidity: delays in fund transfers disrupt salary payments and hinder essential project financing. Investor hesitation persists, both domestically and internationally, due to the unstable economic environment and lack of full Palestinian control over financial mechanisms. Furthermore, even with increased international grants, a significant portion of financial benefits remains subject to Israeli-imposed rules, diminishing the impact of new funding on local economic growth. nFrom a legal and strategic standpoint, broader recognition strengthens Palestine’s standing, enabling it to engage in international treaties and attract investment by reducing sovereignty-related risks. This could shift foreign aid from conditional, short-term support to stable developmental commitments, unlocking access to tools such as development loans, green bonds, and multilateral funding programs—most of which require formal state recognition. nAnalyst Tani Goldstein from “Zman Yisrael” notes that any political resolution must account for the complex economic interdependence between the two populations. The Palestinian economy operates using the Israeli shekel, relies on Israel for imports and exports, and depends on Palestinian labor within Israel, creating what Goldstein describes as “one economy for two peoples.” nFuture scenarios—whether involving an independent Palestinian state, territorial annexation, or a federal union—face significant implementation challenges due to bureaucratic, political, and socioeconomic disparities. nProfessor Arye Arnon, an economist at Ben-Gurion University and researcher at the Truman Institute, explains that economic dependency dates back to the 1967 Six-Day War. After the conflict, while some Israeli leaders advocated economic separation, Defense Minister Moshe Dayan succeeded in integrating the occupied territories into Israel’s economy, enabling large-scale Palestinian employment inside Israel. Even after partial disengagement, Israel maintains full economic control, particularly in Gaza. Arnon raises a critical question: if Israel manages customs, trade, and employment for Palestinians, should it not also bear responsibility for providing socioeconomic safety nets? This dilemma poses a major challenge for future policy planning. nIsraeli economic editor Uriya Bar-Ma’ar highlights that growing international recognition transforms symbolic support into practical legal and diplomatic capital. Legally, it reinforces the classification of Israeli-held territories as occupied Palestinian sovereign land, aligning with international law and UN principles. This strengthens Palestinian rights to self-determination and opens avenues for legal actions against alleged violations. nDiplomatically, recognition enhances Palestine’s global engagement—allowing embassies, diplomatic immunity, and access to international airspace and maritime zones. It also provides strategic leverage, enabling Palestine to participate in global forums with greater political and economic influence. Bar-Ma’ar stresses that while recognition does not immediately alter economic realities, it builds long-term diplomatic and legal assets that can translate into strategic influence. nDespite these gains, ground-level challenges persist. Movement of goods and capital remains under Israeli control at crossings, weakening the immediate economic impact of international recognition. Budgetary pressures contribute to rising unemployment and poverty, even amid external support. Long-term investment and aid accumulation require effective Palestinian governance and institutional reforms to maximize returns. nThe Palestinian economy’s reliance on Israeli-administered revenue flows makes any economic growth fragile. Restrictions on capital movement limit Palestine’s ability to expand exports or import essential goods at competitive prices. However, accumulating international recognition could serve as leverage to renegotiate the Paris Protocol, reducing economic dependency and advancing financial and trade autonomy. nUltimately, such recognition represents a step toward economic sovereignty, offering Palestine greater control over resources and market access. The real challenge lies in converting this diplomatic capital into practical economic policies that boost local production, expand markets, and attract sustainable investment—transitioning from a financially constrained authority to an economically independent state capable of shaping its own economic framework. n— news from (الجزيرة نت)n
— News Original —nWhat is the economic benefit of recognizing Palestine under the Paris Protocol?nOccupied Jerusalem – As international recognition of the State of Palestine increases, a fundamental economic question arises: To what extent can these recognitions transform diplomatic legitimacy into real economic opportunities, given the continued restrictions of the economic Paris Protocol signed with Israel?nThe Paris agreements define the financial relationship between the Palestinian Authority and Israel since 1994, under which Israel collects taxes and fees on behalf of the Authority, then transfers them after deducting its dues.This system allows Israel to delay or deduct funds, directly affecting the Authority’s budget and limiting its flexibility in planning development projects, even if aid increases or investments flow from abroad.International recognition grants Palestine the opportunity to sign free or preferential trade agreements, but does not eliminate Israeli restrictions on crossings.International recognition reduces risks for foreign investors by stabilizing the legal status, and increases the attractiveness of projects in sectors such as technology, energy, and smart agriculture, despite the persistence of structural obstacles.Despite successive diplomatic gains, reality indicates that the Paris Protocol limits the Palestinian ability to fully benefit economically from these recognitions; As long as Israel continues to retain the right to tax and clearance, the Authority will remain constrained in developing its economy and providing for its population, reflecting a gap between political achievements and field economic constraints.Tangible impactsThis formula gives Israel broad authority over Palestinian financial resources, leading to the following:Restricting cash liquidity: Any delay in transferring funds hinders salary payments and funding of basic projects.Inhibiting investments: Investors, whether local or foreign, are reluctant to inject money into an unstable economic environment, and in the absence of full Palestinian control over resources.Weakening the ability to benefit from international grants: Even with increasing recognitions of the Palestinian state, a large part of the revenues remains tied to Israeli rules, reducing the impact of new financing on the local economy.Political-economic capitalFrom an Israeli analytical perspective, international recognition enhances Palestinian legitimacy, giving the Palestinian state a legal status that enables it to sign trade agreements and attract investments.Stabilizing the legal status of the State of Palestine helps reduce investor risks and also reduces the “sovereignty risks” that hindered access to Palestinian markets, meaning opening doors to international financing.International recognition of Palestine can transform international aid from conditional temporary support into stable development commitments, and also enables new financing tools such as development loans, green bonds, and international support programs, as international institutions usually deal with legally recognized states.Analyst and editor Tani Goldstein from the “Zman Yisrael” website believes that any political solution to the Palestinian issue cannot ignore the complex economic reality.He pointed out that the Palestinian economy is managed in shekels, imports and exports through Israel, and depends on Palestinian labor inside Israel, making the Palestinian economy completely dependent on Israel, or as Goldstein describes it: “One economy for two peoples.”Goldstein points out that any future scenario, whether the establishment of an independent Palestinian state, annexation of territories and resettlement of populations, or even the establishment of a joint federal union, will face difficulties in implementation due to political, bureaucratic complexities and the large gap in living standards between Palestinians and Israelis.Continuous dependencyFor his part, Professor Arye Arnon, Professor of Economics at Ben-Gurion University and researcher at the Truman Institute, explains that economic dependency began after the Six-Day War (1967).After the war, Arnon says, “there was a debate between Yigal Allon and Moshe Dayan about the future of the territories,” and Allon preferred to keep them linked to Jordan and use the dinar, while Dayan succeeded in integrating them into the Israeli economy, allowing Palestinians to work freely inside Israel in large numbers.Despite the partial separation later, Arnon adds, “Israeli control over the Palestinian economy remained complete, especially in the Gaza Strip.”Arnon asks, “If the Palestinian economy is completely dependent on Israel, and the latter manages customs, trade, and employment on behalf of Palestinians, does not Israel bear the responsibility of providing a social and economic safety net for them?” He adds that this poses a major challenge for any future political or economic plan.Legal and economic dilemmaIsraeli economic editor Uriya Bar Ma’ir highlighted the implications of increasing international recognition of the State of Palestine, considering that it goes beyond symbolism to become practical legal, political, and economic capital.She explained that legally, recognition makes Israel an occupier of land with Palestinian sovereignty, which violates international law and the UN Charter, strengthens the Palestinians’ right to self-determination, and allows other countries to take legal action against potential violations.On the diplomatic, political, and economic level, Meir believes that recognition strengthens Palestine’s international relations, including opening embassies and benefiting from diplomatic and legal immunity, as well as enabling Palestinians to call in international observers to the West Bank and legally use the airspace and territorial waters of Gaza and the West Bank.She pointed out that these recognitions provide strategic pressure tools on Israel, and increase the Palestinians’ ability to participate in international platforms and take stronger political and economic positions, saying that “international recognition does not immediately change the economic reality,” but it constitutes diplomatic and legal capital that can be converted into political and strategic influence in the medium and long term.Real limits of economic impactDespite these achievements and the entitlement to international recognition of Palestine, the reality on the ground remains complex; The movement of money and trade is subject to Israeli control at crossings, weakening the immediate impact of any international recognition on the local Palestinian economy.Also, pressure on the Authority’s budget leads to worsening unemployment and poverty, despite international recognition and signs of external support, while investments and aid may accumulate in the long run, but require internal policies and Palestinian administrative reforms to maximize benefits.The Palestinian economy’s reliance on Israeli financial flows makes any economic growth fragile, especially given restrictions on the movement of money that limit Palestine’s ability to expand its exports or import basic materials at competitive prices.Pressure on the Paris ProtocolAccumulating international recognition can be an effective pressure card to renegotiate the restrictions of the Paris Protocol, allowing for the disengagement of the direct dependence of the Palestinian economy on Israel, thus enhancing Palestine’s financial and commercial independence.International recognition is an important step towards economic sovereignty, and also contributes to expanding Palestine’s ability to control financial and commercial resources, and create real opportunities to develop the local economy and open international markets to Palestinian products.Despite the complexities on the ground, international recognition of Palestine represents political-economic capital that can be invested to overcome the restrictions imposed by the Paris Protocol.The real challenge lies in linking this capital to practical economic policies that enhance local Palestinian production, expand markets, and attract investments, transforming Palestine from a “limited economic authority” into an economically independent state capable of shaping its own rules of the game.