The Possible Impact of the Israel-Palestine War on the Philippines
Will the Israel-Palestine war impact the Philippine economy? How? Understanding the essence of the conflict should provide a clue.
The Israeli policy over recent years did not necessarily want to cultivate a Palestinian leadership... Many are in prison, and Israel's interest - because I repeat: it was not in their program or in Israel's interest at the time, or so they thought - was instead to divide the Palestinians and ensure that the Palestinian question fades. This Palestinian question will not fade. And so we must address it and find an answer. This is where we need courage. The use of force is a dead end. The moral condemnation of what Hamas did - and there's no "but" in my words regarding the moral condemnation of this horror - must not prevent us from moving forward politically and diplomatically in an enlightened manner. The law of retaliation is a never-ending cycle—Dominique De Villepin, former Prime Minister of France
In this issue
The Possible Impact of the Israel-Palestine War on the Philippines
I. The Increasing Trend of Wars; Nakba 1.0: The Origin of the Israel-Palestine Conflict
II. Nakba 2.0: The Israel-Palestine War: The Prison Revolt
III. Divide and Conquer Rule: Israel Created, Nurtured and Fought the Hamas
IV. The Global Sympathy War
V. The Collective Punishment of The Palestinians
VI. The Law of Large Numbers, Rising Risks of Direct World War 3
VII. The Middle East Conflict as Symptom of the "Thucydides Trap"
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The Possible Impact of the Israel-Palestine War on the Philippines
I. The Increasing Trend of Wars; Nakba 1.0: The Origin of the Israel-Palestine Conflict
GMA News, October 12: The ongoing conflict in Israel will not affect the prices of commodities, Go Negosyo founder Joey Concepcion said Thursday. “Sa tingin ko naman we don’t import much from Israel. It may have influence on oil prices because of the conflict because medyo malapit ‘yung Israel sa mga lugar ng oil-producing countries. But I am confident that the rest of commodities halos pareho pa rin ang presyo,” Concepcion said at a public briefing. (We don't import much from Israel. It may influence oil prices because Israel is relatively close to the areas of oil-producing countries. But I am confident the prices of commodities will remain the same.) He added that the government has sufficient supply of raw materials up to the second quarter of 2024.
We shall deal with this later.
Let us start with a caveat.
This outlook intends to analyze the potential impact and risks to the global and Philippine financial markets and the economy.
The world is flaring up.
February 24, 2022: Predicated on a Special Military Operation (SMO), the Russian government launched an offensive against Ukraine.
October 7, 2023: The Islamic Resistance Movement (HAMAS), the military and political group governing the Gaza Strip, launched an unprecedented surprise assault against Israel.
In discussing the Chinese astrology or zodiac signs, we warned that, aside from the impact of the 12-year credit cycles, several geopolitical powder kegs were ripe for a blow-up.
A month before the Russian Invasion of Ukraine, I wrote,
Aside from the eroding concerns over the pandemic, potential geopolitical flashpoints for a hot war may occur.
For instance, the US-Russian impasse over Ukraine (Russia’s vehement objection over the slippery slope of NATO’s expansion into her borders), China’s flexing of its military muscles over Taiwan (Figure 2, topmost pane) while simultaneously asserting its sphere of influence at the disputed territories of the South China Sea and the Senkaku Islands. There are also ongoing border disputes between China and India at the Himalayan Aksai Chin and the south of the McMahon Line and between India and Pakistan over Kashmir.
So yes, if diplomacy fails, the higher the risks that standoffs morph into a hot war. (Prudent Investor, 2022)
Last January, we pointed out that the year of the Rabbit hasn't been exactly peaceful. It included:
The Year of the Rabbit also saw the outbreak of the Arab Spring protests in 2011. Although the trigger for the unrest started with the self-immolation of a street vendor in Tunisia in December 2010, the social strife spread like wildfire throughout several Middle East nations in 2011 (Bahrain, Saudi Arabia, Egypt, Syria, Libya, Tunisia, United Arab Emirates, and Yemen). (Prudent Investor, 2023)
Although we're no geopolitical experts, what needs to be understood is how the world evolves via complex feedback loops, resulting in these developments.
Or, the ongoing war in Ukraine and Israel did not occur out of a vacuum but signifies accumulated adversarial social-political-economic domestic and foreign interactions that resulted in these unfortunate events.
Quoted in full is the terse background of the Israel-Palestine conflict from the West-controlled multilateral agency, the United Nations, highlighted by the Nakba:
The Nakba, which means “catastrophe” in Arabic, refers to the mass displacement and dispossession of Palestinians during the 1948 Arab-Israeli war. Before the Nakba, Palestine was a multi-ethnic and multi-cultural society. However, the conflict between Arabs and Jews intensified in the 1930s with the increase of Jewish immigration, driven by persecution in Europe, and with the Zionist movement aiming to establish a Jewish state in Palestine.
In November 1947, the UN General Assembly passed a resolution partitioning Palestine into two states, one Jewish and one Arab, with Jerusalem under a UN administration. The Arab world rejected the plan, arguing that it was unfair and violated the UN Charter. Jewish militias launched attacks against Palestinian villages, forcing thousands to flee. The situation escalated into a full-blown war in 1948, with the end of the British Mandate and the departure of British forces, the declaration of independence of the State of Israel and the entry of neighbouring Arab armies. The newly established Israeli forces launched a major offensive. The result of the war was the permanent displacement of more than half of the Palestinian population.
As early as December 1948, the UN General Assembly called for refugee return, property restitution and compensation (resolution 194 (II)). However, 75 years later, despite countless UN resolutions, the rights of the Palestinians continue to be denied. According to the UN Relief and Works Agency for Palestine Refugees (UNRWA) more than 5 million Palestine refugees are scattered throughout the Middle East. Today, Palestinians continue to be dispossessed and displaced by Israeli settlements, evictions, land confiscation and home demolitions.
The Nakba anniversary is a reminder not only of those tragic events of 1948, but of the ongoing injustice suffered by the Palestinians. The Nakba had a profound impact on the Palestinian people, who lost their homes, their land, and their way of life. It remains a deeply traumatic event in their collective memory and continues to shape their struggle for justice and for their right to return to their homes. In 2022, the UN General Assembly requested that this anniversary be commemorated on 15 May 2023, for the first time in the history of the UN. (UN)
Figure 1
A short rewind on the mass Jewish immigration facilitated by the Balfour Declaration:
More than 100 years ago, on November 2, 1917, Britain’s then-foreign secretary, Arthur Balfour, wrote a letter addressed to Lionel Walter Rothschild, a figurehead of the British Jewish community.
The letter was short – just 67 words – but its contents had a seismic effect on Palestine that is still felt to this day.
It committed the British government to “the establishment in Palestine of a national home for the Jewish people” and to facilitating “the achievement of this object”. The letter is known as the Balfour Declaration.
In essence, a European power promised the Zionist movement a country where Palestinian Arab natives made up more than 90 percent of the population.
A British Mandate was created in 1923 and lasted until 1948. During that period, the British facilitated mass Jewish immigration – many of the new residents were fleeing Nazism in Europe – and they also faced protests and strikes. Palestinians were alarmed by their country’s changing demographics and British confiscation of their lands to be handed over to Jewish settlers. (Al Jazeera, 2023)
So, the legacy elements of the Israel-Palestine conflict have been:
-hegemonic intervention
-ethnonationalism
-occupier/colonist/settler-indigenous/native relationship
-religion
Knowing these, how can the Philippine elites discount or ignore the potential impact of an escalation of the conflict?
II. Nakba 2.0: The Israel-Palestine War: The Prison Revolt
But there is more.
Gaza Strip is not a state. It is an enclave of Palestinian people with a very high population density composed mainly of women and children.
Worst, many call this piece of land an "Open-Air Prison."
This stunning excerpt from a US media: (bold added)
‘World’s largest open-air prison’
Since 2007, Israel has imposed an air, land and sea blockade on the Gaza Strip, saying the move is necessary to safeguard the country from Hamas’ attacks. Gaza is surrounded by concrete walls and barbed wire fences.
Palestinians are prohibited from entering or leaving the territory except in extremely rare cases such as “urgent, life-threatening medical conditions,” according to Israeli human rights group B’Tselem. Foreign citizens are not subjected to the same restrictions. Human rights groups have described it as “the world’s largest open-air prison.”
The humanitarian situation in Gaza was already quite dire after 16 years of Israel’s crushing closure. But we’re now descending to depths we simply haven’t seen.
Its economy has been crippled by the strict restrictions on the movement of individuals. Gaza’s unemployment rate is above 40%, and 63% of Gazans are deemed food insecure, according to the U.N., with no reliable access to affordable, nutritious food. Additionally, about 80% of Gaza’s residents have been reliant on some sort of international aid.
Figure 2
As I recently tweeted, the Palestinians of the Gaza Strip are poor. Israelites have a per capita of 6.55 times. Despite the high-income status, the Israeli government has received $3.8 billion in military aid a year from the US government since 2016.
Israel is an economic heavyweight in combat against a depressed prison enclave in revolt.
To add, the Israel Defense Force (IDF), with 169,000 active duty and recently mobilized 360,000 reservists, is supported by 241 fighter jets (including the state-of-the-art F-35s), 48 attack helicopters, 2,200 tanks, over 1,200 artillery units, seven warships, and at least six submarines. It also has a nuclear warhead stockpile of around 80-400.
Likewise, according to NDTV, Israel has one of the world's most acclaimed intelligence networks, including the Mossad; the famed spy agency is widely seen as one of the best after the United States' Central Intelligence Agency.
Altogether, the IDF was ranked fourth in the world with the "strongest" military by the US News.
On the other hand, the rebelling Hamas has a measly 30,000 men, armed with 7,000 rockets as of 2021. In boxing, a heavyweight versus a featherweight.
Outnumbered. Outclassed. Overpowered.
So, by the tale of the tape, the only way for Hamas to win is by a miracle.
III. Divide and Conquer Rule: Israel Created, Nurtured and Fought the Hamas
In a related plane, with its divide-and-conquer rule to defeat the two-state solution, Israel reportedly created the Hamas.
From a 2018 article by the Intercept:
Brig. Gen. Yitzhak Segev, who was the Israeli military governor in Gaza in the early 1980s. Segev later told a New York Times reporter that he had helped finance the Palestinian Islamist movement as a “counterweight” to the secularists and leftists of the Palestine Liberation Organization and the Fatah party, led by Yasser Arafat (who himself referred to Hamas as “a creature of Israel.”)
“The Israeli government gave me a budget,” the retired brigadier general confessed, “and the military government gives to the mosques.”
“Hamas, to my great regret, is Israel’s creation,” Avner Cohen, a former Israeli religious affairs official who worked in Gaza for more than two decades, told the Wall Street Journal in 2009. Back in the mid-1980s, Cohen even wrote an official report to his superiors warning them not to play divide-and-rule in the Occupied Territories, by backing Palestinian Islamists against Palestinian secularists. “I … suggest focusing our efforts on finding ways to break up this monster before this reality jumps in our face,” he wrote.
They didn’t listen to him. And Hamas, as I explain in the fifth installment of my short film series for The Intercept on blowback, was the result. To be clear: First, the Israelis helped build up a militant strain of Palestinian political Islam, in the form of Hamas and its Muslim Brotherhood precursors; then, the Israelis switched tack and tried to bomb, besiege, and blockade it out of existence. (Intercept, 2018)
Incredible.
Hamas turned out to be the proverbial demon from within, a Frankenstein, which the Israeli government tried to extinguish by labeling it a terrorist group: a blowback as it is.
Hamas was also reportedly funded by no less than the Israeli Prime Minister Benjamin Netanyahu.
From Israel’s leading news, the Times of Israel,
For years, the various governments led by Benjamin Netanyahu took an approach that divided power between the Gaza Strip and the West Bank — bringing Palestinian Authority President Mahmoud Abbas to his knees while making moves that propped up the Hamas terror group.
The idea was to prevent Abbas — or anyone else in the Palestinian Authority’s West Bank government — from advancing toward the establishment of a Palestinian state.
Thus, amid this bid to impair Abbas, Hamas was upgraded from a mere terror group to an organization with which Israel held indirect negotiations via Egypt, and one that was allowed to receive infusions of cash from abroad.
Hamas was also included in discussions about increasing the number of work permits Israel granted to Gazan laborers, which kept money flowing into Gaza, meaning food for families and the ability to purchase basic products.
Israeli officials said these permits, which allow Gazan laborers to earn higher salaries than they would in the enclave, were a powerful tool to help preserve calm.
Toward the end of Netanyahu’s fifth government in 2021, approximately 2,000-3,000 work permits were issued to Gazans. This number climbed to 5,000 and, during the Bennett-Lapid government, rose sharply to 10,000. (Schneider, 2023)
The Israel and Hamas conflict has stretched back to its origin in 2006, highlighted by several principal engagements: 2008-2009 and 2014.
If true, Israel created, nurtured, and fought the Hamas.
Figure 3
In any case, the Palestinians were always at the receiving end of the violence.
IV. The Global Sympathy War
Armed with paragliders, motorbikes, and bulldozers, supported by a barrage of missiles, which overwhelmed the allegedly impregnable Iron Dome air defense system, the Hamas group surprised the supposedly invincible IDF with a well-organized broad assault last October 7, 2023—costing 1,400 Israeli lives, mostly civilians and about 220 taken as hostages.
Even then, the Hamas seem to have known that holding out on these territorial gains wouldn't be possible.
But why undertake such a suicidal mission?
In our humble opinion, the first is to expose the vulnerability of the IDF and encourage the opposition to stand against Israel. (see the legacy elements above)
The second, the Hamas waged a "sympathy war" to win the hearts and minds of the world.
Entrepreneur and geopolitical analyst Arnaud Bertrand wrote this remarkable insight, (bold added)
It says a lot about Israel for 3 reasons. 1) It says a lot about Israel's image that it was expected to react with massive collective punishment, violating international law. 2) It also says a lot about Israel's inability to think strategically that it would react in exactly the way its adversary predicted it to. Revenge is not a strategy, in fact it is the opposite of strategic. And, lastly 3) it says a lot that Israel doesn't seem to have learned a thing from the US's immense mistakes in its post 9-11 response.
Yes, of course, it also says a lot about Hamas, because they knew their actions would undoubtedly cause untold suffering on their own people (on top of the suffering they caused with the attacks). No question there…
I'm going to go out on a limb here and hypothesize that this was Hamas, as an organization, committing suicide for the Palestinian cause. Hamas undoubtedly won't survive this, it's pretty clear. And sadly thousands of innocent lives will be lost. But they've focused the entire global conversation on their topic and Israel's reaction is making Palestinians win the sympathy war. (Bertrand, 2023)
And that's exactly how things have been turning out.
Perhaps, this gambit represented an "existential issue" for the Hamas, where the likely goal is to force Israel into agreeing to a two-state solution, which should free the Palestinians.
V. The Collective Punishment of The Palestinians
The reflexive response by the IDR to the October 7 attack was a "collective punishment" of the Palestinians.
Emboldened by the backings of the formidable US armada, the IDF relentlessly carpet bombed the Gaza Strip to the Stone Age, slaughtering civilians indiscriminately.
According to the NDTV World, 8,000 Palestinians have died, about half of them children (as of October 30th).
The latest UNICEF headline: Gaza has become a graveyard for thousands of children.
Instead of defeating the Hamas, the real goal appears to be forcing the Gazans out of their homeland.
The Israeli government told 1.1 million Palestinians to evacuate as they would ramp up operations against the Hamas. While many did, the IDF bombed and heinously massacred some of them. Ironically, even pro-Israel Western media reported it.
The government of Israel recently admitted to drafting a plan that would have forced the migration of Gazans to Egypt's Sinai peninsula.
Aside from expanding land, another possible reason why the Israeli government wanted Palestinians out of the Gaza Strip could be access to oil and gas reserves.
And it is not just Palestinians.
Because truth is the first casualty of war, the IDF seems to have targeted even journalists or media reporters, with 31 slain since the October 7th outbreak of hostilities (as of October 30th).
The relentless bombing also cost the lives of 64 UN Relief workers and 22 injured (as of October 30th).
Nonetheless, with real-time casualties of women and children in Gaza mounting, as exhibited in social media, many in the Muslim world, including non-Muslims, have marched on the streets to demand a "ceasefire."
VI. The Law of Large Numbers, Rising Risks of Direct World War 3
Figure 4
As I have recently tweeted, the law of large numbers should apply. With over two billion Muslims globally, every % increase in this population in support of the Palestinians could put pressure on their governments. In doing so, such increases the odds of widening the Israel-Palestine conflict into a regional war, if not a World War III.
Massive Pro-Palestinian rallies calling for a cease reverberated across the world, which even mainstream media like CNN found hard to suppress.
This also created a schism among the global elites.
The UN secretary general called for an immediate ceasefire, citing Israel's alleged violations of international law in Gaza, which includes the bombing of schools and hospitals.
Figure 5
Last October 26th, the UN General Assembly voted for an "immediate and sustained humanitarian truce." Unfortunately, the Philippine government voted to abstain.
Accusing Israel of war crimes in a massive rally, Turkey's President Recep Tayyip Erdogan subtly threatened to join the war against Israel.
As an aside, if Turkey joins the war against the US-NATO supported Israel, will it leave NATO?
Yemeni’s Iran-backed Huthi rebels vowed more attacks on Israel.
While Israel initially rejected or blocked aid to the Gaza Strip—the popular outcry for humanitarian relief—has softened its stance and has started to allow entry of relief goods.
Ironically, while pro-Palestine movements have sprouted in many places, accepting them as refugees has barely gotten any tailwind. Scotland appears to be the first nation to welcome Gazan refugees.
Yet, giving rise to the popular momentum, Hamas has taken a Public Relations blitz on the geopolitical sphere.
After meeting with Hamas and Islamic Jihad leaders last week, the Iran-backed Hezbollah chief is slated to deliver a speech this Friday. Should it declare war on Israel, this would be the second front of the war.
Iran's senior envoy met with Hamas representatives in Moscow last October 27th, apparently with the blessing of the Russian leadership.
But the US has continually accused Iran of conspiring with Hamas in its attack on Israel, which the latter has denied.
And while Israel seems to have delayed its full-scale ground assault on the Gaza Strip, the US continues to strike at Syrian targets, possibly testing the Iran and Russian response. [Updated to add: Israel may have begun its ground operations in Gaza]
Iran is a member of the Shanghai Cooperation Organization (SCO), which according to the UN, represents an intergovernmental organization...mainly focused on regional security issues, its fight against regional terrorism, ethnic separatism, and religious extremism. Differently put, the SCO is the emerging competitor of NATO, which implies that an attack or military action against one of the members may prompt a response from the group.
If so, increased American-NATO hostile activities against Israel's foes may drag Russia and China into the region's theater of war.
VII. The Middle East Conflict as Symptom of the "Thucydides Trap"
What should have been a Prisoner's revolt has been morphing into a regional conflict.
The Russian-Ukraine (US-NATO) proxy war has expanded to the Middle East, again, increasing the chances of a deeper involvement of the world's biggest nuclear powers. It could be seen in the context of increasing intensity of hegemonic competition or the "Thucydides Trap."
As previously noted, there are many other potential tinderboxes, including the South China Sea and the Korean Peninsula. The Philippines hosts 9-US bases or EDCA sites, which means that instead of a deterrent, any plans by China on Taiwan or the South China Sea should translate into a magnet for involvement. Have people forgotten December 8, 1941, or the day after Pearl Harbor? The Japanese Imperial Army bombed the US bases in Clark.
With rapidly ballooning intolerance, the world appears to be "sleepwalking" into a global war—to quote billionaire icon Elon Musk.
VIII. The Possible Impact of the Middle East Conflict on the Global and Philippines Economy, The Path towards the War Economy
How is this supposed to impact the Philippines?
Like the butterfly effect, feedback loops (action-reaction) could worsen, magnify and disseminate.
The possible escalation of the Hamas "prisoner's revolt" into a regional war should translate into a broadening of global economic dislocations.
Timed with financial tightening, an abrupt emergence of a crisis of confidence may incite magnified risk aversion, aggravating the bursting of various credit-funded asset bubble chains.
And given the magnitude of systemic leverage, margin calls could ripple here and abroad. It could intensify the drain on liquidity, which would be met by central bank liquidity injections.
The Philippine financial markets could come under increased pressure. Aside from trade and investment flows, displacement in the Philippines would involve OFWs, tourism, and BPOs, reducing the BSP's FX buffer. Increased economic strains would incite authorities to the mechanical recourse of bailouts: record fiscal deficits and unprecedented monetary injections plus relief measures—entrenching inflation.
And today's environment is a lot different compared with the outbreak of the Russia-Ukraine war, which means dislocations from the present war will piggyback on the previous imbalances.
To see things in the context of supply chains would be to analyze the unfolding chain of events backward and engage in selective perception.
For one thing, resonating the Russian-Ukraine conflict, if this war transforms into a "meat grinder," this would accelerate the transformation of the global economy into a war economy, prioritizing the defense and military-related infrastructure, logistics etc., which should intensify the crowding out effect, "war socialism," and further entrench the age of inflation.
Worse, this translates to a crucial retreat in civil liberties.
And the shift to a war economy could be disorderly. Since the Philippines has structured its economy on the Keynesian paradigm of debt-financed consumerism, the ensuing adjustments could take a heavy toll on the incumbent financial and economic structures.
So, unless the angel of peace descends upon us to allow reason and tolerance to prevail, as libertarian anarchist-philosopher businessman Doug Casey says "Trends in motion tend to stay in motion until they reach a crisis."
Batten down the hatches.
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References:
An Interview On Gaza With Dominique De Villepin (As Translated By Arnaud Bertrand), Moon of Alabama, October 28,2023
Prudent Investor, What Surprise is in Store for the 2022 Year of the Water Tiger?, January 23, 2022
Prudent Investor, What Surprise is in Store for the 2023 Year of the Water Rabbit? January 22, 2023
United Nations, About the Nakba, The Question of Palestine
Al Jazeera, What’s the Israel-Palestine conflict about? A simple guide October 9, 2023
CNBC, What is the Gaza Strip? What you need to know about the territory at the heart of the Israel-Hamas war, October 17, 2023
Medhi Hasan and Dina Sayedahmed, BLOWBACK: HOW ISRAEL WENT FROM HELPING CREATE HAMAS TO BOMBING IT, The Intercept, February 18, 2018
TAL SCHNEIDER, For years, Netanyahu propped up Hamas. Now it’s blown up in our faces, Times of Israel, October 8, 2023
Arnaud Bertrand - How Israel Stepped Into A Trap, Moon of Alabama, October 15, 2023