On 15 August, the Israeli Ministry of Defense reopened the Kerem Shalom border crossing to fuel and commercial vehicles, as part of an initial agreement for a more permanent ceasefire.

• The latest ceasefire is likely to hold for at least several weeks unless a more extensive agreement can be agreed between Hamas and Israel. Acceptance by the Palestinian Authority (PA) is unlikely as President Mahmoud Abbas rejects any ceasefire that serves to treat Hamas as an independent authority in Gaza.
• Prime Minister Netanyahu's government, despite some bellicose rhetoric by right-wingers, and the IDF leadership, has sought to avoid responding to Hamas's cross-border fire by a prolonged ground operation in Gaza. The Israeli casualties that would result from such an operation, and its likely inconclusive result, make military action a high-risk and politically damaging option for Netanyahu while he prepares for an election campaign that is likely to take place in early/mid 2019.
• The Israeli government's security priority remains the protection of the northern front with Syria and the prevention, with Russian support, of an established Iranian military presence capable of threatening the Israeli communities around the occupied Golan.

The agreement also included a restoration of the fishing zone off Gaza's coast from six kilometers to 17. The Israeli concessions are dependent on Hamas ceasing its cross-border fire, including the launch of incendiary kites and balloons from Gaza into southern Israel, and are likely to serve as the initial conditions of a proposed year-long ceasefire between Israel and Hamas to be settled at the end of the celebration of Eid al-Adha on 25 August.

The ceasefire arrangement appears to follow the economic development track favored by the UN's envoy Nickolay Mladenov, rather than the political reconciliation model favored by the Egyptians. Both proposals were initially based on a permanent halt to the launching of incendiaries and rockets from Gaza into Israel in return for an opening of the Kerem Shalom border crossing to Israel and the Rafah crossing with Egypt to allow the entry of humanitarian and reconstruction materials into Gaza.

The Egyptian proposal reportedly also contained a precondition requiring a political reconciliation between Hamas and Fatah, the dominant political faction of the Palestinian Authority. This remains unlikely to be achieved, as PA President Mahmoud Abbas rejects any ceasefire that would serve to treat Hamas as an independent authority in Gaza.

Initial details of the ceasefire terms reported by the Hizbullah-affiliated Al Mayadeen network on 15 August indicated that the ceasefire would last for one year, with significant measures taken to alleviate the economic crisis in Gaza overseen by Hamas. These would allegedly include the opening of a shipping route between Cyprus and Gaza overseen by Israeli security forces, and Qatari funding for fuel imports and payment of Hamas officials' salaries. The initial stages of the ceasefire do not appear to involve any repatriation of Israeli hostages and the remains of IDF soldiers held by Hamas, as demanded by Israel. Hamas's leadership will likely condition the release of their Israeli prisoners and soldiers' remains on a corresponding release of Hamas prisoners, as they did in 2011, but IHS Markit assesses that a limited exchange is likely to take place if the initial arrangements for a longer-term ceasefire are agreed upon. A failure to achieve a full exchange and repatriation of remains would almost certainly impede the resolution of a longer-term settlement.

Military escalation from Hamas and Israel
The arrangement of a ceasefire between Hamas and Israel comes after a significant escalation in violence in the previous week. On 7 August, an Israeli tank strike killed two members of Hamas's Izz al-Din al-Qassam military wing and in response 180 rockets were fired at Israel over a two-day period. Israel claimed that approximately 30 rockets were intercepted by the Iron Dome air-defense system. One rocket landed in an open area near Beer-Sheva - 40 km from Gaza - the longest-range projectile launched since the 2014 war.

The Israeli response - airstrikes on at least 140 Hamas military and administrative targets across Gaza, was intended to demonstrate a growing lack of Israeli acceptance of Hamas rocket fire. The low casualty rate - three Gazan fatalities - was likely intended to signal Israeli reluctance to cause civilian casualties, or to escalate into an all-out offensive campaign. An Israeli airstrike that destroyed a five-story building in the al-Shati camp of northwest Gaza on the evening of 9 August was almost certainly intended to convey the will to target high-level Hamas leadership figures for assassination if Hamas's military escalation was not reduced - the building, an alleged Hamas internal security headquarters, was close to the family home of Hamas political head, Ismail Haniyeh.

Outlook and implications
The violent escalation by Hamas on 7-9 August came in the context of attempts by Egypt to broker a more comprehensive ceasefire between Hamas and Israel - ending the launching of arson attacks against the communities of southern Israel in return for some economic development opportunities for Gaza.

The latest ceasefire is likely to hold for at least several weeks, unless a more extensive agreement can in the interim be negotiated between Hamas and Israel. IHS Markit assesses that the willingness of Hamas to launch so many rockets in the two-day period of direct confrontation was in part determined by a need to demonstrate a credible show of force to Israel before a ceasefire was agreed, and to remind Israel of the heavy costs of a sustained military operation.

It appears that Hamas underestimated the willingness of the Israeli government and defense establishment to respond with extensive airstrikes on Hamas' strategic infrastructure, but also to purposefully avoid civilian casualties where possible. The Israeli policy of pre-warning the targets of airstrikes undermines Hamas's option of using civilian casualties and damage as a rallying cry for further escalation and for Arab support with reconstruction. Hamas is almost certain to abstain from using its longer-range rockets with the capability of reaching Tel Aviv or Jerusalem; the severe risk of damage that these would pose to aviation assets at Ben Gurion Airport, and subsequent disruption to cargo and transport, and the political consequences for the Israeli government, would almost certainly provoke a sustained Israeli air/ground offensive intended to permanently degrade Hamas's military capacity.

The Israeli defense establishment and Prime Minister Benjamin Netanyahu likely seek to avoid a prolonged ground operation in Gaza, but if numbers of Israeli civilians are killed the pressure to take military action will be deemed politically unavoidable. To be justifiable in the eyes of the Israeli public, such an operation would almost certainly have to achieve the permanent removal of Hamas as a political and military force and the likely Israeli casualties that would result from such an operation would be politically damaging to Netanyahu while he prepares for an election campaign that is likely to take place in early/mid 2019.

The difficulty of achieving this end-state and perceived attractiveness of even a temporary occupation of Gaza make this a high-risk and last resort option but one which the government may feel forced to take in the face of any continued Hamas provocation. The priority of the Israeli government remains the protection of the northern front with Syria and the prevention of an established Iranian military presence capable of threatening the Israeli communities around the occupied Golan.

The scale and wide-range of the chosen Israeli targets was most likely a factor in this decision, as Hamas leadership was almost certainly seeking to avoid military escalation involving an Israeli ground operation or assassinations of its leadership if rocket fire led to Israeli fatalities or reached larger Israeli population centers such as Ashkelon or Tel Aviv. Indicators of a changing attitude towards military intervention, and increased war risk, would be right-wing members of Netanyahu's governing coalition rejecting the terms of a ceasefire deal, or a sustained period of government civil defense preparation, such as evacuations of southern communities, and stockpiling of basic commodities and medical provisions in hospitals and community centers in the Eshkol region. Continued Friday protests by Hamas and Gazan civilians along the border with Israel are unlikely to cause a breakdown in the ceasefire.

Posted 23 August 2018 by Jack A. Kennedy, Associate Director and Head of Desk, Country Risk – Middle East and North Africa, S&P Global Market Intelligence