On 30 September Mahmoud al-Zahar, a senior official of Hamas - the Islamist group controlling Gaza - used an interview with Al Khaleej newspaper to criticize Palestinian Authority President Mahmoud Abbas.

• Hamas' leadership has likely assessed that in order to distract from the economic deterioration in Gaza it must escalate the intensity of protests along the border with Israel.
• At present, the Israeli government likely assesses that the relative lack of international censure, particularly from the US, following the high-casualty suppression of Gaza protests earlier in 2018, mean that the current level of protest is likely to be manageable without sustained air or artillery suppression.
• There is an elevated risk that Hamas' miscalculates the level of acceptable violence that the IDF is willing to allow, with the border protests, and Israeli fatalities, particularly civilian, likely to be a red line for the Israeli government, which will respond with airstrikes.

Zahar was speaking from Cairo, as part of a Hamas delegation taking part in Egypt-brokered reconciliation talks, and accused Abbas of impeding progress to push Hamas and Israel into a war.

The, so far unsuccessful, reconciliation was intended to unify the legislative governance of the West Bank and Gaza, but there has been no meaningful development since the end of 2017, with key disagreements over the unwillingness of Hamas to disarm under any final deal, the application of the PA's legislative system in Gaza, and public land being returned to PA control by Hamas.

Economic deterioration

In an attempt to force Hamas' leadership to negotiate, Abbas has cut salaries to PA employees under Hamas' supervision in Gaza, and withheld tax payments that are due for Gaza. On 31 August, the US Department of State announced that it would cease funding for United Nations Relief and Works Agency (UNRWA). UNRWA is responsible for the provision of social and humanitarian support for Palestinian refugees and their families and the withdrawal of US largesse creates a USD217 million shortfall equivalent to one third of UNRWA's annual budget.

On 4 October, Israeli newspaper Haaretz reported that Qatar had reached an agreement with all parties to finance the supply of additional electricity into Gaza, potentially raising the daily provision from four hours to eight. The deal is almost certainly going to be rejected by the PA, and will rely on bilateral co-operation between Hamas and Israel - a situation that is likely to be exploited by more extremist Salafist groups seeking to provoke a further round of sustained violence.

Since mid-August, Hamas has increased the frequency of protests from weekly to approximately once every two days. The use of incendiary kites and balloons has also increased, together with a shift to focusing on protests at dusk and into night - where mass protests along the fence are harder for the IDF to control and it is easier for demonstrators to breach the security barrier.

On 28 September, during protests involving upwards of 20,000 people and in which as many as 100 improvised explosive devices and grenades were thrown at IDF troops, several dozen protesters broke through, before being driven back. The Israeli government is likely to permit a lowering of the threshold at which lethal fire can be used to repel protesters if the attempts to breach the barrier continue - there is only a distance of several kilometers from the barrier to the nearest Israeli settlements and Prime Minister Benjamin Netanyahu will be unwilling to permit any scenario in which a hostage situation becomes more likely.

Outlook and implications

Hamas' leadership has likely assessed that in order to distract from the economic deterioration in Gaza it must escalate the intensity of protests along the border with Israel. Mass protests carry less direct risk of casualties of Israeli civilians and soldiers, which almost certainly would result in retaliatory airstrikes.

It is extremely unlikely that a political reconciliation between Hamas and Fatah will be agreed upon in the three-month outlook, meaning there is unlikely to be a unified legislative system for the PA to implement and an improvement in the economic situation for Gaza. IHS Markit assesses that the leadership of Hamas is aware that it its domestic support among Gazans is likely to be at an unprecedented low, and will continue to mobilize protests as an outlet while continuing to negotiate with Egypt and, by extension, the Israelis, to maintain open access to the Rafah and Kerem Shalom crossings for basic materials.

There is an elevated risk that Hamas' miscalculates the level of acceptable violence that the IDF is willing to allow at the border protests. At the time of writing, there have been no Israeli casualties from the protests, but if grenades and improvised explosives continue to be thrown this is likely to change. Israeli fatalities, particularly civilian, are likely to be a red line for the Israeli government, which will respond with airstrikes.

IHS Markit assesses that Netanyahu is intending to hold early parliamentary elections in the first quarter of 2019, and as such, will want to avoid a direct conflict with Hamas involving a ground operation in Gaza in which the IDF is almost certain to incur casualties. At present, the Israeli government likely assesses that the relative lack of international censure, particularly from the US, following the high-casualty suppression of Gaza protests earlier in 2018, mean that the current intensity of protest is politically sustainable without requiring as escalatory response. Hamas rocket fire would be unlikely to extend beyond 12 km out of a desire to limit the potential Israeli response, and is almost certainly not going to pose a threat to the larger civilian population centers of Ashkelon, Beersheva, or Tel Aviv. Indicators of rising risk of conflict would be a sustained period of PA arrests of Hamas members in the West Bank with support from Israeli security forces, as this would likely provoke specific protests in Gaza involving larger numbers of Hamas' military wing, and whether the US or Israel refuse to accept Qatari proposals to fund electricity generation in Gaza.

Posted 11 October 2018 by Jack A. Kennedy, Associate Director and Head of Desk, Country Risk – Middle East and North Africa, S&P Global Market Intelligence