The End of Tunnelnomics

View photos of Gaza’s tunnel economy.

RAFAH, Egypt — "I recently lost one of my tunnels," Abu Jawad told me nonchalantly. "An Israeli drone flew by, identifying its coordinates, and within minutes an IDF jet had dropped a precision-guided missile, destroying its exit."

To Abu Jawad, a Palestinian tunnel entrepreneur and owner/operator of several tunnels, this was another workplace hazard. He cut an imposing figure at over 6 feet tall, with a glaring black moustache and a high-tech hunting vest worn over his traditional galabiyya, with several walk-talkies, pulley grips, and other bits of equipment stuffed in it. "I would fix it for about $10,000, but it’s not worth the re-investment as the Israelis already have its coordinates," he concluded with a shrug. "I might just have to build another."

My friend and I had set off from Cairo to the Egyptian-Israeli border hoping to cross into Gaza to report on the state of the border after the Egyptian revolution in January, and to show our solidarity with the Palestinian people. We were now receiving a crash course in Tunnelnomics — the unique capitalist math behind the smuggling tunnels connecting Egypt with Gaza.

Since Israel’s 2008 assault on Gaza, which it termed Operation Cast Lead, there has been a virtual blockade on the territory. Israel and former Egyptian President Hosni Mubarak’s regime allowed only minimal humanitarian supplies into Gaza, and prohibited all other shipments. Israel controls the airspace, sea passageways, and all the land crossings into Gaza — except for the one at Rafah, which straddles the border.

Since the Egyptian revolution, tunnel owners have indicated that it is still "business as usual" along the border. However, there are indications that Egypt’s current rulers, the Supreme Council of the Armed Forces (SCAF), are loosening the blockade on Gaza. Egyptian Foreign Minister Nabil El Araby said in late April that the Rafah crossing would soon be open on a permanent basis, describing Egypt’s previous policy on Gaza as "shameful."

But while Egypt sorts out its post-revolutionary politics, Gaza continues to suffer. A report by the World Food Program and the United Nation’s Food and Agriculture Organization (FAO) found that, since the 2008 offensive, more than 61 percent of Gazans now suffer from food insecurity and rely on humanitarian aid agencies to feed their families. "Restrictions imposed on the civilian population by the continuing blockade of the Gaza Strip amount to collective punishment, a violation of international humanitarian law," the report argued.

Tunnels, or "lines" as they are known locally, are a profitable business in an otherwise economically impoverished area, both on the Egyptian and the Palestinian side of the border. In Gaza, the tunnels are the lifeline of both Hamas and the approximately 1.5 million people living there. They are used to smuggling supplies, cars, weapons, fuel — even livestock.

But the tunnels at Rafah are an equally precious asset for the impoverished residents on the Egyptian side of the border. The Bedouins who inhabit the Sinai Peninsula were furious that Mubarak, after reassuming control from Israel in 1982, continued to neglect the economic development of the region. Instead, the former president directed billions of dollars of investment toward seaside resorts such as Sharm El Sheikh, where he kept a chic modern seaside residence, while completely neglecting the less glamorous parts of Sinai. The Bedouins, therefore, see the tunnels as a golden opportunity to improve their livelihood in an otherwise economically stagnant area.

"What other opportunities do I have here?" asked Abu Mukhtar, an Egyptian tunnel part-owner. "Open a grocery? Work in a hotel in Sharm El Sheikh? Neither option will make much money. I can partner in a tunnel and make a decent living for myself and my family."

Like any industry, there are start-ups and well-established businesses. According to Abdel Jawad, the cost of a tunnel can start at $15,000 for a four foot-high by three foot-wide tunnel used to smuggle cartons of cement (resembling more of a hole than a tunnel), and can reach up to $150,000 for a state-of-the art, 10 by 6-foot tunnel used to smuggle cars.

As Rafah is effectively one city divided between two sides, Palestinians and Egyptians enter into partnerships to build and operate the tunnels. Tunnels usually start under a house in Egypt, and end up in a house in Gaza. Each side is manned by an "operations manager" who is in close contact via cell phones and walkie-talkies with his counterpart on the other side. When a delivery comes through, it is either carried or pulled through tunnels with a pulley system. Some tunnels use ropes to lift the cargo up on the Palestinian side, while others even make use of electric elevators.

An entrepreneurial Egyptian or Palestinian can pocket a tidy profit from a tunnel. A ton of cement can cost between $200 and $300. Cars assembled locally in Egypt, such as the Hyundai Elantra and Chevrolet Cruise, can cost around $2,000. More luxurious sedans like the Honda Accord — several of which we observed cruising around Rafah with no license plates, presumably destined for the tunnel trade — could cost more than $3,000.

The operation is a closely regulated industry, with Hamas appointing a "head of Tunnels Authority" to oversee the operation, maintain quality standards, levy taxes, and impose fines for "illegal" transport of goods and people, meaning transfers unauthorized by Hamas. According to Yezid Sayigh of King’s College London, Hamas earned an estimated $200 million from tunnel taxes in 2009.

The dangers are as great as the potential rewards. Smugglers risk tunnel collapses, Israeli strikes, as well Hamas’s wrath should they attempt to smuggle unauthorized and unregistered cargo. Nonetheless, considering the economic situation on both sides of the border, it is a risk many are willing to take. Material passes through during the night and day; I have witnessed trucks laden with construction materials, such as cement and iron bars, cross Egyptian Rafah’s central plaza only to appear later, empty, having discharged their cargo.

Non-Palestinians trying to get into Palestinian Rafah are vetted by Hamas, which charges a $100 fee to cross. To have our visit approved, we had to submit an email application to our contact in Gaza, who then presented it to the Tunnel Authority. It explained who we are, what we do, and why we were attempting to enter the strip. Our contact returned with a negative response: The authority refused our application out of fear of jeopardizing Hamas’s relations with Egypt’s new government.

Hamas is hoping that its improving ties with the new military government in Cairo will finally bring an end to the blockade on Gaza. High-ranking Hamas officials have been shuttling in for meetings with Egyptian authorities since the revolution, signifying an end to Mubarak’s hostility toward the group. These talks recently culminated signing of a reconciliation accord between Hamas and Fatah, the dominant party in the West Bank.

The shifting political terrain in Egypt may indeed convince the government to reopen the Rafah crossing. Egypt’s newly empowered Muslim Brotherhood is set to make major gains in upcoming future elections. The Brotherhood, which enjoys close historical ties to Hamas, has long championed the Palestinian cause and supports a full reopening of the border.

One potential motive for opening the border, then, may be to take away one of the Brotherhood’s campaign issues and gain popular support by reversing Mubarak’s detested policy on Gaza. El Araby’s announcements have been hailed in the media and have so far resonated very well with the Egyptian people. The prime minister, Essam Sharaf, also visited Sinai at the end of April to apologize publicly for years of neglect toward the region.

The moment may be approaching when Egypt opens the Rafah border unconditionally to cargo and people, thus bringing an end to the tunnel industry. The Bedouin, however, have been promised many things, only to see the government fail to deliver. "We have heard a lot of talk of this before. I will believe it when I see it," Abu Mukhtar said. "If it happens, I will have to find another job."

Until that day, tunnelnomics continues to rule in Rafah.