The Economist - USA (2020-06-27)

8 Leaders The EconomistJune 27th 2020

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inemenandonewomanhaveledIsraelsincethesix-day

warof 1967 broughttheWestBankunderitscontrol.Nearly

allthoughtittooriskytoannexanyoftheterritorybeyondEast

Jerusalem.True,Israelhasbuiltscoresofsettlementssincethe

war,sothatmorethan400,000IsraelisnowliveintheWest

Bank,alongside3mPalestinians.Butitsleaderscalculatedthat

annexationwouldbringglobalopprobrium,destabilisethere-

gionanddoomthetwo-statesolution—theideathata Palestin-

ianstateanda Jewishonemightonedaypeacefullyco-exist.

BinyaminNetanyahu,Israel’sprimeministertoday,thinkshe

knowsbetter.Lastyearhewooedhawkishvotersbyvowingto

absorba handfulofsettlementsandtheentireJordanValley.

Then,inJanuary,PresidentDonaldTrumpreleaseda peaceplan

thatwouldgiveIsrael30%oftheWestBank.The

Palestinians,unsurprisingly,rejectedit.ButMr

Netanyahuwantstoproceedwithannexation

(seeMiddleEast&Africasection).Heisunder-

estimatingthecostsandmovingIsraelcloserto

a fatefulchoiceaboutitsfuture.

MrNetanyahu,ofcourse,doesn’tseeitthat

way.Hespiesa windowofopportunity,stem-

ming not onlyfrom his friendship with Mr

Trump—whichmaybelessusefulcomeNovember—butalso

fromIsrael’stieswithArabstates.Acommonenemy,Iran,has

broughtthemtogether,whilethequestionofwhattodoabout

thePalestinianshasbeenputontheback-burner.MrNetanyahu

seemstobelievehecankeepit there.Arabcountries,afterall,did

littlemorethanshoutwhenAmericarecognisedthedisputed

holycityofJerusalemasIsrael’scapitalin2017.Envoysfromthe

GulfevenattendedtheunveilingofMrTrump’speaceplan.

Thepeaceprocessismoribundanyway,sayMrNetanyahu’s

men.TheyblamethePalestiniansforspurningpastoffersand

refusingtodiscussMrTrump’splan,whichwouldestablisha

Palestinianstate(albeitunderratheronerousconditions).“The

Palestinianscontinuetorejectdialogueandtoremainintheir

deepshit,”saysBennyGantz,thedeputyprimeminister,who

opposedunilateralannexation(andMrNetanyahu)untilrecent-

ly.Israel,therefore,mustactalone,saysRonDermer,itsambas-

sadortoAmerica.Annexation,heclaims,will“getthepeacepro-

cessoutofthecul-de-sacit hasbeenstuckinfortwodecades.”

TheIsraelis’frustrationwiththePalestiniansisunderstand-

able.ButMrNetanyahusharesblameforthefailureofthepeace

process—andannexationseemsanoddwaytoreviveit.The

risksforIsraelaremanifold.StartinAmerica,whereMrTrumpis

laggingbehindJoeBideninthepolls.MrNetanyahuallbutig-

norestheDemocraticnominee,whoopposesunilateralannex-

ation,andhiscolleagues,whomaynotsupportIsrael’sgovern-

mentcomewhatmay.TheirdoubtsaresharedbyEuropean

leaders.Theeu’s foreign-policychief,JosepBor-

rell,saysannexation wouldhave“significant

consequences”forrelationswithIsrael.

Arabstateshavealsospokenup.Annexation

“willcertainlyandimmediatelyup-endIsraeli

aspirations for improved security, economic

andculturaltieswiththeArabworld,”wrote

Yousefal-Otaiba,anEmiratidiplomat,inwhat

isthoughttobethefirstopinionpiecebya Gulf

officialinanIsraelinewspaper.KingAbdullahofJordan,who

hasmillionsofPalestiniansinhiscountry,warnsofa “massive

conflict”.Someofthisisprobablybluster.ButevenIsraelioffi-

cialsworrythatannexationcouldleadtoprotestsorviolence.

Evenif annexationweretogoaheadsmoothly,thereisanoth-

ercosttoconsider.If MrNetanyahustartstakingbitsoftheWest

Bank,Israelcouldendupfacinga profoundlyuncomfortable

choice.ItcoulddecidetograntthePalestiniansfullIsraeliciti-

zenship,andthusriskseeingthemonedayoutnumberandout-

voteJews.Orit couldchoosetoleavethemshutawayinreserva-

tionswithminimalrights,likeanapartheidstate.Toremain

bothJewishanddemocratic,Israelmustfindawaytoavoid

thosetwooutcomes. 7

Consider the cost

Binyamin Netanyahu is underestimating the risks of annexation

Israel and the Palestinians

Y

ou maynot realise it, but a growing share of your savings and

pensions pot has been wagered on the commercial buildings

in which you work, shop and sleep. The original idea was that

these investments would provide a steady stream of earnings for

decades into the future, rather as government bonds did before

interest rates fell so low. But now the virus has thrown that as-

sumption into a cement mixer.

Across the world millions of tenants have stopped paying

rent, leading to chaos among shopping-mall and office landlords

(see Finance section). In the longer term, a renewed appreciation

of the threat from pandemics, and of the potential of new tech-

nologies, could lead to a sharp shift in how commercial build-

ings are used. Savers and fund managers need to be alert. A safe,

slow-moving asset class has become an unpredictable one that

demands scrutiny and active management.

Commercial property has become an investment craze over

the past two decades. In that period the nominal yield on a long-

term American government bond has dropped from over 6% to

less than 1%. Desperate to find other steady higher-yielding

sources of earnings, pension trustees and fund managers have

piled into malls, offices, hotels and warehouses. A corner of the

economy that had been the preserve of moguls, amateurs and

Watch this space

Investors have loaded up on commercial property. Now they face a reckoning

Property troubles