Palestine: Gaining Currency?

The Palestinians may be losing a chance at their state if they gain a currency.

The Palestinians are putting money on notion that they will have a state next year.

This month's edition of The Monocle, a London based magazine on politics and culture reveals that the Palestinian Authority in the West Bank is planning to roll out a currency—the Palestinian pound.

In a one-on-one interview, Palestine Monetary Authority Chairman Jihadal-Wazir, son of Fatah founder and PLO terrorist Khalil al-Wazir, insists that the step is "not necessarily immediate." However, based on the interview with this sharply dressed–Marquette University graduate, it is also clear that a great deal of planning has already gone into the currency.

For example, The Monocle reports that a photo of the late Yasir Arafat "is almost certain" to appear on the currency, and that the design of the currency will likely be decided by competition. Reserves of the currency would also be held in the Palestinian Central Bank, which is currently under construction in Ramallah.

The currency has deep historical meaning. In short, because the Palestinians have never been a nation, they've never had a currency of their own. The pound was the currency of the British Mandate of Palestine from 1927 until the creation of Israel in 1948. From 1948 until 1967, when the West Bank was under Jordanian occupation, citizens there were forced to do business in Jordanian dinars. Similarly, thanks to the Egyptian occupation of the Gaza Strip, citizens there had little choice but to trade in Egyptian pounds. Since 1967, the Palestinians in both territories have primarily done business in Israeli currency—the Lira until 1980, and the shekel since that time.

The Palestinians still don't have a state. But they now have reason to think that it’s just a matter of time. U.S. President Barack Obama has jumpstarted the Palestinian-Israeli peace process, with a deadline of next fall to solve all of the outstanding issues, and set final borders. To that end, he is pushing the Israelis to relinquish lands conquered in previous Arab-Israeli wars so that Palestinians can inhabit them. Numerous reports indicate that the President is ready to back the establishment of an independent Palestinian state before the end of his first term.

Obama has taken other steps, too, such as upgrading the Palestinian delegation's diplomatic status in Washington, with no apparent assurances from the Palestinians in return.

With or without encouragement from the Obama administration, these steps are premature. The idea of a viable Palestinian state lacks, well, currency.

For one, the Palestinians and Israelis are far from agreeing on political borders, let alone Jerusalem. Obama's one-year deadline is not a realistic one, particularly at the rate the current talks are going, despite the State Department’s recent effusively positive statements.

It's also worth noting that if the Palestinians plan to declare a unilateral state, it won't bode well. As Israeli Prime Minister Benjamin Netanyahu once stated, "unilateral [Palestinian] steps will lead to unilateral Israeli moves." To put it another way, such a move could draw Israel into a needless conflict over territory that Israel is not inclined to cede, particularly if terrorist groups continue to attack Israel as they have in recent days.

As analyst Nathan Brown recently noted, Palestinian efforts at state-building have stagnated, despite some reports to the contrary. In addition to the breakdown of governing structures, the West Bank has witnessed a rapid erosion of civil society.

The more the Palestinian internecine conflict rages, the less anything else matters. The fight is between Hamas, which now controls the Gaza Strip, and Fatah, which maintains control of the West Bank thanks to U.S. support. Creating a currency will not reconnect these territories or reconcile these two warring groups. In fact, under the current circumstances, the creation of a West Bank currency might even prompt Hamas to adopt a currency of its own, and further divide the territories in the process. In fact, given the current high level of support Tehran already provides to the Hamas government, one could argue that the official currency there is already the Iranian Rial.

Despite these problems, the Palestinians continue to forge ahead. They are emboldened by Obama administration policies that fan their nationalist sentiments, without securing real facts on the ground first.