Cashless in GazaSee related story line: Still cashless in Gaza
Hover over a circle for cable information, or click for interactive graph
SummaryWork in progress... forks are welcome.
Note that this is the same graph that the "Fil mish-mish" story line comes from, and this demonstrates that there can be several loosely-related stories in a single graph.
1) 08TELAVIV624 2008-03-18 CONFIDENTIAL
ISRAELI-PALESTINIAN CORRESPONDENT RELATIONSHIP IN STABLE BUT CRITICAL CONDITION
After Gaza was declared a "hostile entity" by the GOI in June of 2007, [Israeli banks] Hapoalim and IDB argued that it was impossible to verify with certainty that standard banking transactions carried out on behalf of Palestinian banks in Gaza were not benefiting a designated terrorist organization (Hamas).
The problem seems to be a legal one
The banks' real concern is their liability and court costs in an ongoing civil suit against Arab Bank in U.S. courts. They hoped to use the correspondent issue and the threat of collapsing the Palestinian financial system to pressure the GOI and USG to intervene and force a settlement.
The history of this legal case is a long chain of "designation by proxy":
- Hamas [the democratically elected ruling party] gets designated as a terrorist organization
- IDF suspects that the Ramallah branch of Arab Bank deals with Hamas, and confiscates funds in connection with the investigation.
- The investigation "designates" Arab Bank as a "Hamas banker" and serves as ground to a US lawsuit against the bank by an Israeli group of hundreds of terror victims and their families. 
- Arab Bank "designates" Israeli banks Hapoalim and IDB as the processors of the
"terrorist transfers" through their correspondent accounts.
The Israeli banks don't believe such claims would stand in court, but they claim that
The legal fees and demands on human resources are a serious burden
- Israeli banks threatened to cut ties with Palestinian banks in order to minimize exposure to similar lawsuits in the future.
There's also another reason:
Instead of fighting in court, [IDB's legal advisor Amnon] Lorch said that IDB would prefer that Arab Bank settle the case. He implied that IDB's threats to cut off correspondent banking with Palestinians were intended to force such a solution.
- Gazan economy becomes a victim of "collateral designation"
 Six years after the raid, the IDF formally admits Arab Bank and/or its employees had no involvement in terror, but the US lawsuit is still ongoing (as of July 2013), running on "designation fume".
2) 08TELAVIV1508 2008-07-11 CONFIDENTIAL
ISRAELI BANK DETERMINED TO CUT GAZA BANKING TIES
Bank Hapoalim (BH) informed the Bank of Palestine (BOP) in a July 6 letter that it will no longer provide it with cash transfer services. The decision was made independent of any consultation with or approval by the GOI or the Bank of Israel (BOI) and was triggered by a BOP request for a NIS 25 million transfer in early July.
3) 08TELAVIV1742 2008-08-08 SECRET
TERRORISM FINANCE: GOI SAYS NOW IS THE TIME TO ACT AGAINST THE CENTRAL BANK OF IRAN AND INCREASES ITS FINANCIAL ISOLATION OF GAZA
Udi Levi [from Israel's National Security Council (NSC)] ... said that the GOI maintains information to implicate the CBI [Central Bank of Iran] in 1) transferring money without the use of Swift to obfuscate the identities of the parties transmitting and receiving money, 2) planning to purchase undesignated banks using false names through which it could assist Iranian enterprise in circumventing sanctions, and 3) acting on behalf of designated Iranian banks such as Bank Melli and Bank Saderat  to execute transactions that would otherwise be prohibited. On the last point, DAS Glaser mentioned that if any of this activity were occurring in London, such information could be key to persuading an otherwise highly cautious UK to take action. The Israelis said that they would look into that question.
 This is a good example of the "contagious" effect of designation: Bank Saderat was one of the two Iranian banks released by the EU general court in 2013 (in both cases, CableGate leaked cables were accepted by the court as evidence). At the time, Bank Saderat was designated. This made it possible to accuse CBI of collaborating with it.
Regarding liquidity in Gaza:
econoff learned that the BOI and Israeli Defense Forces (IDF) were operating under a principle of not permitting any additional liquidity into Gaza. ... GOI intelligence agencies generally believe that PA salaries paid in Gaza actually make their way into the hands of Hamas;  therefore, the PA argument that the salaries meet the mutually beneficial goal of bolstering Fatah does not impress the Israelis. While Israeli officials frequently express their doubts with regard to PA statistical assessments of the state of the economy in Gaza, whether the PA is able to meet its salary commitments in Gaza appears of little concern to the GOI.
 Note: since 2007, PA (at least in the west bank) is Fatah-led, and is considered an ally by both GOI and USG. It's in their interest [at least officially] to strengthen it and weaken Hamas.
4) 08TELAVIV2291 2008-10-07 CONFIDENTIAL
ISRAELI-PALESTINIAN CORRESPONDENT BANKING RELATIONSHIP AT A CROSSROADS
On Sunday, September 29, Bank Hapoalim (BH), one of only two Israeli commercial banks providing correspondent services to Palestinian banks, informed the Bank of Israel (BOI) that it would end its business relationship and cease all services to Palestinian commercial banks on November 30. Esther Deutch, Chief Legal Advisor at [IDB — Israel] Discount Bank, told econoff that while no formal decision has yet been made, Bank Hapoalim's move is likely to inspire Discount to follow suit within the next few weeks.
5) 08TELAVIV2447 2008-11-03 SECRET
CASHLESS IN GAZA?
Israeli officials reject the PA,s argument that denying banks the liquidity to pay PA salaries in full bolsters the Hamas regime. While some acknowledge the gains to Hamas from a weakened formal banking sector in Gaza, they argue that such gains are small relative to the cost of giving Hamas greater access to shekels or the economic benefits they bring to Gazans.
The words "gains" and "cost" are (of course) from GOI's perspective, but what about the impact of cash shortage on the Gazan in the street?
Israeli officials have confirmed to econoffs on multiple occasions that they intend to keep the Gazan economy on the brink of collapse without quite pushing it over the edge
Another example of this approach can be found at 10TELAVIV413 (not on this graph):
Given the separation between Hamas and the PMA-regulated private banks, Shin Bet [Israeli security agency] assesses there to be little connection between these banks' stability and Israel's counter-terrorism goals. In the short-term, security concerns from a decrease in confidence in these banks by average Gazans is negligible for Israel.
as in: "I can stand on your neck for quite a while without losing balance" :)
6) 08STATE122043 2008-11-17 CONFIDENTIAL
DEMARCHE REQUEST: SEEKING HALT TO TERMINATION OF CORRESPONDENT BANKING SERVICES
The Department requests that Embassy Tel Aviv demarche Stanley Fischer, Chairman of the Bank of Israel (BOI), as soon as possible prior to November 30 and attempt to forestall the threatened termination of correspondent banking services for Gazan branches of Palestinian banks.
7) 08TELAVIV2713 2008-12-04 SECRET
GOI CALLS GAZA CASH CRISIS A HAMAS PLOY
[Counterterrorism Finance Bureau Director at the National Security Council (NSC) Udi] Levi did say that the GOI is considering a policy to permit about NIS 40 million in new liquidity to enter the Gaza Strip banks on a monthly basis. ... However, Levi noted GOI intelligence has indications that Gaza banks are being forced by Hamas to underreport their true reserve holdings ... He posited that the present pre-Eid crisis might be an attempt by Hamas to further consolidate its power in Gaza though he was vague on how the crisis would forward the Hamas agenda. ... Of greater concern is Levi's claim to have new evidence that the PA's current Gaza salaries list is tainted by Hamas sympathizers.
8) 08JERUSALEM2274 2008-12-19 CONFIDENTIAL
NEW "HAMAS BANK" TO OPEN IN GAZA DECEMBER 28
Hamas has announced the "licensing" of a new bank, the Islamic National Bank (INB), in the Gaza Strip. Palestine Monetary Authority (PMA) Governor Jihad al-Wazir considers the bank an illegal entity, and said the PMA will launch a public campaign against it. He said Hamas is capitalizing on GOI restrictions on cash shipments to Gaza
At last — GOI's efforts to choke Gaza's economy are "fruitful" :)
9) 08TELAVIV2859 2008-12-19 SECRET
ISRAEL'S NSC SUPPORTS MINIMUM MONTHLY CASH FOR GAZA; WANTS USG HELP TO SELL THE IDEA
Note: This cable was sent less than 4 hours after 08JERUSALEM2274. The cable doesn't discuss the new "Hamas bank". It stands to reason that the TELAVIV post wasn't aware of its announcement at the time.
Israeli NSC Counterterrorism Finance Director Udi Levi on December 17 to discuss GOI efforts to establish a minimum monthly cash transfer to Gaza banks. Levi agreed that a complete collapse of the banking system would not serve Israel's security interests, but warned that shekels entering Gaza were being funneled to Hamas in large quantities through various methods.
[Foreign minister]Tzipi Livni, who opposes any cash transfers to Gaza, has asked the DG at the MFA to determine if the GOI has a legal means of revoking its recognition of the PMA as it applies to Gaza.
2008-12-27 to 2009-01-18
10) 09TELAVIV471 2009-02-27 CONFIDENTIAL
GOI WILLING TO PASS THE BUCK BUT NOT THE SHEKEL
econoff contacted David Zaken, Assistant Supervisor of Banks and Head of Off-Site Examination and Licensing at the Bank of Israel (BOI), to lobby for GOI approval of a transfer of funds to Gaza banks in March. Zaken told econoff on February 27 that he expects the Prime Minister's office (PMO) to approve transfer of approximately 50 million shekels (NIS) to Gaza in response to the Palestinian Monetary Authority's request for an NIS 254 million transfer to cover March salary and other obligations.
One possible turn of events that may effect the ability of the GOI to approve the PMA's request is a High Court decision on whether to hear a case brought by the Land of Israel Foundation (LIF) against the GOI after the last transfer of cash to Gaza. The LIF case claims that the GOI acted in a manner contrary to its own Anti-Money Laundering/Counter Finance of Terrorism (AML/CFT) legislation.