January 06, 2009

We are seeing a nice recovery in commodity prices, specifically crude oil which has bounced nicely over the past week or so due to the turmoil in Gaza, so the commodity backdrop has been a bit of a positive.
- George Davis, chief technical analyst, RBC Capital Markets

Markets care not. To them, the only relevance of human suffering is its effect on the perception of scarcity.

Hamas has been democratically elected to lead the government of Gaza; but from day 1 its reputation has been against it, and every sign of compromise has gone unseen. Instead, the western world shut its doors to credit and even to common diplomacy, and turned a blind eye when Israel stopped the transfer payments from the ports. The high concrete wall has been called protection by one side and jail by the other. Its success in providing increased protection is debatable. It seems to have somewhat more success at concentrating and shutting away the people of the territory from their livelihoods, their rightful income, and from any semblance of a normal life.

Barred from a major source of the Palestinian Territory's income, it did not take long for the Hamas government to run out of money. For a brief time, Palestinian government officials were carrying cash funds across the border in briefcases, donated by Arab neighbours. These few cash transfers seemed like a lot of money, but even these millions were barely enough to keep the territory functioning.

As in so many other countries where the normal functioning of government is hobbled by outside interests, it was not enough to curb those elements within Hamas which still sought military demonstrations and violent solutions. How could it be? Even in the most stable and best-functioning governments, a few extremists will always find cause to resort to violent methods: and the Palestinian Territory has never had that kind of stability.

So violent incidents continued -- by both sides, for extremists exist among the ultra-conservatives of Israel as well, and the forced evacuation from Gaza has never sat well. Personal harassment and worse than harassment was just common enough to continue to be continually feared. The occasional bombs exploded. The occasional rockets landed. Families were disrupted, people were injured and some died on both sides, although never at the levels of the previous intifadas.

Embroiled in their own political battles and economic crisis, the western media never noticed.

Maybe that was why Israel chose this time to act. There was no question that Israel would take action. Israel has always taken action, even where such action has required the invasion and occupation of a neighbouring country: and whether acknowledged or not, the accepted ratio of retribution is 10+ Palestinian deaths per every Israeli death. (Both sides having engaged in guerrilla tactics at different times, neither side places much value in the civilian/military distinction.) At the same time, Israel's domestic window of opportunity had been rapidly narrowing before the February 10 election, and a likely change of leadership sharply away from compromise and coexistence.

In addition, for some time the tide of world opinion had been gradually tilting against Israeli policy, and with Barack Obama's election the country stood in danger of losing their only steadfast international ally. As the inauguration date neared, the window of opportunity was rapidly narrowing. Still, Israeli military response had not been in the world headlines for months, even years in some places: and out of sight is out of mind.

Yet Hamas began as a guerrilla organisation, and it has never forgotten those roots. If its central structure is forced against the wall, even those elements which had sought compromise and stable government remember how to fight back.

The markets note only that the turmoil has restored the price of oil from a sickly $39 USD a barrel to a nice recovery of over $48; and petrocurrencies around the world are breathing a collective sigh of relief.

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