Guest Post by Henry Clay
After defeating ISIS, the Abraham Accords were perhaps the greatest peacebuilding legacy of the Trump administration. The agreement was announced in August 2020 and finalized on January 6, 2021, when Sudan signed on to the agreement. The Accords normalized diplomatic relations between Israel and many Arab and Muslim nations, including Bahrain, Sudan, Morocco, and the UAE, and marked the first time Israel established diplomatic relations with an Arab country since the Israel-Jordan Peace Treaty in 1994. With the eventual addition of Saudi Arabia all but a certainty, a major step toward peace and geopolitical stability in the region was well underway.
Less than four years later, the picture of Middle-East peace and stability is substantially bleaker, to say the least. The deadly and atrocious terror attacks committed by Hamas against Israeli civilians on October 7, along with the broader reverberations of this conflict in Lebanon and Iran, threaten to engulf the entire region (if not the entire world) in a major war.
The situation in Gaza itself is bleaker still. Nearly 2 percent of the Gazan population has died in the wake of the October 7th attacks. A preliminary calculation suggests that the life expectancy fell by 5 to 15 years for women and 7 to 23 years for men as a direct result of violence. This is surely an underestimate for two reasons. First, despite the death of Hamas leader Sinwar, guerrilla warfare in Gaza shows no sign of stopping. Second, it neglects the substantial indirect deaths resulting from the economic, health, and social deprivation arising from the ongoing IDF efforts to neutralize Hamas. For reference, the COVID-19 pandemic, which led Western policymakers to engage in rolling lockdowns, mandated vaccination, and mass censorship, reduced life expectancy by less than 3 years in the U.S. for either sex in the largest credible estimates I have been able to find. In fact, this very outlet, Revolver News, was the very first to ingeniously apply a life years metric to more accurately quantify the loss of life resulting from COVID lockdowns.
The tragedy in Gaza shows no sign of ending, and worse still, the conflict has intensified in Lebanon and Iran. In solidarity with the Hamas fighters, Houthi pirates have blockaded the Red Sea Strait, one of the planet’s most important trade routes. Furthermore, battles on the Lebanese border and Israel’s bold liquidation of Hezbollah’s leadership have exacerbated some of Israel’s PR and geopolitical challenges stemming from its ongoing actions in Gaza. This extends beyond Russia’s decision to curry favor with anti-Western forces by condemning Israel’s actions to include significant pushback from Western leaders, the most prominent of which is Macron, who recently pledged the shipping of hundreds of millions of dollars in aid and arms from France to Lebanon (which are likely to wind up in Hezbollah’s hands). Biden administration incompetence and malfeasance have resulted in essentially no progress toward the resolution of either the blockade or the Gaza war. President Trump will enter (God willing) his second term amidst an unprecedented Middle Eastern conflagration.
What can be done? As a preliminary matter, the U.S. should first recognize what its interests in the region are. Israel has an interest not only in the neutralization of Hamas but more broadly in doing what is necessary to achieve a secure existence in the region into the indefinite future. More cynically but not mutually contradictory, Netanyahu recognizes his interest in prolonging the conflict as long as possible to avoid his domestic troubles (possibly even prosecution and jail). The U.S. has a strong interest in ending the conflict and restoring global trade through the Red Sea Strait as soon as possible. Indeed, reports indicate that Trump has signaled that he expects Netanyahu to end the war before he assumes office. In addition to ending the Gaza conflict and its wider extensions in Lebanon and Iran, the U.S. has a more enduring interest in reducing its long-term expenditures in the Middle East, which have exceeded trillions in the Iraq war and international aid. The benefit from this spending is debatable, but no one argues that the benefits have exceeded the cost. Policymakers have limited time and attention. In the case of the Israeli-Gaza conflict, many would argue the problems of immigration, rapid population aging, the possibility of atomic warfare in Europe and the Pacific, and even rogue superintelligence are more pressing by any serious calculation than squabbles over a piece of land spanning less than 370 square kilometers, with few natural resources and limited geographic importance.
This all brings us to our perhaps not so modest proposal to bring peace and stability to the seemingly intractable situation in Gaza—a big check to Egypt in exchange for Egypt’s willingness to absorb the population of Gaza. If this sounds crazy or even scandalous at first, hear us out. The first thing to note is that Egypt’s yawning $150 billion in debt outstanding imposes an enormous fiscal burden on its citizens. Over 30% of Egypt’s tax revenues go directly to payments on its debt. This is not just a fiscal burden on the nation and its citizens; it is a crisis that threatens the very durability of the regime itself. The New York Post reports that Egypt “is on the brink of insolvency.” If ever there were a nation ripe for a bailout, it is Egypt. Rumors have it that the Biden administration actually did offer billions of dollars to take in Gazan refugees. Egypt refused. Why? First, the Egyptian government wishes to show “solidarity” with the plight of the Palestinians under siege in Gaza. To quote an important Washington Institute report:
[T]he movement of Palestinian refugees out of Gaza would evoke memories of the mass displacement that accompanied the creation of Israel in 1948. Egypt fears that such an eventuality would bring an end to any future prospect of Palestinian-Israeli peace based on a two-state solution, instead bringing a diplomatic void and inflaming Arab public opinion.
This concern is so widely and deeply held in the region that, even as Palestinian civilian casualties mounted after October 7, other Arab countries supported Egypt in its vehement opposition to opening the Sinai for refugees. Indeed, after concluding a tour to several Arab capitals, Secretary of State Antony Blinken told Al-Arabiya TV that he heard “from virtually every…leader that I’ve talked to in the region that that idea is a nonstarter, and so we do not support it.”
It must also be said that Palestinians have a well-earned reputation as one of the worst refugee populations on the planet. In Europe, especially Germany, their terrorism has been so substantial as to merit its own Wikipedia page. Humorously, Germany, which had earlier accepted millions of Middle Eastern refugees under dubious circumstances, demurred when two members of the Israeli Knesset advocated resettling displaced Gazans there in a Wall Street Journal op-ed. In Jordan, they are known for forming terrorist cells, assassinating Jordanian Prime Minister al-Tel in 1971, and numerous assassination attempts against the beloved King Hussein of Jordan. In Egypt, Palestinian terrorists found themselves unable to enter Israel and blew up tourist hotels instead.
It is therefore not such a surprising or unreasonable move that after Hamas took over the Gaza Strip in 2007, Egypt immediately sealed the border. The Islamist Muslim Brotherhood group, a progenitor of Hamas, briefly held the country from 2011 to 2013, but was unable to repair relations or substantially relax border controls. Now, a 20-foot wall sits between Gaza and Egypt. Although there are rumors that the Biden administration has considered making its aid conditional on the resettlement of Palestinian refugees, there has been little reporting on the matter in the U.S. press. These rumors, if true, are gesturing in the right direction, but Biden has still (unsurprisingly) bungled the deal for two reasons.
First, the aid numbers considered are far too small in light of the factors outlined above. The price has not been right. Not even close. The issue very well could be that Egypt is No U.S. policymaker has entertained paying the Arab nations, especially Egypt, more than $10 billion. For perspective, military and economic aid to Israel alone now costs the U.S. approximately $20 billion per year in direct expenses. Offers of about this amount should have been presented to Egypt in exchange for taking refugees at the very minimum as an alternative to direct military aid.
The direct costs of Houthi piracy now exceed $6 billion dollars per year for the Suez Canal authorities. I am not aware of any complete cost tabulation, but one economist at J.P. Morgan has said that the trade disruption has increased global core inflation by about 0.7 percentage points. A rule of thumb is that a half-percent decline in the interest rate generates about a 150 billion dollar reduction in deficits from declining interest payments. Not all of this would accrue to the generic U.S. taxpayer, but this ballpark cost of the Gaza war is probably an order of magnitude higher than has been previously recognized.
Second, Biden’s lack of vision, attempt at balance, and implicit commitment to the status quo have limited his negotiation capacity. A complete resettlement of the Gazan peoples in neighboring Arab country Egypt is simply not within the leftist Overton Window. Because this option, unthinkable to the left, is on the table and possibly preferred by Trump, he would have considerably more capacity for action in this direction.
Third, the Biden administration has shown no capacity for grand bargains, in contrast with the Trump administration’s successful negotiation of the Abraham Accords. Egypt should be willing to take any deal because insolvency could also result in the current regime collapsing.
Together, these facts suggest that a natural first solution should be to offer Egypt a deal that they cannot refuse. The model for the deal could be the Clinton administration’s $20 billion dollar loan (about $45 billion in today’s dollars) to Mexico to end the peso crisis. In the interest of “grandness,” the U.S. should be willing to consider an offer of something like a 25-year loan of $80–$90 billion at a 10% yield. To my knowledge, this would be the largest government-to-government loan ever offered. Such a gesture would go a long way toward establishing the good faith of the U.S. with their Egyptian interlocutors. In exchange, the Egyptians would agree to take in all of the Gazan refugees resulting from the ongoing crisis. The Egyptians would then have the authority to manage the new population however they saw fit, including potentially resettling them elsewhere if need be.
Such a move would, in one stroke, all but eliminate Hamas (as only the hardest core fighters will be left behind in the Strip), eliminate the fiscal pressure on Egypt, give Egypt the fiscal scope to engage in domestic counter-terror, end the Houthi campaign of piracy (at least according to the Houthis’ external logic), and ultimately set the stage for winding down the U.S.’s deleterious entanglement in the Middle East. This package would generate immediate benefits to global trade and policymaker attention. Most importantly, it would yield tremendous downstream benefits from freeing up policymaker attention to focus on more important matters. A loan at this rate would, although favorable to the Egyptians in that it would be on a longer-term basis and at a much lower cost than their current debt, be a net revenue generator for the U.S. The left in America would, correctly, blame much of the chaos on Biden administration malfeasance, and the political benefits going into the first midterm would be substantial. Israel and the Congressmen supported by Israel are extremely likely to support such a move should it need to be put to a Congressional vote (although presidents have historically had a free hand in making loans on favorable terms to other countries, as in the Mexico bailout).
Egypt should be willing to take the deal for a few reasons. Consider the fear that the Egyptian regime would collapse if it accepted large numbers of Palestinian immigrants. Insolvency could also result in the current regime collapsing. These eventualities must be balanced against each other. The small potato aid offered by the Biden administration does nothing to eliminate the fiscal insolvency problem, while the “deal you cannot refuse” would kick the can down the road into at least the 2050s. Second, when it comes to the problem of domestic backlash and Palestinian terrorism, timing is everything. Specifically, the threat of organized terror has been greatly reduced by the recent destruction of Hamas’s leadership. Given that the Palestinians now have no means of organized resistance, and it is clear that there is no possibility of a negotiated settlement, Egypt’s welcoming of a large number of Palestinian refugees would have a much more positive valence among the Palestinian sympathizers in Egypt than it would have earlier in the conflict. The size of the proposed deal would give Egypt approximately $45,000 per Palestinian refugee. This is more than enough to dramatically revamp Egypt’s domestic counter-terror operations and strengthen the state capacity of the Sisi government. Fourth, if the Palestinian terror problem cannot be handled domestically, Egypt can count on the U.S. to support it in pursuing secondary deals with other Arab and sub-Saharan African countries for partial resettlement of the Gazan population.
The prospect of the population of Gaza being absorbed into a neighboring Arab country like Egypt has additional benefits that translate into domestic politics in the USA. Much of the galvanizing energy the Gaza conflict gives the left derives from a leftist paradigm that considers the Israelis to be the white, western colonialists (bad guys) and the Palestinians as the brown and colonized (and therefore good guys). This paradigm would be interrupted, if not severed entirely, if the Gazan population were overseen by an Arab country such as Egypt, and therefore it could drastically reduce the sense in which distant mid-east politics galvanizes left-wing domestic forces in America.
If Egypt is unwilling to entertain the offer in question, then it should be made to all other Arab and even sub-Saharan African countries with the capacity to resettle the Palestinians. The more functional countries in sub-Saharan Africa, e.g., Rwanda, Kenya, and Ethiopia, have demonstrated the technical capacity to resettle hundreds of thousands of displaced people, generating income and earning goodwill across the first and third world. In the event of an Egyptian refusal to participate, Israel would need to provide considerable logistical support for resettling Gazans, but the financing terms proposed would not put an undue burden on the U.S.
If these terms are turned down by Egypt and all Arab countries, then the President can announce to the public that he was willing to go to extraordinary lengths to solve the Middle Eastern crisis. The option of eventually making the deal public in the event it was rejected would highlight the farcical nature of “solidarity” between the Arab nations of the world and the Gazans. Strategically disclosing which countries turned down the offer could be used to embarrass the (often genuinely cosmopolitan) leadership of these countries and strengthen the hand of the President in future engagements.
On the other hand, what if, against all reason and good judgment, no country is found that would be willing to accept a loan for the Palestinian people? The problem will become considerably more complex, but low-hanging fruit remains.
At a minimum, and this could be done anyway, the armed forces of the U.S. should seek complete elimination of the Houthi pirates. The operation has been mostly ineffective because the U.S. has puzzlingly limited itself to missiles, air strikes, and defensive operations using a single carrier strike group. Much like how ISIS benefited from the divided attention of U.S. policymakers until President Trump concentrated U.S. forces and attention on their elimination, the Houthi pirates benefit from cheap drones and a hardened core of around 100,000 fighters, some of whom have been featured on leftist podcasts. Houthi pirates, like ISIS, have proved to be something of an embarrassment to the U.S. from their successful blockage of global shipping, indecisive battles with U.S. sea forces, and hostage taking. President Trump would gain considerable political capital from running the same playbook and engaging in a complete decapitation of the Houthi leadership and the elimination of Houthi’s seafaring capabilities. Because the Houthis are a proxy for Iran, beginning any longer-term engagement with the elimination of Houthi piracy would simultaneously build Trump’s credibility with Israeli negotiators in the settlement of any conflict. Although this would not “solve” the Middle Eastern conflict, it would eliminate a complexity that makes resolution of the Gazan conflict difficult, actually advance the U.S. interest, and help re-establish the U.S.’s credibility as a problem-solver in the region.
There are no good or easy solutions to the Israel-Gaza conflict, and America’s role should be to facilitate a resolution in the most peaceful and cost-effective manner possible. With the absorption of the Gazan population into neighboring countries, the locus of the Israeli-Arab conflict would largely shift from military and counter-terrorism to regular domestic policing. The stakes involved would fall accordingly, and the United States and the world would be far less likely to be dragged into a broader war in the region, and, for reasons explained above, whatever conflicts that would persist would have far less likelihood of galvanizing destructive domestic political movements in America.
Henry Clay is the pseudonym of a former Treasury Department official.
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