‘A source of considerable annoyance’: an Israeli–Palestinian backchannel in the efforts to release the blocked Palestinian bank accounts

Abstract

In addition to the great emotional toll that the Nakba inflicted on the Palestinian people, the 1948 exodus occasioned substantial material losses for the refugees as well. As the 1948 War ground to a halt, the international community had to decide how to deal with all of this, and in the early 1950s the matter of the so-called ‘blocked’—or frozen—Palestinian bank accounts became one of the main issues on the UN Palestine Conciliation Commission’s agenda. Initially, its effort included the government of Israel and the British-owned Barclays Bank. As things progressed, however, Israeli diplomats also engaged a group of Palestinian refugees in an informal backchannel. This article sheds light on this largely overlooked episode and shows how the channel was established, and how the Palestinian group faced nothing but strong international opposition, most notably from the British Foreign Office. Protecting the interests of its regional ally Jordan, as well as those of Barclays Bank, the Foreign Office did what it could in order to make sure that this particular Israeli–Palestinian backchannel was promptly closed.

Notes

1 Benny Morris, The Birth of the Palestinian Refugee Problem Revisited, 2nd ed. (Cambridge: Cambridge University Press, 2004).

2 UN A/RES/194 (III), December 11, 1948, https://unispal.un.org/DPA/DPR/unispal.nsf/0/C758572B78D1CD0085256BCF0077E51A.

3 Ibid. Resolution 194 (and in particular its paragraph 11) is at the heart of the Palestinian claim for a right of return; it is where UNRWA (United Nations Relief and Works Agency for Palestine Refugees in the Near East) gets its working definition of who is a Palestinian refugee; and it is what all efforts to find a solution to the refugee problem refer to.

4 Neil Caplan, Futile Diplomacy: The United Nations, the Great Powers and Middle East Peacemaking, 1948–1954, vol. 3 (New York: Routledge, 1997).

5 Ibid., vol. 3, p. 145.

6 The two works that do this most systematically are: Caplan, Futile Democracy, vol. 3, pp. 126–256; David P. Forsythe, United Nations Peacemaking: The Conciliation Commission for Palestine (Baltimore, MD: Johns Hopkins University Press, 1972). Jacob Tovy and Don Peretz both address the release of the accounts, the former more so than the latter. Tovy identifies the release as one of three important ‘secondary aspects’ of the refugee issue; he does not, however, go into the second release. Peretz’s description of these negotiations, on the other hand, is mainly based on the material that was publicly available at the time—UN statements and newspaper articles. See Jacob Tovy, Israel and the Palestinian Refugee Issue: The Formulation of Policy, 1948–1956 (New York: Routledge, 2014), pp. 242–256; Don Peretz, Israel and the Palestine Arabs (Washington, DC: Middle East Institute, 1958), pp. 222–239.

7 See, for example, Rashid Khalidi, Palestinian Identity: The Construction of Modern National Consciousness (New York: Columbia University Press, 1998); Baruch Kimmerling and Joel S. Migdal, The Palestinian People: A History (Cambridge, MA: Harvard University Press, 2003). In 1969 Meir was quoted in The Sunday Times saying: ‘It was not as though there was a Palestinian people in Palestine considering itself as a Palestinian people and we came and threw them out and took their country away from them.’ See Khalidi, Palestinian Identity, p. 147; Kimmerling and Migdal, Palestinian People, p. xxvii.

8 A 1949 report gave a lower estimate, claiming that the number of accounts was fewer than 10,000. See Rene Servoise, ‘Status of the Question of Unfreezing Assets’, November 23, 1949, FO 371/82560, PRO. Servoise was the PCC’s economic advisor.

9 It is very difficult, if not impossible, to accurately establish today’s relative worth of the Palestine Pound anno 1948. I have used a so-called historic inflation calculator, which only allows me to say something about the relative value of the pound sterling. Although a Palestine Pound was the same as the pound sterling, the former and its market vanished after 1948, and a conversion thus cannot indicate the purchasing power or wage inflation in Palestine. To indicate that Palestinian assets would be approximately 142 million pounds sterling today can therefore only be considered a ballpark estimation, at best. For the calculator I have used see ‘Calculators: Relative Values’, Measuring Worth, n.d., http://www.measuringworth.com/ukcompare/. Its most recent year available is 2013, and in 2013 pounds, my entry of £4,5 million equals roughly £142 million.

10 For an overview of the amounts and the total number of Palestinian claims, see Michael R. Fischbach, Records of Dispossession: Palestinian Refugee Property and the Arab-Israeli Conflict (New York: Columbia University Press, 2003), pp. 199, 204–205 (specifically tables 3.7, 3.8 and 3.9).

11 Servoise, ‘Status of the Question of Unfreezing Assets’, November 23, 1949, FO 371/82560, PRO.

12 Ibid.

13 Peretz, Israel, p. 210; Caplan, Futile Diplomacy.

14 Aide-Memoire by Eban, June 2, 1952, Documents on the Foreign Policy of Israel, 1952, vol. 7 (Jerusalem: Israeli Government Printer Keter Press, 1991), p. 274.

15 Morris, The Birth; Caplan, Futile Diplomacy.

16 For an analysis of these negotiations and the agreements they produced, see Hilde Henriksen Waage, ‘The Winner Takes All: The 1949 Island of Rhodes Armistice Negotiations Revisited’, Middle East Journal 65(2) (2011), pp. 279–304.

17 Aide-Memoire by Eban, June 2, 1952, DFPI, 1952, vol. 7, p. 274.

18 For examples of this attitude see, for example, Burdett to Secretary of State, March 14, 1949; Memorandum of Conversation, March 22, 1949; Memorandum of Conversation, March 24, 1949; Pinkerton to Secretary of State, March 28, 1949; Memorandum of Conversation, April 5, 1949; Foreign Relations of the United States (FRUS) 1949, The Near East, South Asia and Africa, Vol. 6 (Washington, DC: US Government Printing Office, 1949), pp. 825, 855, 878, 890. See also Caplan, The Lausanne Conference 1949: A Case Study in Middle Eastern Peacemaking (Tel Aviv: Tel Aviv University, Moshe Dayan Centre for Middle Eastern and African Studies, 1993), pp. 29–30.

19 Eban to US Division, May 5, 1952, DFPI, vol. 7, pp. 211–212; Fischbach, Records of Dispossession, p. 196.

20 Eban to Sharett, May 5, 1952, DFPI, vol. 7, p. 217; Fischbach, Records of Dispossession, p. 196.

21 Eban to Sharett, May 8, 1952, DFPI, vol. 7, pp. 216–217. For a detailed study of the diplomatic process surrounding the establishment of the state of Israel and the country’s campaign to obtain membership in the United Nations, see, respectively, Jørgen Jensehaugen, Marte Heian-Engdal, and Hilde Henriksen Waage, ‘Securing the State: From Zionist Ideology to Israeli Statehood’, Diplomacy and Statecraft, 23(2) (2012), pp. 280–303; Marte Heian-Engdal, Jørgen Jensehaugen, and Hilde Henriksen Waage, ‘“Finishing the Enterprise”: Israel’s Admission to the UN’, International History Review, 35(3) (2013), pp. 465–485.

22 Eban to Sharett, May 8, 1952, DFPI, vol. 7, p. 217.

23 Eban to US Division, May 5, 1952, DFPI, vol. 7, p. 211.

24 Kollek to Ben-Gurion, May 21, 1952, DFPI, vol. 7, pp. 241–248.

25 Ibid., p. 245.

26 Aide-Memoire by the Ambassador of Israel in Washington, June 2, 1952, DFPI, vol. 7, pp. 274–276.

27 The lack of foreign currency was one of the biggest challenges for the Israeli economy. Foreign Minister Sharett described the country’s need for ‘large amounts’ of foreign exchange as ‘desperate’. Memorandum of Conversation, May 23, 1952, Documents on the Foreign Policy of Israel, 1952, Companion Volume, vol. 7 (Jerusalem: Israeli Government Printer Keter Press, 1991), p. 117.

28 Israel only agreed to release a total of 50 pounds a month, and only for 10 months, for a maximum of 500 pounds, to so-called ‘small accounts’. Of the 6246 blocked accounts by 1949, 45.1 per cent were in this category. Furthermore, Israel would only allow the release of funds owned by people who had lived in Palestine up to 29 November 1947 (the day of the Partition Plan), and who had fled prior to September 1948. Fischbach, Records of Dispossession, p. 198. (See especially table 3.7 in Fischbach.)

29 Ibid., pp. 200–202; see also Tovy, Israel and the Palestinian Refugee Issue, pp. 246–247.

30 Note Verbale from the British Embassy in Tel Aviv to the Israeli Ministry of Foreign Affairs; PCC, Aide Memoire to the Israeli UN Delegation, May 25, 1954, Documents on the Foreign Policy of Israel, 1954, vol. 9 (Jerusalem: Israeli Government Printer, 2004), pp. 62–64, 347–348 (the formal request did not come until 25 May 1954).

31 Avi Plascov, The Palestinian Refugees in Jordan, 1948–1957 (London: Psychology Press, 1981), p. 20. For the Palestine Refugee Congress’s resolutions, p. 220.

32 Palestine General Refugee Congress to British House of Commons Members, March 15, 1955, RG 130/MFA/328/12, ISA; Plascov, The Palestinian Refugees, p. 20.

33 Ibid. For the list of resolutions adopted by the GRC in Ramallah on 17 March 1949, and the issued statement from the meeting, see appendices nos. 3 and 4 in Plascov.

34 Bulos to Etheridge, 14, May, 1949, https://unispal.un.org/DPA/DPR/unispal.nsf/9a798adbf322aff38525617b006d88d7/5f621b2b6a451a3a8525750b0050b072?OpenDocument; Plascov, The Palestinian Refugees, pp. 20–21.

35 The delegation at Lausanne had been sent by the GRC’s executive committee, a body established along with the organization itself on 17 March 1949 in Ramallah. There, 800 delegates from ‘Samaria, Hebron, Jerusalem, Ramallah and Jericho’ attended and voted on a ‘council of forty members’ that in turn elected an executive committee. For more on how the GRC defined itself, see the organization’s detailed letter of explanation to the PCC: Bulos to Etheridge, May 14, 1949, UNISPAL, https://unispal.un.org/DPA/DPR/unispal.nsf/9a798adbf322aff38525617b006d88d7/5f621b2b6a451a3a8525750b0050b072?OpenDocument; Plascov, The Palestinian Refugees, pp. 20–21, 220–223. Yahya would later succeed Ahmed Shuqairy as the second chairman of the PLO, in December 1967.

36 ‘Arab Threatens Refugee Uprising’, New York Times, May 7, 1949.

37 Rony E. Gabbay, A Political Study of the Arab-Jewish Conflict: The Arab Refugee Problem (A Case Study) (Genève: Librarie E. Droz, 1959), p. 266.

38 Bulos to Etheridge, May 11, 1949, UNISPAL, https://unispal.un.org/DPA/DPR/unispal.nsf/DDQAZMMH/D78EBF68F907D3C08525750B004F27EE?OpenDocument; Bulos to Azcerate, June 15, 1949, UNISPAL, https://unispal.un.org/DPA/DPR/unispal.nsf/X6RGT5BG/C4F0D2B35320DBDB8525750B0057EDF4?OpenDocument.

39 Neil Caplan, ‘A Tale of Two Cities: The Rhodes and Lausanne Conferences, 1949’, Journal of Palestine Studies, 21(3) (1992), p. 16; Plascov, The Palestinian Refugees, p. 21.

40 According to the GRC, the Jordan regime’s establishment of a governmental ministry devoted to the Palestinian refugee problem—the Jordanian Ministry of Social Welfare—was primarily an effort to undermine the GRC. Plascov, The Palestinian Refugees.

41 ‘Arab Threatens Refugee Uprising’, New York Times, May 7, 1949.

42 Palestine General Refugee Congress to British House of Commons Members, March 15, 1955.

43 Sasson to Sharett, August 25, 1952, DFPI Companion Vol., vol. 7, p. 209. The GRC had also made repeated attempts to reach out to the PCC in order to take small steps to alleviate the refugees’ plight, as the delegation had done in Lausanne. See Bulos to Azcerate, June 15, 1949; Bulos to Azcerate, June 29, 1949, UNISPAL, https://unispal.un.org/DPA/DPR/unispal.nsf/ICEJ62MT/S23QRJKM/B724124DF96D23178525750B005EC790?OpenDocument; Bulos to Azcerate, June 30, 1949, UNISPAL, https://unispal.un.org/DPA/DPR/unispal.nsf/ICEJ62MT/3D0B98F3EA5844EC8525750B005D4A32?OpenDocument. Note that the only reply the PCC gave to these suggestions was to uphold its decision not to include the GRC in the formal developments of the negotiations. See Azcerate to Bulos, June 25, 1949, UNISPAL, https://unispal.un.org/DPA/DPR/unispal.nsf/ICEJ62MT/3D0B98F3EA5844EC8525750B005D4A32?OpenDocument.

44 Sasson to Sharett, August 25, 1952, DFPI Companion Vol., vol. 7, p. 209.

45 The files referred to in the Israeli State Archive are located at RG130/MFA/15/3738. According to the archive’s staff, the files are classified as ‘sensitive files regarding security and private issues’. They are due to be opened to the public in 2017. Israeli State Archive in private email correspondence with the author, March 2014.

46 Palmon to Rafael, June 5, 1954, Documents on the Foreign Policy of Israel, 1954, Companion Volume, vol. 9 (Jerusalem: Israeli Government Printer, 2004), p. 228. Israeli diplomat Gideon Rafael subscribed to this position until 1956.

47 Palmon to Rafael, June 5, 1954, DFPI Companion Vol., vol. 9, p. 226.

48 Rafael to Israeli Embassy in Paris and Rome, November 1, 1954, DFPI, vol. 9, pp. 743–744.

49 See Rafael as quoted in Elath to Eytan, November 8, 1954, DFPI Companion Vol., 9, pp. 450–451.

50 Rafael to Eytan, July 23, 1952, DFPI Companion Vol., vol. 7, p. 172. Rafael was at that time political counsellor at the Israeli UN delegation.

51 Memorandum of Conversation, September 22, 1952, FRUS, vol. 9 (part 1) (Washington, DC: United States Government Printing Office, 1986), p. 1006.

52 Morris, The Birth, pp. 313–334.

53 Palmon to Rafael, June 5, 1954, DFPI Companion Vol., vol. 9, pp. 226–228.

54 Ibid., p. 226.

55 Ibid.

56 Ibid., p. 227.

57 Ibid.

58 Ibid.

59 Ibid.

60 Palmon to Rafael, June 5, 1954, DFPI Companion Vol., vol. 9, pp. 226–228. The PCC had already approached the Israelis with the suggestion to move forward with the release of the remaining blocked accounts. Eytan to PCC Chairman, August 19, 1954, RG 130/MFA/2451/20, ISA.

61 General Refugee Congress to PCC, July 20, 1954, RG 130/MFA/2451/20, ISA.

62 The GRC’s letter, as quoted by Rafael in: Rafael to Shihadeh, August 9, 1954, RG 130/MFA/2451/20, ISA.

63 Eytan to PCC Chairman, August 19, 1954, RG 130/MFA/2451/20, ISA; see also Kidron to Rafael, September 22, 1954, RG 130/MFA/2331/13, ISA.

64 Eytan to PCC Chairman, August 19, 1954, RG 130/MFA/2451/20, ISA.

65 Ibid.

66 Ibid.

67 Kidron to Rafael, September 8, 1954, DFPI Companion Vol., vol. 9, pp. 344–345.

68 By mid-September, the GRC still had not heard from the PCC. The GRC sent a reminder letter on 18 September but to no avail, even as late as 23 September. The PCC even refused to acknowledge having received the letter. Rafael to Kidron, September 23, 1954, RG 130/MFA/2331/6, ISA.

69 Evans (British Embassy Tel Aviv) to Eytan, September 1954, RG 130/MFA/2451/20, ISA.

70 Ibid.

71 Avi Shlaim, Lion of Jordan: The Life of King Hussein in War and Peace (London: Penguin Books, 2009), p. 59.

72 Plascov, The Palestinian Refugees.

73 Danny Gutwein, quoted in Asher Schechter, ‘Requiem for the Shekel’, Haaretz, February 24, 2012, sec. ‘Week’s End’, http://www.haaretz.com/weekend/week-s-end/requiem-for-the-shekel-1.414590.

74 Tovy, Israel and the Palestinian Refugee Issue, p. 249.

75 Barclays Bank, Jerusalem Branch to Kaplan (Israeli Minister of Finance), September 21, 1954, RG 130/MFA/2451/20, ISA. Tovy also describes a similar process that was taking place in the Jordanian courts. See Tovy, Israel and the Palestinian Refugee Issue, p. 248.

76 The Arab Bank had deposited funds with Barclays Bank’s Allenby Square branch in West Jerusalem prior to 1948, and had later moved its office first to the Old City of Jerusalem and later to Amman, Jordan, in June 1948 as a consequence of the fighting. The Israeli Custodian for Absentee Property had ruled that the Arab Bank’s assets were frozen with Barclays because they belonged to an ‘absentee company’. The British House of Lords dismissed this claim in 1954. See Fischbach, Records of Dispossession, pp. 201–202.

77 Ibid., p. 201.

78 Barclays Bank, Jerusalem Branch to Kaplan, September 21, 1954, RG 130/MFA/2451/20, ISA.

79 Ibid.

80 Kidron to Rafael, September 8, 1954, DFPI Companion Vol., vol. 9, pp. 344–345.

81 Barclays Bank, Jerusalem Branch to Kaplan, September 21, 1954, RG 130/MFA/2451/20, ISA.

82 Under this agreement, those who had already applied for the release of their assets under the so-called ‘First Release Scheme’ of 1952 would reaffirm their applications, while those who had not already done so would have to file a claim with the bank. This claim would then be sent to Israel, which would hold the final say in its ratification. The Israeli Custodian for Absentee Property retained the right to refuse any application, in whole or in part. Memorandum of Agreement between the Government of Israel and Barclays Bank, September 26, 1954, RG 130/MFA/1829/12, ISA.

83 Editorial note regarding the Statement by the Government of Israel on the Release of the Remaining Blocked Accounts of the Arab Refugees, September 27, 1954, DFPI Companion Vol., vol. 9, pp. 376–377; ‘Israel Agrees to Release All Assets of Palestine Arab Refugees’, Jewish Telegraphic Agency, September 30, 1954, Jewish News Archive, http://www.jta.org/1954/09/30/archive/israel-agrees-to-release-all-assets-of-palestine-arab-refugees.

84 Rafael to Kidron, September 30, 1954, RG 130/MFA/2331/6, ISA.

85 Rafael to Israeli Embassy in Paris and Rome, November 1, 1954, DFPI Companion Vol., vol. 9, pp. 436–437 (see footnote 3 of the same memo).

86 Rafael to Kidron, September 30, 1954, RG 130/MFA/2331/6, ISA.

87 Kidron to PCC, November 1, 1954, DFPI, vol. 9, pp. 743–744.

88 Rafael to Israeli Embassy in Paris and Rome, November 1, 1954, DFPI, vol. 9, pp. 743–744.

89 Kidron to PCC, November 1, 1954, DFPI, vol. 9, pp. 743–744.

90 Rafael to Israel Embassy in Paris and Rome, November 1, 1954, DFPI Companion Vol., vol. 9, pp. 436–437.

91 Elath to Eytan, November 8, 1954, DFPI Companion Vol., vol. 9, p. 450.

92 Rafael to Kidron, October 17, 1954, RG 130/MFA/2331/6, ISA.

93 Ilan Pappé, The Making of the Arab-Israeli Conflict, 1947–1951, 4th ed. (London: I.B. Tauris, 2006), p. 223.

94 Elath to Eytan, November 1, 1954, DFPI Companion Vol., vol. 9, p. 450.

95 Ibid.

96 Plascov, The Palestinian Refugees, p. 21. The same happened after the 1967 War. See Avi Raz, The Bride and the Dowry: Israel, Jordan, and the Palestinians in the Aftermath of the June 1967 War (New Haven, CT: Yale University Press, 2012), pp, 145–146, 150.

97 In fact, considering the records that do exist of the 1954 affair they had with the Israelis over the blocked accounts, it seems unlikely that this was the case. That does not of course exclude the possibility that the two could have become Israeli agents at some point after these talks, or maybe even throughout, and because of, the process.

98 Elath to Eytan, November 1, 1954, DFPI Companion Vol., vol. 9, p. 450.

99 Consultation at the Ministry of Foreign Affairs, November 11, 1954, DFPI Companion Vol., vol. 9, p. 457.

100 Ibid.

101 Jensehaugen, Heian-Engdal, and Waage, ‘Securing the State’; Heian-Engdal, Jensehaugen, and Waage, ‘Finishing the Enterprise’; Jørgen Jensehaugen and Hilde Henriksen Waage, ‘Coercive Diplomacy: Israel, Transjordan and the UN—a Triangular Drama Revisited’, British Journal of Middle Eastern Studies, 39(1) (2012), pp. 79–100; Waage, ‘The Winner Takes All’; Stian Johansen Tiller and Hilde Henriksen Waage, ‘Powerful State, Powerless Mediator: The United States and the Peace Efforts of the Palestine Conciliation Commission, 1949–51’, International History Review, 33(3) (2011), pp. 501–524.