How Israel is dismantling the dream of a Palestinian state
While attention has been focused on Gaza, Israel has undermined the delicate architecture of governance in the West Bank built up over three decades
Mehul Srivastava in Jenin
Israeli soldiers in the Jenin refugee camp earlier this year © John Wessels/AFP/Getty ImagesThe last time the Israeli military took over the Jenin refugee camp, in 2002, it fought Palestinian militants street-by-street for 10 days, losing 23 soldiers before it could quell the restive camp at the heart of the second intifada, as the uprising is known.
But earlier this year, when it sent tanks into the tiny camp in the northern West Bank, it encountered barely any resistance at all.
So weakened were the poorly equipped fighters of the so-called Jenin Battalion from intermittent Israeli raids — and also from a weeks-long confrontation with their own government’s security forces — that they just “ran away”, says Rayad Hassan, a Palestinian police officer injured in 2002 and displaced in 2025.
“Now there is no resistance, no fighters, nothing.”
The fighters are gone.
And so are the camp’s nearly 25,000 Palestinian residents, forced out by the Israelis and displaced around the occupied West Bank, living in tents, schools and half-completed apartment blocks.
Nine months after Israeli soldiers entered the camp, they are so completely in control of an area once considered the factory of Palestinian militancy that on a recent afternoon they could be seen driving around in soft-top SUVs, laughing and joking as their bulldozers chomped away at the ruins of the camp.
Before the Israeli military took over Jenin camp, it was a densely packed home to nearly 25,000 refugees.
Satellite imagery shows the extent of the military demolition operations that began in January.
Ask the Israeli military why the troops are still in Jenin, and it cites security tactics.
But ask one of the most senior far-right politicians in Israel — a person deeply involved in its policies in the West Bank, but wary of the western media — and they allude to the grander strategy at play.
“Don’t keep asking about the future of Jenin,” the politician says, speaking on the condition of anonymity.
“Ask what is the future of Oslo?”
In Israeli politics, Oslo is a catch-all nickname for a series of agreements, including the Oslo I and II Accords, signed through the mid-1990s between Israel’s last significant leftwing governments and the Palestine Liberation Organization.
The accords, named after secret talks held in Norway, created the Palestinian Authority, an interim body that took on limited self-rule in parts of the occupied territories.
The hope was that the institutions set up under Oslo could expand in tandem with Israeli withdrawals from Palestinian land, creating a smooth transition from Israeli occupation to Palestinian statehood.
For rightwing Israelis, Oslo was a betrayal of both their Zionist and religious claims to what they, and the Bible, call “Judea and Samaria”.
An extremist Jew assassinated the prime minister, Yitzhak Rabin, in 1995 for signing the accords, and the word “Oslo” has become a rallying cry on the Israeli right for what it considers to be a historic misjudgment — the first whispers of an independent Palestine.
Even though Oslo has been in collapse for years, the standard bearer for its demise is the far-right Israeli finance minister, Bezalel Smotrich, who leads Religious Zionism, a political party that forms the anchor of Prime Minister Benjamin Netanyahu’s coalition — and traces its origins to the rejection of the Oslo process itself.
“What Oslo represents for Smotrich is the threat of an incipient Palestinian state,” says Dennis Ross, the former US Middle East envoy and peace negotiator during the Oslo years.
Now that Smotrich is in power, “he wants to remove even the vestige, the potential of that possibility”.
The fate of the West Bank will come into focus next week at the UN General Assembly where the UK, France, Canada and Australia — all allies of Israel — intend to recognise a Palestinian state, as do many others.
Smotrich has threatened to respond by annexing an area equivalent to 82 per cent of the West Bank, which, if East Jerusalem is included, encompasses the 750,000 Israeli settler population.
But even before that threat, Smotrich has used the shadow of the devastating war in Gaza to surgically dismantle what is left of Oslo in the occupied West Bank, choking what billions of dollars in western aid and three decades of diplomacy have failed to create, a fledgling Palestinian state.
It is, by some measures, a far more successful — if radically different — strategy compared with the one Israel has pursued in Gaza, where it is far from “complete victory” and close to international isolation, accused of genocide and war crimes.
In the West Bank, Israel has grabbed wide swaths of land, installed hundreds of new checkpoints and destroyed refugee camps.
Emboldened extremist settlers have rampaged through remote villages.
Hundreds of Palestinians have died.
Those who remain have watched as the little autonomy they had built under the auspices of Oslo has been eroded, paving the way for the right-wing’s ultimate goal, the annexation of Judea and Samaria into Israel itself.
“There will be no Palestinian state,” declared Netanyahu last week at Ma’ale Adumim, a rapidly expanding settlement outside Jerusalem.
“This place is ours.”
Israel has been weakening the delicate architecture of governance and occupation that Oslo created in the West Bank almost since the accords were signed by expanding settlements, illegal under international law, building walls and deepening its military presence there.
But under Smotrich’s influence — he also holds a high rank in the defence ministry, which officially runs the occupation — Israel has made more strides in the last 23 months of conflict than in the decades prior.
In the Jenin refugee camp — and two others nearby — that has meant the longest Israeli presence in a Palestinian city since the late 1990s, cancelling out the PA’s authority.
“I have to ask the Israelis for anything now, even permission to put in a water pipe,” says a city official who did not give his name for fear of retribution.
In Ramallah, the administrative capital, that has meant what Palestinian officials claim is a concerted effort to collapse the Palestinian banking system.
“This is a much cheaper war than the one they have in Gaza — by killing our financial system, they will suffocate our economy, and then will bring our government down,” says Yahya Shunnar, the governor of the Palestine Monetary Authority, itself a creation of the Oslo process.
In far-flung Palestinian villages and downtown Ramallah it has meant the sudden appearance of late-night Israeli patrols after decades of being classified under Oslo as being part of Area A of the West Bank, off limits to Israeli civilians and technically self-administered.
“An Israeli officer came into my office and said, ‘There is no Area A, no Area B, no Area C,’” says Ibrahim Abu al-Rab, the mayor of Jalboun village.
The message from the officer was clear, he adds: “Forget Oslo — Israel controls everything.”
Taken together, Palestinian institutions have been weakened to the point of collapse, says Husam Zomlot, the PA’s ambassador to the UK.
“We are at a very existential moment,” he says.
“Israel is destroying the entire apparatus of the Palestinian government and Authority.”
That is a necessary step for Smotrich’s ambitions, even if the PA is deeply unpopular among Palestinians for its ineffectiveness and corruption, says Aaron David Miller, another veteran American negotiator.
“The PA is a contrivance, an easy target, but it’s a threat because of its international stature, because the UN, the UK and others cling to it in forlorn hope that it will reform itself,” he says.
And if the west can convince Israel to withdraw from Gaza, “the PA will be the hook on which they will hang their hat”.
Smotrich spent years on the fringes of Israeli politics — he was once arrested on suspicion of involvement in a plot to use arson to slow down Israel’s 2005 withdrawal from Gaza.
Current polls suggest he will not be re-elected, giving him and the Religious Zionism party a small window to achieve their goals.
“The first goal, first and foremost, is to dismantle the Palestinian Authority,” says Ohad Tal, Smotrich’s right-hand man in the Knesset, and the party’s primary interlocutor with the White House.
“The second, is to apply Israeli sovereignty to Judea and Samaria.”
Smotrich declined to comment.
Those goals were rightwing talking points, rather than achievable political goals, until October 7 2023, when Hamas triggered war with Israel in Gaza with its cross-border raid that killed 1,200 people.
Since then, both Smotrich and Netanyahu have conflated Hamas and its relatively secular rival, Fatah, which dominates the PA, describing both as terrorists.
Smotrich has studied the minutiae of the Oslo Accords, according to his aides, allowing him to hasten the collapse of the PA by exploiting decisions made during a more hopeful time in the Israeli-Palestinian conflict.
In one example, the architects of the accords intended for their economies to be intertwined, says Ghassan Khatib, who negotiated on behalf of the PLO in the early 1990s.
The Israeli shekel became the de facto currency of the Palestinian territories.
And the Israelis agreed to collect customs duty on imports into the territories and to transfer the revenue to the PA to pay salaries.
In 1994 the Palestine Monetary Authority was established.
These agreements have left Smotrich, as Israel’s finance minister since 2022, with immense control over the Palestinian economy.
“These were Israeli conditions — and at that time, they made sense, because we were talking about a transitional period,” says Khatib.
“In the eyes of the decision makers at that time, they had no other choice, and people were optimistic that Israeli leaders like Rabin and [Shimon] Peres were serious about historical compromise.”
Current PMA governor Shunnar was in his twenties during the Oslo years, a junior member of staff in the negotiating teams “filled with hope”.
He remembers ferrying to Washington printouts of agreements and annexes from months of frantic negotiations in Egypt, Italy and Israel.
“It was good times, optimistic, and everybody was upbeat, and we were just shooting for the stars,” he says.
“Now, you fast forward to 2025, and I am in the post of being the governor of one of the institutions which was a result of those good old days — it’s so ironic, and it’s frustrating at the same time,” he says.
Smotrich has withheld — often for months at a time — the tax revenues Israel collects on behalf of the PA, releasing only partial amounts either to pay off the PA’s debt to the Israel Electric Corp, or under intense pressure from the international community.
Over time, those arrears have built up to about Shk10bn, or $3bn, according to Palestinian officials, leaving the PA unable to pay full salaries to the civil servants, police officers and healthcare workers that make up the core of its limited government.
On September 1, Palestinian schools did not open — teachers had not been paid.
“His plan is extremely effective — all Smotrich needs is time,” says Khatib.
“If nobody interferes, the PA will no longer be able to pay salaries — that will be the beginning of the collapse, and he will achieve his objective of dismantling the Palestinian Authority.”
Smotrich’s office also has the power to withhold an indemnity it provides to Israeli banks for their customers’ dealings with Palestinian businesses.
Without that indemnity, the Palestinian economy — whose primary trade partner is Israel — will regress to the days before Oslo, with a massive grey market of unregulated cash transactions, says Shunnar.
Many Palestinians are now carrying out larger transactions, like real estate purchases, in Jordanian dinars or US dollars.
Palestinian banks are bloated with cash — an artefact of Oslo is that the Israeli central bank now only accepts Shk18bn a year from it to convert into electronic deposits.
The excess cash that has built up — now about Shk13bn — sits idle in Palestinian bank vaults.
Shunnar says appeals to his counterpart at the Bank of Israel have gone nowhere.
He has contemplated selling the excess shekels to US banks or the UAE for foreign currency.
But his powers as a central banker without his own currency are limited.
“As colonial planners of the occupation, people like Smotrich certainly know how to use what remains of Oslo to their benefit,” says Raja Khalidi, director of the Palestine Economic Policy Research Institute.
“And he cares about destroying it effectively, and he’s doing that very well, in a sort of piecemeal, gradual way.”
By banning Palestinian workers from Israel, throttling the transfer of tax revenues and weakening the banking system, Khalidi estimates Israel has shrunk the Palestinian economy by a third since October 7 2023.
Asked two weeks ago what his goals are for the West Bank, Smotrich replied: “Maximum land with minimum Arabs.”
In the village of Sinjil, a short drive from Ramallah, Palestinian residents say that policy is on display.
During the roughly 30 years since Oslo, the village lost hundreds of acres of its land to four nearby settlements, according to mayor Mo’ataz Tavavsha.
But it took only a few months after October 7 to lose nearly all the rest.
First, he says, the Israeli military installed a gate to the land surrounding the settlements.
Then came clashes with extremist settlers, who had set up a small outpost on a hill beside the village.
The Israeli military responded to the clashes — which involved stones being thrown — by warning the villagers to stay far from the outpost.
In June the Israeli military started building a barbed wire fence around Sinjil, claiming in a letter to Tavavsha that it was to prevent stone throwing on to a highway nearby.
By early August, the entire village was in effect sealed in, its only exit guarded by Israeli soldiers.
“They’ve made Sinjil a jail,” Tavavsha says.
Students cannot reach their universities, the ill cannot make it to hospital and dozens of houses have been abandoned by their owners, especially after a 14-year-old was shot and killed standing near the fence.
“People have started to leave — at least 100 people have emigrated,” he adds.
Last month, the Israeli authorities warned a neighbouring village, Turmus Ayya, that they may build a similar fence there, according to village officials.
“Soon, it will be all of Palestine pushed inside a fence, and everything outside will be Israel,” says Tavavsha.
The same sense of uncertainty pervades in Jenin, where on a recent afternoon the City Center Mall is packed.
High school results have just come out and families whose movements have been restricted by intermittent closures and curfews for many months are out trying to have a normal lunch.
The six-year-old mall is a few hundred meters from the city’s refugee camp but it feels a world apart, with gleaming escalators, high-end shops and carefully trimmed topiary.
Qaed al-Sadi, the 27-year-old scion of a Palestinian family that spent an estimated Shk100mn building the mall, slides into a chair in a packed restaurant.
In January, as the army sent tanks into the nearby refugee camp, his family got a call, he says.
The mall needed to be evacuated, or it faced demolition.
They complied.
Soon, the city itself shut down as the army broke up the camp.
Now things are calmer the mall has reopened.
But at night, Israeli soldiers often break in, Sadi says, showing the FT footage from the CCTV.
In the video, soldiers break the locks and walk around, as if exploring, and then leave without finding anything.
Sadi leans back and pulls up another video on his phone.
Soon after October 7, the Israeli army kicked his family out of their family home, a palatial mansion on top of a hill with a view over all of Jenin.
For a month, they used it as a military court.
When they left, the video shows, Stars of David were scratched into the family’s luxury cars.
“Fuck Palestine,” reads one scratching.
From “The Nation of Israel Lives” reads the next.
“They just wanted to show everyone that they can reach anywhere, anytime,” he says.
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