King's College London

This piece was originally published on Nick Butler's Substack, Nick's Newsletter

A ceasefire and the release of the Israeli hostages are great steps forward after two years of bitter conflict in Gaza. These first steps, however, are only the prelude to the challenge of reconstruction. If Gaza can be rebuilt there is a chance of coexistence and at least form of peace. If not, the present moment will be no more than an interlude before the next war begins.

Renewal of Gaza as a community will require disarmament by Hamas, the withdrawal of Israeli forces and the establishment of a credible process of governance. But reconstruction also has a physical dimension – the rebuilding of what has been destroyed over the last two years.

Physical reconstruction can only be achieved if Gaza has secure energy supplies. Energy for emergency relief, for the removal of the rubble and the debris of war especially from the cities and then for the building of infrastructure including roads and housing and for the creation of a viable economy which can support two million people.

What follows is based on four bold assumptions. Three months ago, each would have seemed incredible. Now, with all the caveats about the dangers of ever allowing optimism to colour one’s view of the Middle East, they are just conceivable though far from secure.

First, that the remaining elements of the Trump plan are implemented, even if imperfectly and without a full-hearted commitment to peace on either side.

Secondly that sufficient financial resources are available from regional players such as Saudi, Qatar and the Emirates, and from the US and Europe, to fund a substantial reconstruction plan over the next five to 10 years.

Thirdly, that the area is sufficiently stable to justify international private sector investment supported no doubt by state guarantees, but also strong enough to provide the basic standards of safety which companies will need before they send staff into the region.

Fourthly and crucially that Israel cooperates fully in the reconstruction process.

If any of these cannot be delivered, reconstruction will be impossible and Gaza will remain a failed state with mass poverty and unemployment – the perfect situation for the revival of a militant organisation which will look very much like Hamas 2.0. Although Israeli cooperation in the process of reconstruction is not explicitly included in Trump’s 20-point plan, it would seem to be entirely in Israel’s self-interest to do everything possible to avoid Gaza becoming the base for a new wave of terrorism.

The first of the necessary energy supplies will come as part of the emergency relief programme being put together by the United Nations and the international aid agencies.

According to the most recent published assessments by the United Nations, around 83 per cent of all the structures in Gaza City have been destroyed, as have 78 per cent of buildings across the rest across the 360 sq km of the whole territory. Some 60 million tons of debris wait to be cleared. Gaza’s power grid, such as it was, appears to have been almost totally destroyed. The country’s single power station – run on diesel fuel supplied until the war by Israel is reported to be damaged but not destroyed. The electricity supplies from Israel which flowed through the connection points at Eraz in the North and near Khan Younis in the South have been cut off since October 2023. It is not clear whether they can be reopened without major repairs. It seems a reasonable assumption that the entire grid system across the areas where the conflict has been concentrated will need to be rebuilt. The process of recreating the grid will be complicated by the risk of unexploded munitions and a shortage of skilled local workers. For some time the emergency relief effort will have to rely on mobile generators and makeshift local facilities such as rooftop solar panels – devices which have been Gaza’s main sources of electric power for much of the last two years. Additional supplies of oil could be brought in by road and gas, imported using floating LNG facilities once the onshore infrastructure is in place to distribute the gas to end users.

Disaster relief is the immediate challenge but more substantial supplies, particularly of oil, will soon be needed for removal of the badly damaged buildings. Rubble clearance will require the use of powerful diggers and waste disposal vehicles as well as a highly skilled set of bomb disposal experts. Roads will need to be rebuilt to enable the clearance work to take place. The work involved will create some local jobs but most of the expertise required will have to be imported, with properly equipped camps for the workers involved.

As this proceeds the third phase of reconstruction must begin. The construction of new homes and basic social provision such as schools and hospitals will be priorities but reconstruction must also involve the creation of the infrastructure necessary to revive the economy. Even prior to the war Gaza’s economy was extremely weak and heavily dependent on international aid. Until 2007 much of the area’s income depended on the thousands of Gazans who crossed to work in Israel each day, especially in the construction sector. It is far from clear that such work will be made available again even if the ceasefire holds.

Historically the Gazan economy has relied on trade in basic agricultural products such as citrus fruits, tomatoes, dates and wheat, and some very basic manufacturing activity almost entirely for local use. Figures from 2020 show an economy in which the main sources of employment were local services, almost all of which were paid for by international aid. Even before the current war began in October 2023, Gaza was one of the poorest regions of the world.

A restoration of basic agriculture will be necessary, as will a revival of the area’s longstanding but much diminished fishing industry. Both have been damaged by war, but their potential remains. Neither however seem likely to be sufficient to sustain an area which cannot rely for its long-term sustainability on generosity from the Gulf States or anyone else. International philanthropy has never been secure and once immediate relief from starvation has been achieved the strong risk is that attention will turn to the next crisis. Support from the developed world will also be fragile. Overseas aid has been cut from government budgets in both the US and the UK – both once proud champions of development assistance. The US has long resisted the concept of nation-building. European governments, including the UK, are facing extremely high debt ratios and multiple calls on public spending. Gaza will not remain a priority for long.

One answer may lie in securing a flow of export revenue based on the creation of energy supplies for other countries in the region and eventually the countries of Southern Europe.

Gaza has two key areas of potential. The first is the establishment of large-scale solar production which can meet the bulk of local electricity needs and provide a surplus for export through new grid lines to Egypt and potentially through Cyprus to Europe.

The second potential source of revenue and trade is the offshore gas field, known as Gaza Marine, discovered in 2000, 35km off Gaza’s coast. The field has never been developed because of the political situation but holds an estimated 1 tcf of natural gas. For development to proceed Israel would need to confirm that the field is an asset which belongs to Gaza, a process complicated of course by the fact that Gaza is not as yet a nation state. In 2023 ownership of Gaza Marine passed from British Gas to the Palestinian Investment Fund and the Consolidated Contractors Group – the Athens-based civil engineering business originally created after 1948 to provide work for the Palestinian diaspora. In June 2023 the Israeli government gave the go ahead for the field to be developed. That process was suspended in October 2023 – an early victim of the war.

The known unknown is whether Gaza Marine is an isolated field. Although the Levant basin – the area running parallel to the coast from Egypt and Sinai in the south to Turkey and Cyprus in the north – has produced a number of finds, including the very substantial Leviathan field offshore from Haifa in Israel, most of the area is unexplored for political reasons. A recent UNCTAD estimated that the reserves across the region amount to 122 tcf of gas and 1.7 bn bbl of oil. If anything close to stability were to be achieved not just in Gaza but also in Lebanon and Syria the international oil and gas companies could bring major investment in exploration and development.

Gaza has a 40km coastline and the chance of more finds in the offshore waters must be high. Natural gas could prove to be a significant source of revenue and economic stability which would give the area time to develop a wider economic base.

There is some potential for tourism but it will be years before any substantial number of Europeans or America venture to a Trump resort on the Gazan coast.

A more optimistic scenario is that Gaza could return to its historic role as a trading centre for the Eastern Mediterranean. As well as using and expanding the existing harbour near Gaza City, there is also the potential for physical trade in energy supported by new infrastructure carrying natural gas and electricity. That trade could extend the existing links between the immediate neighbours, Egypt and Jordan, which are energy poor, and Israel and Lebanon, which both have potential to export both natural gas and solar power.

Energy is a vital input to each phase of the renewal of Gaza. At each stage many billions of dollars will be necessary on a multi-year basis. So will patience and the willing cooperation of all parties, including crucially the Israelis. In postwar Germany the allies had won and could shape the process of reconstruction through the Control Commission, which used a combination of public and private investment to rebuild the German economy. There was no resistance to be overcome and Germany, although heavily damaged by the war, retained strong industries and a skilled workforce. Such conditions do not exist in Gaza.

The coordinating group established under the terms of the Trump plan does not have the power of a victorious occupying power. There are still many different views as to the shape of the "day after". The aspirations of the Palestinians for an independent state remain undimmed and the resistance of many Israelis to any such idea is as strong as ever. The Qatari negotiators who managed to achieve agreement on phase one of the Trump deal have made clear that they consciously avoided debate on many of the other steps because they believed that unresolved conflicts about the future could jeopardise the fragile agreement on phase one.

The road to the ceasefire and the release of the hostages has been hard. The next steps will not be easier.

Nick Butler is an energy economist and Visiting Professor at the Policy Institute, King's College London.