Israel sees it as an audacious and definitive blow to the financial base of terrorism. But Palestinians view the army's unprecedented raid on Ramallah banks as a targeting of their economy as a whole.
The fallout from the raids, which ended at 2 a.m. Thursday, was being gauged by the Palestinian financial sector. Bankers were hoping the army's seizure of 30 million shekels ($6.7 million) in assets would not touch off a run of withdrawals from customers fearing for the safety of their money.
"Now no institution is safe," said Omar Abdel-Razeq, senior research fellow at the Palestine Economic Policy Research Institute. Its offices near the raided Cairo Amman Bank were converted into a military post during the raids. Israeli troops also raided the Palestine International Bank and the Arab Bank, forcing employees to operate computer systems and hand over money from the vaults, employees said.
The soldiers seized assets Israel said were being used to sponsor attacks by Hamas, the Islamic Jihad, the Lebanese Hizbullah organization, and other groups. "The benefits of this will hopefully be understood over the long term. This is a blow to them because the terrorists who use these banks accounts will be more careful. You create obstacles for these terrorists," said army spokesman Capt. Jacob Dallal. "It took a lot of intelligence to identify the accounts of people who are terrorists" or who support terrorism, he said.
But the US State Department criticized the raids, saying Israeli actions "risk destabilizing the Palestinian banking system."
"We would prefer to see Israeli coordination with the Palestinian financial authorities to stem the flow of funds to terrorist groups," department spokesman Richard Boucher said. Israel says the seized money is to be spent on charity for the well-being of the Palestinian population.
Palestinian Authority leaders dispute that the funds seized were used for terrorism. "Israel will use any excuse to destroy the Palestinian economy," says Local Government Minister Jamal Shobaki. "The economy is the pillar of stability and this harms the very stability of Palestinian society." He termed the raids "armed robbery."
Mr. Abdel-Razeq predicts that the effects of the seizures "could be drastic. It all comes down to public confidence now. The stability of the banking system is very important to Palestinian investors both outside the country and locally. This will certainly add to the difficulties of the investment environment," he said.
Eighteen Palestinians were injured by gunfire in clashes that erupted as troops entered Ramallah Wednesday morning. But the operation actually began before dawn, when the Arab Bank's director of information technology, Ahmed Abu Ghosh, was arrested at his home, according to Ahmed-Samah Abu Rajai Aweidah, a vice president. Soldiers later forced him to come to the bank and give them access to the computer system, Aweidah said.
Twenty-five soldiers with guns took over the Arab Bank's al-Bireh branch, an employee recalled. Its regional headquarters was also taken over by troops. At 10:20 a.m., Mr. Aweidah said, "I was sitting with a customer. I saw an Israeli soldier pointing an M-16 in my face and asking me to put my hands up. We and the customers were held up at gunpoint. Some of the soldiers spoke fluent Arabic, and they ordered us to go into the corridor. Once they made sure all of the offices were empty, they split us into two groups, males on one side and females on the other."
"At 12:30, they let the women go out. They checked the IDs of all the men and let all the male employees leave by 2:30. As senior management, we agreed with the soldiers that we would stay. By threat of force their hackers went through the system. They forced us to print out the balances for the accounts. They forced us to open the safe. They had dynamite ready to blow it open if we didn't. Our teller went in and counted the money and gave it to the soldiers. The soldiers gave us a receipt and took the money out of the bank."
Captain Dallal responded: "Obviously we needed the assistance of some bank employees to locate the whereabouts of the accounts. That's true. There was no abuse of the people."
Zeev Schiff, military-affairs analyst for Ha'aretz newspaper, said: "Maybe people will be hurt by this and we have to compensate them. But we have to be tougher on the families of suicide bombers and take money from them as well."