Politics and poverty: Tony Blair and the parable of the Jeans

Abed Rabbo Aziz sits behind the ominously tidy desk in the little office at his clothing factory on the edge of the Jabalya refugee camp, and says quietly: "I'm so tired of this."

In good times, you would hardly be able to hear the 39-year-old speak for the din of the sewing machines and Arab music which blared incessantly as his 100 employees, men and women, cut and stitched the jeans the factory has been making here since his father opened the plant in 1969. But since Israel's total closure of the Karni cargo crossing into Gaza in mid-June, the modern machines from Japan and the US, all £125,000 worth of them, have been silent. Carefully packed plastic bags of 4,000 pairs of finished trousers are piled just outside the door, each labelled with magic markers denoting the Israeli firms they are destined for. In his warehouse across the street, perhaps 30 rolls of grey cloth, 4,000m of it, gather dust because until the crossing opens, Mr Aziz cannot ship out his finished garments and get the money to pay his highly skilled workforce, now all laid off, and start work again.

Operating a factory in Gaza is hardly easy at the best of times; Israeli military incursions, and air strikes since the Palestinian uprising began in 2000, the power cuts after Gaza's only generating plant was bombed in the aftermath of the kidnap by militants of Israeli corporal Gilad Shalit last summer. But nothing has been as bad as the past two and half months since the bloody factional fighting of this June which left Hamas in control of Gaza's streets, five of his employees dead, and Karni closed.

In the early days of the shutdown, he says, "the workers came to me when they needed money". But Mr Aziz, who has seven children, and six brothers as dependent on the factory they all run as he is, adds: "I used to give them money, but now I can't."

He has not, until today, brought himself to go upstairs to the factory's eerily silent first-floor where the rolls of brightly coloured thread hang on the walls beside the idle sewing machines. Picking up at random a paper trouser pattern sent from the designers in Tel Aviv, he uncovers a colony of tiny ants on the workbench underneath, busy in the heavy heat of a humid Gaza afternoon. "You see what happens when we aren't working?" he says.

Mr Aziz's story epitomises the much larger economic catastrophe which is likely to confront Tony Blair, the new international envoy to the Middle East, with the first of many daunting dilemmas. The top UN officials Mr Blair will meet today in Jerusalem are certain to raise their mounting concerns about the devastation Israel's closure of the high-security terminal at Karni has wreaked on what is left of Gaza's productive economy.

And they will certainly want him to help with what is probably now the top political priority among international donors, diplomats and aid agencies.

Food and medicine is largely getting through to Gaza, thanks to the other crossings which Israel is still allowing to operate. But virtually nothing else is. The result is the near-total closure of industry in a Gaza already ravaged by poverty and unemployment. With no raw materials coming in and no chance of getting exports out, manufacturing in the Strip is almost at a total halt. Mahmoud Abbas's emergency government in Ramallah is paying hundreds of Gaza policemen, with European Union taxpayers' money, to stay at home so they do not help Hamas by going to work, and 80,000 private sector employees on whom at least six times as many people directly depend, are also languishing at home, with nothing.

Before the bloody Hamas takeover in June, the Palestinian side of Karni was secured by Mr Abbas's presidential guard. Now that has gone, and Gaza is in the control of a faction unrecognised by Israel, the West, or the emergency Palestinian government in Ramallah; there is no co-ordination between Israel and the Palestinians and the crossing has remained tight shut.

Humanitarian work is not immune; the European Commission has already had to suspend an urgently needed drinking-water treatment project for lack of a pump that needs to be imported through the crossing. But the main effect is on industry, from the Pepsi Cola factory which can't get CO2 and whose laid-off employees are now seeing Pepsi produced elsewhere, including Israel, crossing the border as part of the permitted food supply, to Gaza's largest industrial sector, the 964 textile and clothing companies like Mr Aziz's, employing a total of 25,000 now laid-off workers.

It may seem strange that during seven years of bloody conflict here, the economic lifeline between Gaza tailoring firms like this and their Israeli customers has managed to remain open until now. Many Israeli clothing factories have shut down because of global competition; but the alternative of China which partly made that happen, is no't a good one for the young fashion market in Tel Aviv where trends change almost monthly and goods shipped from the Far East may be outdated by the time they arrive, which makes Gaza competitive on price and, as important, quality.

All too conscious of the fickleness of the fashion market he serves, Mr Aziz says he now worries that even if Karni were to open soon, his jeans may be passé by the time they get to the stores in Israel. But Mr Aziz is proud of the reputation he has built up for the professionalism of his workforce. "We can do everything here. Sometimes they send us the cut cloth; sometimes they send the patterns and we do the cutting here."

Mr Aziz, who pays his employees between £5 and £10 per day, depending on their skill, says the jeans he sells his main customer, the Tel Aviv clothier Yehuda Shoshani, can sell over the counter for £25 or more. But Mr Aziz, who understands fully the difference between the two economies, is not complaining. "He is excellent, the best there is," he says of Mr Shoshani. "There is 100 per cent trust between us."

Thanks to the Karni closure, Mr Shoshani, who has himself already lost £500,000 and had to lay off 18 workers for lack of the finished garments, says of his Palestinian supplier, who in easier times used to get a businessman's permit to travel to Israel: "He has been here many times. We eat together, we drink together; it's like he's part of the family." And the workmanship of Mr Aziz's firm? "They can compete on quality with anywhere in the world."

Big efforts behind the scenes, including by some European diplomats, have so far failed to resolve the high politics which is holding up a solution to the mounting Karni crisis. Technically, the problem is probably easily solvable; an international third party presence – whether governmental or private sector– could almost certainly satisfy Israeli security concerns.

Israeli officials have said before that Mr Abbas does not want the crossing open; this is denied by the emergency government, whose Prime Minister Salam Fayad insisted to a group of visiting British MPs on Wednesday that he wanted the trucks flowing through the crossing again.

But some diplomats believe that at the very least it would be easier to solve the issue if the Ramallah government, now in near-continuous dialogue with Israel, was more vocal in pressing for the crossing to be reopened and retain, like some Gaza businessman and civil society leaders, a strong suspicion that Ramallah wants to continue the squeeze on Hamas and believes that the continued closure will help.

One Western diplomat said this week that when approached, Ramallah says there are complications because responsibility for crossings has been passed from the chief negotiator, Saeb Erekat, to a new committee national economy ministerial committee. "They seem to be stalling," he added.

Eyad Sarraj the director of Gaza's community mental health programme, believes the continued closure is an "American decision" with which Mr Abbas is complying, and says an admitted loss of popularity by Hamas stems not from the economic siege but from its "stupidity" in threatening the reputation it built up for security after June by brutal treatment of dissidents. "If Hamas is too isolated, this isolation will give the radicals the upper hand and they will rule by the gun," he says. Mr Aziz himself feels caught by a political power struggle over which he has no control. He starts by saying that "Abu Mazen [Mr Abbas] does not hold the key to the crossing." Then he blurts out: "I blame them both [Fatah and Hamas] for not acting in the interests of the people.

"This is not hurting Hamas: they have money. And the Authority [in Ramallah] is giving money to their employees. We are the ones paying the price, the people. Fatah and Hamas are not the whole Palestinian people."

The Israeli Foreign Ministry said it was open "to any workable and practical solution" in the context of not conferring legitimacy on Hamas. The Hamas government said it was open to a "European third party" securing the crossing.

But no resolution has so far been forthcoming. Which is where Mr Blair could come in. John Ging, the Gaza head of operations for the UN refugee agency UNRWA, and one of the senior UN trio who will meet Mr Blair today, has no doubt of the urgency. He points out that the quartet of the US, EU, UN and Russia (to which Mr Blair is answerable) highlighted the need for crossing points to stay open.

But, he added, the factory closures have simply added tens of thousands of Palestinians, many of them refugees, to those already dependent on aid from an overstretched UNRWA.

"Time is running out, certainly for the business sector," he says. "The plea from the people on the ground is for help to maintain the basics of a dignified human existence. People are in despair, seeing that today is worse than yesterday and that tomorrow will be worse still."

The closures come at a time of continuing crisis in Gaza society. Mr Ging himself this week announced an appalling drop in educational standards, with failure rates in mathematics of between 66 per cent and 90 per cent among those aged between eight and 14 after a year of relentless conflict and poverty. With militant rocket fire continuing into Isreael, heavier incursions by its military are all too possible; 10 Palestinian miltants were killed yesterday. Today there are threats of fresh violence between Hamas and Fatah if the latter go ahead with demonstrations against Hamas.

Mr Ging says he is "very optimistic" about Mr Blair's arrival, given his track record in Northern Ireland and points out that economic progress is central to his mandate.

Referring to the new moves between Israel and the emergency government in Ramallah to establish the "principles" of a future two-state solution, he points to the close relationship between Gaza businesses and the Israeli firms they supply.

"This is a relationship that should lay the foundations of everything that is good and positive. But the [Gaza suppliers] have lost their ability to live up to their side of the relationship and that does not serve the new political agenda of stability peace and security." For Mr Aziz and Mr Shoshani, among many others, Mr Ging's remarks are no mere abstraction.