A Sign of Progress in the Middle East Would Be the Opening of a Casino in Jericho





Mr. Thompson is Professor of Public Administration and author of Gambling in America: An Encyclopedia of History, Issues, and Society. Ms. Friedberg Professor of Political Science and Director, Graduate Program, Public and Internal Audit, University of Haifa.

Casino gambling can thrive only if there are ambient conditions of peace in society. The best news suggesting that the latest "roadmap" for peace between Israel and the Palestine Authority was a plan for reopening the Casino Oasis just outside of Jericho at the border point dividing lands of the two jurisdictions. This essay takes a look at the once and future casino of Jericho.

Pockets of Sovereignty and Gambling

Unusual pockets of sovereignty are found around the globe. They result from historical accidents that occurred long ago, but also accidents that still occur. Most are left over remanents of migrations or conquests and compromises long forgotten. Some of the pockets are actual mini-states, others are political oddities that enjoy special privileges of legal standing afforded by dominant neighboring states.

Most are located in remote places, but some have strategic locations that give them commercial advantages. Typically they fend for themselves economically--most often in a marginal fashion--by clinging to one special exception to general law or another.

Some like Andorra or San Andreas Island become free trade zones, others like Liechtenstein and the Cayman Islands develop banking interests to serve clients who wish protection and secrecy for their accounts. Some welcome radio towers, while others sell jewelry and cigarettes san taxes imposed by neighboring states.

The one commodity which has given the outlying mini-state or sovereignty pocket the greatest hope for prosperity has been gambling.

The precedence for using gambling as a major crutch for the economy of a mini-state was set by the Blanc brothers in the Principality of Monaco in 1863. This was followed in turn by casino domination of what historian Gilman Ostrander has called America's "Great Rotten Borough," the "state" of Nevada. The Portuguese enclave of Macao on the Coast of China formally legalized its casinos in 1934 just a few years after Nevada. In more recent decades new "island" nations of the Caribbean have embraced casinos, while the Isle of Man and Liechtenstein have been among the first international internet gambling sites. Native American reservations and the former "homelands" of South Africa have also prospered by welcoming casinos that could not have been established in most other parts of their "host" countries.

While each of these cases offers a unique flavor for the international scene, the status of the Palestine Authority and its Oasis Casino at Jericho offers perhaps the most interesting case.

A Casino for the Middle East

Commercial casinos need peace in order to function. The Middle East is hardly the region a casino entrepreneur would choose for locating a casino. Such has been the case for a very long time. Moreover the vast majority of people that would be served by Middle East casinos are of the Muslim faith, a faith that strictly forbids gambling. Nevertheless there have been very successful casino operations in the region, notably Casino du Liban, located about 15 miles north of Beirut. It was opened in 1959 and attracted players from many other countries. Citizens of Lebanon were not allowed to come to the facility. In 1975 the general state of war in Lebanon forced the casino to operate only intermittently. It closed completely in 1989. While it was refurbished and reopened in 1996, its drawing power is almost non-existent today.

The Oslo Opportunity

The Oslo accords of 1993 breathed the first air of autonomous freedom into Palestine populations denied self government by their Arab "hosts" for centuries and their Israeli occupiers since 1967. A plan was put in place for the gradual withdrawal of Israeli armies from the areas of Gaza and "The West Bank" which had been conquered by Israeli in the Six Day War of 1967, lands which had been part of Egypt and Jordan but had been ceded by them to create a Palestinian state.

The first "West Bank" area to be evacuated by the Israelis was a 60 square kilometer area around Jericho. In 1994 a local police force was developed, and a local governmental infrastructure was set into place. Jericho soon thrived as a tourist destination. The area contained many archeological artifacts that were exploited with digs. The area also included an important site for Christians, the Mount of Temptations to which Christ retreated for 40 days of contemplation before making his fateful return to Jerusalem. The border at Jericho is only a forty minute drive to Jerusalem, and only an hour and one half away from Tel Aviv, two hours from Haifa. Religion, ancient history, and tourism, and convenience: elements tied together by entrepreneurs into the possibilities for casino gambling. Planning began.

The Jericho Casino: First Round 1998-2000

Over the next few years the newly constituted Palestine Authority elected its governing counsel and selected Yasser Arafat as its president. They ironed out the policy for a casino at Jericho. The selected a developer and operator for a facility which would remain under majority ownership of the Palestine Authority. They selected Casinos Austria to build the casino and to develop a hotel property along with the gambling. Ironically--or perhaps by design--they selected a company with Jewish leadership. Casinos Austria which is involved with as many as 100 casino operations on sea and land around the globe is led by Martin Schlaff. The irony is perhaps overstated, as the Palestinians definitely needed Israeli cooperation if the casino project was to work. Schlaff was "plugged in" to top Israeli politicians. Today he is very close to Prime Minister Ariel Sharon, having visited with him on business and as a house guest at Sharon's ranch in the Negev Desert.

The Oasis casinos, billed as "The Holy Land's First," opened with a large party of 1000 VIP guests on Tuesday evening, September 15, 1998. While tensions were high, the opening occurred without incident. The manager proclaimed that they wished to create an "atmosphere" that "will allow our customers to forget the political tensions outside." The Austrian Company invested $150 million in the facility and over a thousand Palestinians were hired, so their prayers were that the money would come flowing in. Arafat's council had decreed that Palestinians could work at the casino but they could not gamble. Nonetheless, many seemed to get in using passports from other countries.

Three thousand visitors came across the line of demarkation to the casino every day for two years. A survey by the Israel Information and Investigation Service found that 97 percent of the gamblers were Israeli citizens while 3 percent were tourists who were visiting Israel. Fewer were Arabs with foreign passports. One third of the visitors came from the larger cities (Tel Aviv, Jerusalem, and Haifa) on tour buses. A transportation contractor ran 19 buses and 9 minibuses.

The average player was middle-class and middle-aged. Each spent (e.g. "lost") $225 gambling during the casino tours which for the main (in 96 percent of the cases) came between 4 p.m. and midnight. The visitors spent an additional $10 each on food. The food while not in all cases Kosher was consistent with general religious standards for the most part. The gamblers preferred table games, and these outnumbered the slot machines.

The casino was very profitable and represented a major and noticeable outflow of money from the Jewish sectors of Israel to the Palestine Authority populations. The New York Times reported that the casino "represented the largest and most lucrative investment of the Palestinian Investment Fund."

In two years the casino took the equivalent of one-half billion U.S. dollars from the pockets of players, making the casino operations about the same as a large sized Las Vegas Strip casino (such as Ballys, Harrahs, or even the Luxor or Caesars). In contrast to Las Vegas, there were few "highrollers," although a special VIP room remained open until 2 p.m. each evening. Over the two years the daily gaming win of the casinos was between $660,000 (first year) and $710,000 (second year). Operating profits (net after expenses) amounted to $328 million, or well over 60% of the play. This money helped finance many Palestine Authority activities as it was their leading source of revenue.

Sans Peace, No Casino: So It Goes

The situation seemed to please everyone, the players and their hosts--both the Austrians and the Palestinians--for two years. But almost like Las Vegas where "two years" makes a casino old and brings thoughts of implosions to the minds of developers, two years brought explosions to the Casino Oasis as well. In the fall of 2000 the second Intifada began as Palestinians initiated a series of terror attacks against Israelis. The Israeli military responded.

The casino building was in the direct line of fire between the combatants, yet the Israeli military at first telegraphed the notion that the building would not be a target. In response to a false sense of safety, some Palestine partisans saw an advantage and they permitted snipers to shelter themselves on the roof of the building. The snipers fired upon nearby Israeli settlements (not in the "West Bank" area). After repeated warnings did not stop this activity, one Israeli tank simply moved into position and commenced fire a shell into the casino building essentially ruining the structure. The casino had already been closed down, and no lives were lost in the shelling.

This military action was not desired by anyone as the facility had served a very real "need to gamble" felt by many citizens of Israel.

The Desire to Gamble--The Desire for Peace

Israelis would welcome the reopening of the casino. Indeed, in the interim period of the close-down two Israeli businessmen traded their interest in a Greek casino to Casinos Austria and they have acquired an option to purchase a one-third business interest in the property. The price they have offered suggests that the commercial value of the Oasis Casino is $400 million.

In the interim years Milton Schlaff was not exactly idle regarding his "Holy land" interests. He purchased a large ship and used it as a casino training facility for dealers. He also wished to anchor the ship at Eilat and win permission to operate his casino just off the shore of that tourist resort city at the southmost point of Israel on the Red Sea. While the Mayor of Eilat was very much in favor of the idea, the Israeli Attorney General vetoed the project.

The demands for gambling in Israel have also been made evident by a proposal to have a casino on an airplane. In May 2002 the Maariv daily newspaper in Israel indicated that the transport ministry had authorized a Boeing 747 to be operated by Icelandic airlines with a casino aboard. Israel investors were prepared to use as much as $30 million to convert the jumbo jet which would make four-hour flights with 230 gambling passengers from Ben Gurion airport out into Mediterranean skies and then back. Even though it received approval of the transport ministry, the plan was rejected due to strong objections of the government's legal advisor and the Israeli Supreme Court.

In a rather bizarre example of the proclivity of Israelis to gamble, the police initiated investigations of an illegal betting ring which conducted active wagering on specific sites that would be the locations of the next terrorist attacks from Palestinian bombers.

Why Major States Welcome Gambling in Pockets of Sovereignty

There are modern day reasons why sovereign pockets are given privileges to run casinos while their neighbors cannot do so. Most often the "host" or dominant neighbors approve (often in silence) the existence of the casino. Such is the case with Israel and the Oasis Casino of Jericho.

First, Israeli officials realize that there was and is a demand for gambling among Israelis and the casino helps to meet that demand. The casino can draw players away from many illegal casinos and also away from casinos in other jurisdiction. There is a casino in Taba, Egypt, just across the border from Eilat, and it caters almost exclusively to Israeli players. There are also quasi-legal boats that operate out of Eilat and offer casino gambling after they cruise out beyond the national waters. Other casinos in Hungary, Romania, Greece, and the United States also attract Israeli players.

Second, the creation of the Palestine casino lessened pressures to establish casinos in Israel, pressures that involve confrontation with strong moral interests, especially religious parties and members of the Labor Party. These interests may have recognized Israeli complicity in the decision to open the Jericho casino, but the fact that the casino was under Palestine Authority jurisdiction muted their opposition. Better the sin of gambling be on someone else's land.

Third, the existence of the casino allowed Israeli money to move to Palestinians without direct appropriations. These investments helped to lessen hostility of Palestinians toward Israelis, and in turn Israeli hostility toward Palestinians. The many jobs the casino gave to Jericho residents allowed them to (start to) build careers that could lead to a more vibrant local community. Strong healthy Palestine communities would be more likely to wish peaceful relations with Israel, as they would have a lot to lose in an atmosphere of hostility--which has turned out to be the case.

The closure of the Jericho Casino in 2000 siphoned away most of the commercial activity of the community of Jericho. The casino had invigorated a local economy, but the closure cost 1600 jobs.

The closure also affected the revenues of Casinos Austria, a company with interests in approximately 100 casinos worldwide. In 1999, almost 70% of the company's profits came from the single casino at Jericho, and the company's net profits fell 24 percent with the closure of the casino.

Another Willing Party for Gambling

The United States is perhaps a willing partner in the efforts to reopen the casino. Since the Oslo agreements, according to the Jerusalem Post, the United States has given four billion dollars to the Palestine Authority, more money per Palestinian ($1330) than the Marshall Plan gave to Europeans on a per capita basis ($272). Aid to the residents of Palestine lands exceeds the aid the United States gives to any other country. The suggestion is that there are perhaps better ways for Palestine to get aid, and the casino could be one of them.

Some Downsides

On the other hand, the two year existence of the Jericho casino did present some downsides for Israel. First, there were questions about where some of the casino profits went. Certainly many of the dollars went to Yasser Arafat of the Palestine Authority--a major owner of the casino. Much money which was intended for the community of Jericho and the Palestinians purportedly went to Arafat instead, and he may have used the money to plan terrorist attacks on Israel, and also to add to his personal bank accounts. Forbes Magazine cited Arafat as the sixth wealthiest of "kings, queens, and despots" in the world, having a $300 million account derived in part from the casino.

Second, while the casino drew hundreds of thousands of dollars each a day from Israeli players, many Israelis continued to gamble at illegal casinos. They also participated in quasi-illegal and questionable casino activity--on the Internet, and on boat cruises to nowhere, out of the southern port of Eilat.

The hope of the "host" country is, of course, that new leadership--in the person of Prime Minister Mahmoud Abbas--within the Palestine Authority will direct the Authority's share of casino revenues toward the public interest causes that can best help the people of Palestine.

Another downside--depending on one's perspective--of the revitalized Oasis Casino will be political pressure for casinos within Israel proper. At the present time no major religious party has a strong voice within the Sharon ruling coalition. The religious parties have only 21 votes in the 122 member Knesset. Already Mifal Hapais, the national lottery organization, has put forth its plan for as many as five new casinos to be run under their control. Former prime minister and current Minister of Finance, Benjamin Netanyahu, has proposed a plan for private casinos. He has close contacts with notable casino interests in the United States.

The Idea is Global: Good Gambling Means Good Neighbors

Today a reversal of fortunes in many state governments--specifically the two biggest ones, California and New York--have found state leaders doing an almost 180 degree turnabout regarding their willingness to endorse and support casino gambling on Native American lands. Now that their treasury cupboards are bare, they seem quite willing to go to tribes hat in hand and seek mutually beneficial (in a money sense) gambling opportunities, whereas they had vehemently opposed tribal games when state finances were in good shape. So too, Israel looks at casino gambling on its borders with the Palestine Authority not in terms of morality or abstract principles, but rather in terms of mutual advantage. And they do see some mutual advantages in bringing down the new walls between Jericho and its neighbors.



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Jesse Lamovsky - 9/10/2003

A banking and finance center, a la Switzerland or the Cayman Islands? Perhaps.

Palestine also has the advantage of a highly educated, highly literate population, and its independence would also, at least in part, reverse the "brain drain" the Palestinian people have been suffering since 1948. Peace would also bring tourism (biblical sites; Roman ruins). No doubt Palestine would benefit from its proximity to Israel, as Israeli entrepeneurs would be quick to built plants just over the border to take advantage of the lower labor costs.

Despite the country's physical deficiencies, which Mr. Rifkin intelligently pointed out, there can be a bright economic future in Palestine. Other small, resource-poor countries have thrived (notably Singapore).


Stephen Rifkin - 9/10/2003

Making Palestine the Vegas of the middle east (after Adu Dhabi & Bahrain of course) is an excellent idea. Palestine is not aggressively religious so there are few cultural barriers. They are already familiar with handling large amounts of cash. They are good at 'security' and many of them are very well educated and familiar with Western levels of service in a service economy.

Palestine has nothing in the way of natural resources, caqn't grow anything and doesn't have the capital to build out. A service economy is the way to go for them. Start with gambling and move into banking, insurance, capital markets. There is no reason one could not build a stock exchange there.


Jonathan Dresner - 9/8/2003

I'm reminded of the McDonald's thesis: there has never, the story goes, been a war between two countries both of which has a McDonalds' restaurant. I don't know that it is still true, but a NYTimes article in 2001 by Thomas Friedman asserted that it was at that time.

This is an interesting variation, but little more than that: stable societies with integrated internationalized economies are unlikely to allow their differences to become shooting wars and, conversely, countries with shooting war differences will not develop strong integrated internationalized economies.

The idea of channeling "aid" in a hidden fashion is a weak variation on the "free trade/markets replaces the need for government involvement" theory, which is very much just a theory.

And the comparison between aid to Palestinians and the Marshall plan funding is a pure waste of space: US$272 in the 1950s bought a lot more than US$1330 did in the 1990s.

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