In the Middle East, it is hard to find a professional, objective international agency respected by all parties. The one exception may be the World Bank.

The World Bank representative in the West Bank and Gaza, Nigel Roberts, is an agricultural economist by training. Disbursing funds for projects in the areas of water management, sanitation and nutrition to improve Palestinian living conditions is the bread and butter of his job as country director to the Palestinian territories. But in the last two years he and other World Bank officials have found themselves increasingly playing a diplomatic role—as they did last August when Israel disengaged from Gaza and the northern West Bank.

Since he came to the region in 2001, Roberts, a British national, has found his mission of fighting Palestinian poverty often entails a trusting relationship with the Israelis—and fostering ties between the two parties. Accomplishing that requires close attunement to the ebb and flow of the Israeli-Palestinian sea of troubles. In the run-up to Israel’s disengagement, for example, what began as a dialogue on the Palestinian economy evolved into a mission of mediation and coordination.

“When talking to parties in conflict, that is what happens,” said Roberts. “Palestinian poverty is a serious problem for Israel. Both parties, the Israelis and the Palestinians, have to do different things to redress the situation.”

Observers agree that the World Bank emerged as a key communications link between Israel and the Palestinian Authority after Israeli Prime Minister Ariel Sharon launched the disengagement plan.

“When Sharon gave the responsibility of planning the disengagement to the National Security Council [an official advisory body to the prime minister],” said Gershon Baskin, founder and Israeli codirector of the Israel/Palestine Center for Research and Information, an independent think tank, “one of the limitations it faced was that it was not allowed to engage the Palestinians at all because this was a unilateral process and Sharon’s policy was not to do anything to create even an illusion that there is a Palestinian partner.

“The World Bank was invited to come in because it is viewed as a professional rather than political organization. It is well thought of, its reports are viewed as well-written and objective, and it has the resources.”

Indeed, the bank was recognized as a de facto training ground for Middle East mediation in December 2004 when James Wolfensohn, its outgoing president, was appointed special envoy to coordinate the Israeli disengagement on behalf of the international quartet (the United States, European Union, United Nations and Russia).

Technically part of the United Nations system, the World Bank is owned by its 184 member nations. As the bank’s biggest shareholder, the United States has traditionally chosen its president. (President Bush appointed former Deputy Defense Secretary Paul Wolfowitz to succeed Wolfensohn as president in June 2005.)

Israel is a World Bank member and donor and sits on its board in Washington. It was a beneficiary of aid in the 1950’s and 1960’s, but once Israel’s economy matured, it “graduated” and no longer qualified for aid. The Palestinians, meanwhile, became clients in 1992 when, in the wake of the Madrid Conference, Israel, the Palestine Liberation Organization and the international community invited the bank to assess the needs of the Palestinian economy. The resulting six-volume report is still considered the benchmark for Palestinian development plans.

According to a poverty line defined for the Palestinian economy in 1999 as $2 in income per day, one-fifth of Palestinians in the West Bank and Gaza were below the line at that time. Today, after five years of violence, the number has risen to a staggering one-half.

“Poor Palestinians are exposed to two aggravating factors,” said Roberts. “One is that there are quite a few wealthy Palestinians. The other is the perception that their poverty is associated with the conflict and in their mind is caused by Israel. Not to say that it is, but it is what they think. And that acts as an incentive to violence. This is a serious strategic concern for Israel.”

Since 1993, the world bank has injected $7.2 billion into the Palestinian economy. These funds have gone toward water sanitation, land administration, education, electricity and technical assistance projects, to name a few. “The main objective [of the aid] was to provide tangible benefits through improvements in standards of living and increased incomes, which it was hoped would in turn provide an environment conducive to the peace process,” an internal World Bank evaluation report said in 2002.

But the second intifada—which started in 2000 and caused loss of life, health, jobs, infrastructure and markets—plunged the Palestinians into a crisis that required a reordering of priorities from development to humanitarian aid. “The ratio between development aid and emergency aid changed from 7:1 before the intifada to 1:5 in 2002,” wrote Yossi Alpher, former director of the Jaffee Center for Strategic Studies at Tel Aviv University and coeditor of bitterlemons.org, an Internet newsletter on Middle East issues.

In the last four years, roberts noted, the level of aid has been more than $300 per person, “the highest level of aid ever to a developing country.” Yet Palestinian poverty remains at a crisis level, described in another World Bank report as “one of the worst recessions in modern history.” The June 2004 report, “Disengagement, the Palestinian Economy and the Settlements,” written at the request of the Palestinian Authority, Israel and the international community, warned that Israeli disengagement alone would have little impact on the Palestinian economy unless the Palestinians were committed to security and economic reform and Israel eased the closures that put restrictions on the movement of Palestinian people and goods.

“The bank was instrumental in analyzing all aspects of the disengagement plan as it relates to the future of the Gaza economy and the Palestinian economy as a whole,” said Mohammed Samhouri, a United States-educated economist hired by the Palestinian Authority to work with Israel on coordinating the disengagement. “In that sense the bank was at the forefront of this task. It has been instrumental in trying to come up with some formula with the security needs of the Israeli side and the needs of the Palestinian side for free access without compromising each other’s interest.

“Within that context,” he continued, “the bank has been producing papers for the two parties, largely unpublished, and has been participating in meetings to bridge whatever gaps exist between the two positions.”

Wolfensohn’s assignment as special envoy neatly carried the bank’s agenda into the process and, by all accounts, unfroze the deadlock on a long list of disputed issues. He distilled the agenda into four key areas: management of border crossings; a link between Gaza and the West Bank; restoring internal movement inside the West Bank; and constructing direct access to the outside world through a Gaza airport and seaport. Further issues involve stabilization of the Palestinian economy after the Israeli withdrawal—for instance, the continued employment of Palestinians in Israel and Palestinian security and government reforms.

Roberts said his former boss was effective because “he speaks like a businessman. He takes his technical knowledge and uses it as grist for the process. Now the parties are talking about the core agenda set by the World Bank.

“We look at the economy and ask what it needs to fix it, to bring it hope and prosperity,” Roberts explained. “This brings us into issues such as security and freedom of movement and how policies such as closure affect the situation. We can’t say to the Israelis ‘lift all the closures,’ because there is a security problem. But we work a lot on how to manage the passage of people and goods across borders in a way that is both effective and safe. Every time Israel reduces the security measures it is taking a risk. But we believe Israel can introduce safe and effective measures that will benefit everyone.”

The Palestinians, for their part, are being told to rein in their militants and clean up their government—a message that requires a combination of firmness and tact. “It is not always comfortable,” admitted Roberts. “We are doing a lot of work on corruption. That means telling the client many individuals among its ranks are dishonest and need to be taken to task.”

One solution the bank has advanced is the introduction of scanners for the inspection by Israel of Palestinian shipments without unloading whole trucks, to make border crossings less time consuming and shipping less costly. The bank also orchestrated an agreement that renews a direct link between Gaza and the West Bank for Palestinians, without needing to cross a checkpoint into Israel. Initially this will be implemented by using escorted convoys on designated highways. The bank is prepared to fund a more ambitious long-term solution in the form of a rail link, a sunken highway between security fences or an elevated highway.

While a plan to leave the Gaza settlement homes intact and transfer them to the Palestinians fell through, Wolfensohn came up with a creative solution for the settlers’ greenhouses. His initial plan for the United States Agency for International Development to pay for the greenhouses was rejected by Palestinian Authority Civil Affairs Minister Mohamed Dahlan, who believed payment from an official body would indicate retroactive recognition of the settlers’ right to own property on Palestinian territory. So Wolfensohn proposed payment from private donors—which the Palestinians accepted—and put together a consortium of American philanthropists who bought the greenhouses from the settlers for $14 million and gave them to the Palestinians. He gave $500,000 of his own money to the fund. The plan almost fell apart when, immediately after the last Israeli troops left Gaza, Palestinians swarmed into the former settlements. Looting was widespread and the Palestinian Economic Development Company, which now owns the greenhouses, estimates that 30 percent of the structures were damaged to some degree before security forces asserted control.

While there is still much uncertainty, the mere fact that some Israeli leaders see peace as a possibility indicates an improvement. “If after the Israeli withdrawal from the Gaza Strip a process of quick economic reconstruction begins there, and its Palestinian residents feel a significant improvement in their standard of living quickly, the terror organizations’ hold on them will weaken and the Palestinian Authority will get stronger,” Israeli Defense Minister Shaul Mofaz told the daily Yedioth Ahronoth in August.

Economic success in Gaza, added Mofaz, may serve as a bridge to restore trust between Israel and the Palestinian Authority and strengthen Palestinian Prime Minister Mahmoud Abbas’s government. To that end, the international community pledged to dramatically increase its donations to $9 billion, to be administered by the World Bank, for post-disengagement reconstruction of the Palestinian economy.

There are still a lot of “if’s”—ranging from donors fulfilling their pledges to political progress between Israelis and Palestinians. It’s safe to say that, for the time being, Nigel Roberts and his colleagues will be doing a lot of double duty as bankers and mediators.