Gaza is plagued by poverty, but Hamas has no shortage of cash. Where does it come from?

Hamas has an investment portfolio of real estate and other assets worth $500 million, say experts, and an annual military budget of as much as $350 million.

By Dan De Luce and Lisa Cavazuti of CBS. Excerpt:

"The unemployment rate in Gaza is 47% and more than 80% of its population lives in poverty, according to the United Nations. Hamas, however, has funded an armed force of thousands equipped with rockets and drones and built a vast web of tunnels under Gaza. Estimates of its annual military budget range from $100 million to $350 million, according to Israeli and Palestinian sources. 

As the U.S. House and Senate will be asking in separate hearings Wednesday and Thursday, where does all that cash come from?

Since coming to power in the Gaza Strip 17 years ago, Hamas has filled its coffers with hundreds of millions in international aid, overt and covert injections of cash from Iran and other ideological partners, as well as cryptocurrency, taxes, extortion and smuggling, according to current and former U.S. officials and regional experts.

Much of the money is public and legal, including large sums of financial aid from Qatar via the United Nations, an arrangement encouraged and approved by Israel. The Qatari aid covers the salaries of civil servants, buys fuel for the power grid and provides cash to needy families.

Some of it is less than legal, according to experts. In addition to levying taxes on Gaza’s businesses and residents, Hamas imposes unofficial fees on smuggled goods and other activity, for a combined income of up to $450 million per year. Hamas also has real estate and other investments around the globe, despite international restrictions, and uses cryptocurrency to mask some of its transactions.

Some of it may be fully illegal. A small portion of its budget seems to come from smuggling in South America, including drug smuggling.

Experts, enemies and Western governments have questioned whether Hamas mingles the money for its military operations with money meant for civilian use. Hamas could not be reached for comment. But Hamas representatives have said previously that the group strictly separates funding for the administration of Gaza from funding for its military wing, also known as the Izz ad-Din al-Qassam Brigades.

In the wake of the Oct. 7 Hamas attack on Israel that killed 1,400 people, some former Treasury Department officials and experts argue that the United States and its European allies need to crack down on the group’s global financial network.

“There will need to be a policy review,” said Jonathan Schanzer, a former Treasury official now with the Foundation for Defense of Democracies think tank. 

The Iranian connection

The size of the Hamas budget and its sources have both morphed over time.

Iran has been a consistent financial and military patron of Hamas since the 1990s, long before the group achieved control of Gaza. The funding has gradually increased, and is now at about $100 million annually, according to the State Department.

Hamas leaders have publicly acknowledged Iran’s ongoing financial and military support. 

In an interview this month that appeared on Russia Today TV, senior Hamas official Ali Baraka said that “First and foremost, it is Iran that is giving us money and weapons.” Last year, Hamas leader Ismail Haniyeh told Al Jazeera that Iran paid $70 million to the group to support its defense plan. 

In addition to Iran’s support, Hamas has long relied on funds from other ideological allies, including private donations and groups in Turkey, Kuwait and Malaysia, former U.S. counterterrorism officials said.

Hamas also has donors in other parts of the world, including the U.S., according to Treasury reports. From 1995 until 2001, the Holy Land Foundation for Relief and Development operated as the chief U.S. fundraising arm of Hamas, sending more than $12 million “with the intent to willfully contribute funds, goods, and services to Hamas,” according to federal court documents and government assessments. 

Cash in suitcases

After Israel withdrew from Gaza in 2005, Hamas gained another major benefactor, the Qatari government.

Hamas won an election over Fatah, the Palestinian ruling party, in early 2006, in part because residents believed the existing authorities could not be trusted to administer funds properly. Hamas ultimately seized complete control of Gaza and has ruled without an election since 2007.

As conditions continued to deteriorate for residents of the enclave, Israel, the U.S. and the international community turned to gas-rich Qatar to prevent a humanitarian catastrophe.

Qatari officials began carrying millions of dollars in cash in suitcases through Israel’s Erez border crossing into Gaza, with the permission of the Israeli government.

For Israeli Prime Minister Benjamin Netanyahu, who has been in power for much of the time after Hamas began ruling Gaza, the policy was meant to bring some degree of stability to Gaza and bolster Israel’s security. It also, however, helped fuel the bitter rivalry between Hamas and Fatah, which continued to govern the occupied West Bank."

"Muhammad Shehada, a Gaza-born Palestinian analyst and writer, rejects claims that aid has been diverted by Hamas. He points to a 2017 Australian government probe that found no evidence that taxpayer money was misused by the nongovernmental organization World Vision in the Gaza Strip, following allegations by Israel that Hamas had siphoned off millions of dollars a year from the charity to the Islamist group. 

“Given the tough circumstances in Gaza, the group would have faced a rebellion from their civil servants and the population had there been any evidence of them using government revenue to fund their militant wing,” Shehada said.

But skeptics say the U.N. was unable to exercise strict control over how the money was allocated, and that it enabled Hamas to use tax revenue and other funds to build up its military arm.

“All the funds that were supposed to go to the public, most of it went to their military capability,” Neumann said.

After its takeover of Gaza, Hamas also “developed the capability to tax and extort,” said Matthew Levitt, who worked as a senior Treasury official focusing on countering terrorist financial networks. Hamas began to rake in taxes and kickbacks from salaries, sale of goods and smuggling, a sum that now reaches up to $300 million to $450 million a year, said Levitt, now at the Washington Institute for Near East Policy think tank.

Although the U.S. and the European Union have designated Hamas as a terrorist organization, “they’re not effectively cut off from the international financial system,” said Hans-Jakob Schindler, senior director of the Counter Extremism Project. “They actually are able to invest funds in companies and in real estate.”

Hamas’ leadership has invested its income in an international investment portfolio worth $500 million in real estate and other assets from companies in Algeria, Saudi Arabia, Sudan, Turkey and the United Arab Emirates, which it uses to conceal and launder its money, according to a Treasury announcement."