Toppling of Egypt's Muslim Brotherhood has left territory out in cold as residents consider life under Palestine unity government

In his haberdashery, Saleem Salouha tracks the ups and downs of his business against events beyond his control.

The good times for his shop in Gaza City were when Mohamed Morsi and the Muslim Brotherhood were in power in Egypt. The bolts of cloth stacked behind Salouha came via the network of smuggling tunnels under the border at Rafah. Gazans had money too to buy his goods in the middle of a mini-economic boom.

All that, however, ended last July when Morsi was deposed in a military coup and the new regime deemed the Brotherhood a "terrorist" organisation.

Egypt accused Hamas, the Brotherhood's sister group that rules Gaza, of contributing to the security crisis in northern Sinai and closed down the smuggling tunnels.

Now Salouha orders the same goods, but they are brought through an Israeli crossing, pushing up prices by 30%, even as half his customers have withered away.

"It is a double blockade," Salouha says, referring to the long-term Israeli policy of limiting goods to Gaza since Hamas assumed control in 2007. He adds bitterly: "Israel and the Egyptians are competing with each other."

The story of the Salouha shop, in business since 1962, offers a microcosm of what has happened to Gaza and Hamas since Morsi was ousted.

It explains too why, after seven years governing Gaza at odds with its rival Fatah on the West Bank, Hamas might just be serious this time about moves to reconcile the often toxic Palestinian divisions. And if it is not serious, why Hamas views the agreement, signed this week, as an expedient move.

That deal – vague on detail – will see five weeks of talks for a national unity government, apparently largely technocratic. It would see moves to bring Hamas and Palestinian Islamic Jihad under the umbrella of the PLO and the prospect of elections by the year's end.

Despite the very many uncertainties contained within it, not least the fact that the factions have travelled this road before without success, the reality is that unfolding regional events since the Arab spring have left Hamas isolated as its former backers have become embroiled in war, like Syria, more distant, like Iran, or have slammed the door on the Islamist movement as Egypt has.

The consequences have been both economic and political.

The taxes the Hamas government once levied from the tunnel trade paid the salaries of the 47,000 people who worked directly for the movement. In recent months they have received only half pay.

And if the economic crisis in Gaza is different to previous ones, it is because while in the past goods were expensive and hard to come by, at the start of the blockade in 2007 people had money. This time people don't.

Omar Shaban, an economist at the Palthink thinktank, says of the tunnel closures: "It was a huge source of income for [Hamas] and they thought it would go on forever. The shock has been very deep because they didn't anticipate that it could happen.

Senior Fatah official Azzam Al-Ahmed (l) with head of Hamas, Ismail Haniyeh, after announcing a unity government for Palestine. Photograph: NurPhoto/Rex

"What is devastating is that they can't pay the salaries of those who work directly for the movement – and that includes a significant part of their security establishment including the Qassam brigades [Hamas's military wing] and internal security."

In political terms too, Hamas's influence has been hugely diminished. Members of the movement are aware its popularity has halved in Gaza since it won the 2006 Palestinian elections, although it probably still enjoys support from a third of the population despite polls suggesting a much lower proportion.

Behind the scenes Hamas has sustained another worrying blow to its prestige and influence. Despite Egypt's tough new approach towards it, and the closure of the tunnels, it had still maintained a hotline to Cairo's military intelligence, which historically had relied on Hamas to mediate with other factions such as Islamic Jihad in times of crisis.

But when Islamic Jihad fired 70 missiles into Israel last month, both Gaza officials and Gaza analysts admit, Hamas was cut out of the loop with Egypt contacting Islamic Jihad directly to ask for a cessation.

Officially, Egypt says its policies, including destruction of the border tunnels, are to safeguard national security and stop the flow of weapons and supplies to Sinai's militants – responsible for more than 300 reported attacks since July – and not a tactic designed to heap pressure on Hamas inside Gaza.

In showcase trials of Brotherhood figures, including Morsi, Hamas has been accused of helping spring him from jail during the 2011 uprising against the Hosni Mubarak regime.

"We will close the tunnels because they are illegal and because they constitute a security threat to Egypt," the Egyptian foreign minister, Nabil Fahmy, told the Guardian last week. "It's not being used as a pressure point against Hamas in favour of the PA [Palestinian Authority]."

Privately, senior Egyptian military officials tell a different story. "Our main goal," said one, "is to secure our borders and our national security interests, and to eliminate any kind of smuggling. But also as a side-effect, we need to see the Palestinian Authority in charge of the Gaza Strip. It's our business to see the Palestinian Authority run the Gaza Strip, to have somebody to deal with … we don't have a relationship with Hamas. We see them as a terrorist organisation that is allied to the Muslim Brotherhood."

According to another military official, who spoke on condition of anonymity, it was not Egypt's problem if the tunnel closures affected Hamas. "Hamas will not be happy because they get a lot of money from the tunnels – $2bn [£1.2bn] a year. But it's not our problem … should we let them do it? No. It's illegal."

He added: "Fuck them. We would prefer any other government. [That's] one of the targets. If I have an unfavourable government in a neighbouring country, of course we want regime change [there]."

Some products are still reaching Gaza from Egypt. Cement from a company in which the Egyptian military has a financial interest is one. Other foreign projects in which Egypt has a contractor interest are also still going ahead.

Palestinian security forces stand guard in Gaza City, during a demonstration in support of a new unity government. Photograph: APAimages/Rex

Politically too, while the present regime in Egypt may want to shut down Hamas for largely domestic considerations, it is also aware that collectively punishing Gaza may be unpopular.

"Hamas is a problem for Egypt. Because the Muslim Brotherhood is a banned organisation now in Egypt, Hamas is also banned. The Sisi regime cannot be seen to be dealing with Hamas. But that does not mean that there are no contacts at all, although for now they are at a minimal level," said Mkhaimar Abusada, a political scientist at Al Azhar University in Gaza, referring to Abdel Fatah al-Sisi, the retired army chief expected to win the presidential elections next month. Abusada added that Hamas felt rejection last month when Cairo spoke directly to Islamic Jihad about ending rocket fire into Israel.

Since then, however, Egypt has allowed Hamas deputy leader, Mousa Abu Marzouk – who had been in Egypt and banned from travelling – to enter Gaza, as a prelude to the Palestinian unity talks.

One thing that many observers, both in Gaza and outside, agree on is that Hamas will be hoping the reconciliation process with Fatah leads to Egypt easing restrictions at the Rafah crossing, which is currently only open for a handful of days a month.

There is another, perhaps more self-interested reason, driving Hamas back to talks with their West Bank rivals, as described by the Haaretz journalist Amira Hass in a recent comment article.

"Many Palestinian observers predict that the collapse of the PA – assuming Israel sticks to its policy of weakening it – would help strengthen the position of Hamas and its government.

"If Hamas joins the PLO it will become a major force within it, and if it doesn't join, it will be perceived as a true and legitimate representative of the Palestinians. These mutual suspicions about the motives of the other party could end up scuttling reconciliation once again."

Palestinian rivals



Hamas

Founded 1987 as offshoot of Muslim Brotherhood in Egypt by a group in Gaza including Sheikh Ahmed Yassin, later assassinated by Israel. Military wing is the Izz al-Din al-Qassam brigades. Its founding charter committed to the destruction of Israel and the founding of a state based on Islamist values.

Regarded as a terrorist organisation in the west for its attacks on Israelis it has in recent years offered a more nuanced view of Israel including the offer in the past of a 10-year truce in return for a complete Israeli withdrawal from territories occupied in 1967.

Its entry into mainstream politics saw it sweep Palestinian elections which Israel, the west and Mahmoud Abbas's rival Fatah movement refused to recognise, leading to Hamas asserting its control over Fatah in the Gaza Strip in 2007, leading to the rift between the two main Palestinian movements.

Seats won 74 in 2006 PLC elections.

Political strength One poll last year put support at 20%, but analysts in Gaza believe it is closer to 30%.

Armed strength Israeli estimate in 2011 said armed wing numbered 10,000.

Fatah

Founded The largest faction under the umbrella of the Palestine Liberation Organisation, Fatah was founded in 1959 by a group including Yasser Arafat, who led it until his death in 2004 and who signed the Oslo peace accords with Israel. Fatah was surprised by the outcome of the 2006 elections which saw many Palestinians reject a movement they believed had become self-serving and out of touch.

Since Hamas's assumption of power in Gaza the two factions have been at odds, with both sides arresting supporters of the other in the areas they control. Despite efforts to bring about a reconciliation, and two previous agreements, little progress has been made in the past.

Seats won 45 in 2006.

Political strength A poll published last month taking Gaza and the West Bank together predicted victory for Fatah in presidential and legislative council elections by 43% to 28%.