More than 60 years after the founding of Israel precipitated two tides of refugees in the Middle East, the Israeli government has launched a campaign to persuade the world that it’s not just Palestinians who suffered in Israel's early days.

Facing powerful forces that were reshaping the Middle East – including rising anti-Semitism, nascent Arab nationalism, and a strengthening Zionist movement – some 856,000 Jews from Morocco to Iran were compelled to leave their home countries. Most of them settled in Israel.

Partly because of draconian Arab laws issued after Israel declared independence in 1948, these Arab Jews left behind assets estimated at $700 million (about $6 billion today). According to one accounting, that’s roughly double the value of Palestinian assets lost.

Now, Israel is demanding that those losses be acknowledged and recompensed in some way. In doing so, the campaign touches one of Palestinians' most sensitive wounds, harbored since Israel’s founding in 1948: their right to return to lands and homes left in 1948-49, when at least 750,000 either fled or were expelled by Israel.

Though many Palestinians recognize at least some Arab Jews as refugees, they are concerned that Israel is trying to cancel its debt to them by putting the suffering of Arab Jews on the same international ledger.

The campaign has also met resistance from some Arab Jews in Israel, who have criticized both the logic and the motives behind it. Palestinian and Israeli critics have two main arguments: that these Jews were not refugees but eager participants in a new Zionist state, and that Israel cannot and should not attempt to settle its account with the Palestinians by deducting the lost assets of its own citizens, thereby preventing individuals on both sides from seeking compensation.

“You cannot create some kind of accounting equation in which one cancels out the other,” says Yehuda Shenhav, an Iraqi Jew and author of “The Arab Jews." He adds, “You cannot use the Arab Jews that arrived to Israel … as the capital in which you deny the legitimate rights of [Palestinians].”

Refugee status

When the United Nations presented its 1947 proposal for partitioning historical Palestine into two states, an Arab delegate warned that doing so could unleash hatred against the roughly 1 million Jews living in the Middle East – an anti-Semitism perhaps worse, even, than seen in Nazi Germany.

“If the United Nations decides to partition Palestine, it might be responsible for the massacre of a large number of Jews,” said Heykal Pasha of Egypt.

Days later, the UN voted in favor of the 1947 partition plan, paving the way for Israel’s declaration of independence in May 1948. As Arab countries joined Palestinian fighters to protest the new state, they also cracked down on Jews in their own countries.

Iraq made it illegal to propagate Zionist ideology and froze the assets of its Jewish population – the wealthiest in the Middle East – and allowed them to leave only under condition that they leave behind their property and never return.

The Syrian government took property from Jewish residents to make room for Palestinians. Egypt passed a law just before the UN decision, in July 1947, requiring Egyptian companies to maintain quotas of Egyptian directors and employees that caused many Jews to lose their jobs, since most were not Egyptian citizens.

Egypt, Algeria, and Jordan all passed laws in the 1950s and early '60s preventing Jews from holding citizenship. And Jews were the target of significant violence, particularly in Libya and Iraq, where hundreds were killed.

Zionists, eager to bolster the population of their new state, recruited fellow Jews during these tumultuous times and the Israeli government helped to orchestrate the floods of new immigrants.

Timing

Israel originally romanticized the exodus of Jews from Arab countries; the transport of 50,000 Jews from Yemen became colloquially known as the “magic carpet” operation, for example. Only more recently has Israel sought to emphasize the suffering endured by such refugees.

Indeed, part of what makes Israel’s campaign controversial now is the timing, which some say is politically motivated.

“You can definitely be a refugee and be fleeing persecution and then end up showing up [in Israel],” says Diana Buttu, an international human rights lawyer and former adviser to the Palestinian negotiating team, adding that that’s not the real issue. “I think what’s driving it is: (1) they want to completely eliminate the issue of the right of return, (2) ... they want to create this idea of homelands and that the only place you can flee to is your homeland.”

The implication, she says, is that Palestinians in the future could only return to the part of historical Palestine designated as a Palestinian state –and not inside Israel proper, where many of them lived before 1948.

But Yigal Palmor, spokesman for Israel’s Foreign Ministry, describes the current push as the maturing of long-term political and social processes – including the gradual willingness of Holocaust survivors to discuss their experiences and seek reparations, thereby awakening Arab Jews’ desire to make similar claims, and the growing political clout of Arab Jews over the years.

He flatly denies that it’s a political ploy.

“It’s not that we’re negotiating Palestinian demands [on refugees] and someone comes up with this idea on how to neutralize Palestinian demands,” he says.

He also notes that Israel has always been highly critical that the UN created a special agency for Palestinian refugees, known as UNRWA.

According to a 2008 assessment by international economist Sydney Zabludoff, who has spent years working on Jewish reparation issues, UNRWA has spent more than triple the amount the Palestinians originally lost in 1948. To be sure, the Palestinian refugee population has expanded to some 4 million since then as Arab countries have resisted assimilating them and the Israeli-Palestinian peace process remains stalled.

Settling accounts

But the most controversial aspect to Israel’s campaign is the perceived attempt to equate the suffering of Arab Jews with that of Palestinians and thus cancel out both accounts without individuals on either side receiving compensation.

"It all sort of comes out in the wash, they [Arab Jews] had a lot of property, they were pretty wealthy … it’s far too complicated, let’s just call it a day," says Ms. Buttu, summarizing her view of what the Israelis will say in negotiations.

In Israel, a group of Iraqi Jews issued a statement recently thanking Israel for recognizing them as refugees but taking issue with the new campaign. They wrote in part, “we will not agree with the option that compensation for our property be offset by compensation for the lost property of others (meaning, Palestinian refugees).”

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Zvi Gabai, a former Israeli ambassador whose family came to Israel from Iraq in 1951 with nothing, says the answer lies in a suggestion he attributes to President Bill Clinton: establishing an international fund to compensate Palestinian refugees as well as Jewish refugees.

“I think this would be the best way to solve the question,” he says. “To compensate both groups of refugees.”