By Ali Sawafta, James Mackenzie and Suleiman Al-Khalidi

JENIN, West Bank Sitting in a bullet-scarred building in the city of Jenin, two fighters from Islamic Jihad - a militant group funded by Iran - celebrated what they said was a victory for Palestinians over the biggest Israeli operation in the West Bank in decades.

Israeli commanders said the two-day incursion in Jenin last month succeeded in seizing weapons and smashing infrastructure used by fighters funded by Iran, who use a crowded refugee camp - where thousands live packed into an area of less than half a square kilometre - as a base to attack and kill Israelis.

Israel's National Security Adviser Tzachi Hanegbi said on Aug. 7 that Iran was trying to "draw a ring around our neck" through militant groups like Islamic Jihad and Hamas in the West Bank and its proxy Hezbollah in neighbouring Lebanon.

While the fighters make no secret of the fact money comes from Iran, for them, the battle is a local one, fuelled by anger over the Israeli occupation, and they show no interest in the broader geopolitical issues, according to dozens of conversations with fighters and sympathisers in Jenin.

"We are sons of Jenin," said one of the Islamic Jihad fighters, who identified himself as Abu Salah. A thin, bearded 36-year-old, dressed in black athletic gear and trainers, he said fighters felt they had no alternative. "We are surrounded and we are under siege. We have no choice but to fight."

"It's true that Islamic Jihad is the main faction but the more important thing is that we are sons of Jenin," he said, sitting amid chunks of masonry and burned-out cooking gas canisters used as improvised bombs during the Israeli incursion.

Islamic Jihad is a Palestinian faction sworn to destroying Israel and replacing it with an Islamic state.

"Our goal is close to Islamic Jihad but the motivation is from Jenin," the fighter said.

For over a year, there has been turmoil in the West Bank, a kidney shaped area about 100 km (60 miles) long and 50 km wide that has been at the heart of the Israeli-Palestinian conflict since it was seized by Israel in the 1967 Middle East war.

Hundreds of Palestinians, mostly fighters but many civilians as well, have been killed in Israeli raids since the latest wave of violence erupted in early 2022. In the same period, dozens of Israelis have been killed in shootings, stabbings or car-ramming attacks by Palestinians.

Israeli officials repeatedly accuse Iran of funding militant groups in the West Bank as one element in a multipronged campaign that includes attacks against Israelis abroad, funding for Hezbollah and a programme to build a nuclear weapon.

Many Palestinians see the charge as a means of shifting the focus from Israel's occupation of the West Bank, and the expansion of settlement building, which most of the world considers to be illegal, especially since the election of Prime Minister Benjamin Netanyahu's right-wing government.

'HIT AND MISS'

Jenin, a traditional hub of Palestinian resistance to Israel, has provided a fertile arena for the interests of Iranian security officials, shadowy financiers and competing Palestinian factions to meet.

Nominally under the control of the Palestinian Authority, the body set up some 30 years ago under the Oslo peace accords, Jenin is an increasingly lawless space where PA officials sit behind the high walls of the governor's compound, unable to do much more than protest Israeli raids.

"This is an area without a government," said Mahmoud Al-Saadi, director of the Palestinian Red Crescent in Jenin, who has worked there for decades.

According to the Israeli military, about 25% of families there are affiliated with Islamic Jihad, which receives about 90% of its funding came from Iran, amounting to "several tens of millions of dollars" a year, an Israeli official said. Many of the Palestinian attackers who have killed Israelis in Israel and the West Bank came from the area.

Tamir Hayman, managing director of Israel's Institute for National Security Studies in Tel Aviv, and a former head of Israel's military intelligence directorate, said Iran was unable to exert much direct control over what happens to its money.

"Iran is spending a lot of money in the West Bank but they aren't able to target it precisely or get terror operatives to do exactly what they want so it's a bit hit and miss," he said.

"They send in money by encouraging smugglers and smuggling through criminal gangs or whatever and have to hope that a large enough amount gets through to the Jenin camp and other places to make a difference."

Asked if Iran trains and provides monetary and other support to Islamic Jihad, Iran's mission to the United Nations in New York said in an email: "Our assistance to Palestinian resistance groups is provided upon their request. It is the international obligation of all states to empower and defend these groups against occupation and resist Israeli occupying forces."

Islamic Jihad spokesman Daoud Shehab said it was no secret the movement received Iranian support but that there was "no direct connection between Iran and what's happening in Jenin or elsewhere".

'ALWAYS WAYS'

Surveys show overwhelming public support among Palestinians for armed groups as raids have stepped up and Jewish settler attacks on Palestinian villages have become more brazen.

"If we didn't have the support of the families here, we wouldn't survive an hour," said Abu Salah.

According to a survey by the Palestinian Center for Policy and Survey Research, 71% of Palestinians support armed groups such as the Jenin Brigade, an umbrella group that includes factions like Islamic Jihad and Hamas, and the "Den of Lions" in the nearby city of Nablus.

But as Israel's relations have improved with the wealthy Gulf states that have traditionally funded the Palestinian cause, an important source of money for the militant groups has dried up. That's the gap Iran has sought to fill.

Israel's intelligence services make moving funds difficult but criminal gangs and unscrupulous businessmen - "who gain from high commissions and do not want to know why they are being paid triple" - provide an opening, said a senior Islamist official based outside the Palestinian Territories who has first hand knowledge of the mechanisms used to move money.

"There are always ways to get in support even if it can appear near impossible - they even get it from Israeli smugglers," he said.

While security officials say they have seen a recent increase in smuggling of weapons and drugs, Israeli officials and militant groups say Iranian support also comes from more sophisticated money transfers.

Sometimes the transfers involve criminals and sometimes legitimate or semi-legitimate businesses help to move funds to the West Bank, the militant sources said.

NO QUESTIONS ASKED

Typically, transfers involve legitimate foreign currency letters of credit, or orders for a variety of imported goods, usually at inflated valuations, from garments to toys to shoes and household items mainly from China, four sources familiar with the mechanism said.

"They don't ask questions but the deal is that they hand over part of that money to a respected businessman whom we deal with and who passes it over to our military operative," a senior Islamic Jihad source said.

Anywhere between a quarter to a third of the value of these transactions is passed in cash to businessmen Islamic Jihad trust and who get the money to the militant group, often using family ties to help keep the transfers covert, the source said.

Automatic rifles, such as M16s, can cost $30,000 and, in an area of chronic unemployment, regular fighters say they can earn $300 to $700 a month from the Iranian-backed group.

Much of the weaponry used by the Jenin fighters comes from Israel itself, stolen and sold on through criminal gangs, Israeli officials say. Some is smuggled across the Jordanian border, and some is improvised in local workshops.

For the young men in the camps, inspired by the posters of martyred fighters that plaster public spaces, the origin of the money that pays for the weapons is of little concern.

"It's well known that outside funds come from Islamic Jihad," said another fighter, from the Al-Aqsa Brigades, the armed wing of Fatah, the faction founded in the 1950s by Yasser Arafat, which now runs the Palestinian Authority.

"We don't care who brings the funds to us."

(Ali Sawafta and James Mackenzie reported from Jenin, Suleiman al-Khalidi reported from Amman; Additional reporting by Raneen Sawafta in Jenin, Maayan Lubell and Jonathan Saul in Jerusalem, Nidal al-Mughrabi in Gaza, Michelle Nichols at the United Nations, Leila Bassam in Beirut and Parisa Hafezi in Dubai; Editing by David Clarke)