(Adds U.S. Treasury spokesperson, paragraph)
By Jonathan Saul, John Irish, Arshad Mohammed and Parisa Hafezi
JERUSALEM, May 23 (Reuters) - The Israel-Hamas conflict that ended with a ceasefire on Friday showed the Palestinian group's ability to build an arsenal of home-made rockets largely with civilian materials and Iranian expertise, analysts and officials said, a feat it can likely replicate.
The low cost of such arms and the need to rebuild Gaza leaves Israel and the international community with a quandary of how to meet Gazans' basic needs yet keep ordinary items such as pipes, sugar and concrete from being put to military uses.
Current and former officials see no easy answers, saying it is all but impossible to seal off even a relatively small area such as Gaza and to prevent goods for reconstruction from being turned into locally-made rockets.
Hamas and fellow militant group Palestine Islamic Jihad, both deemed foreign terrorist organizations by Washington, have boosted the quantity and quality of their rockets since the last Gaza conflict with Israel in 2014.
"We were extremely surprised by Hamas' capacities this time around. They had long-distance rockets they didn't have before. That is all down to Iran," said a senior European official on condition of anonymity.
Israel said Hamas, Islamic Jihad and other militant groups fired around 4,360 rockets from Gaza during the conflict, of which around 680 fell short into the Gaza Strip. Israel's Iron Dome interceptors, activated against rockets that threatened its population centres, had a successful shoot-down rate of around 90%, the military said.
It said 60 or 70 rockets still struck population centres, implying an accuracy rate of around 15%. Others fell in open areas, nonetheless triggering panic and sending Israelis scrambling for shelters as they flew overhead.
The majority of the rockets, analysts said, were short-range, unsophisticated and homemade.
"They're extremely simple to fabricate and they use metal tubing, metal pipes. They often, believe it or not, will use detritus from Israeli missiles," said Daniel Benjamin, a former U.S. State Department coordinator for counterterrorism.
"It's just virtually impossible to make a place completely airtight," said Benjamin, now president of the American Academy in Berlin.
The latest Israel-Hamas hostilities were triggered on May 10 in part by Israeli police raids on the Al-Aqsa compound, one of Islam's holiest sites, and clashes with Palestinians during the Muslim holy month of Ramadan.
ROCKET FACTORIES
A Hamas official, Sami Abu Zuhri, said the group had developed its own expertise producing rockets and needed no help.
"Therefore, any attempt to tighten the blockade on Gaza to limit the abilities of the resistance will be worthless," he told Reuters by phone from Mauritania, where he is visiting.
Palestinian militant groups have used rockets for years. Before Israel's unilateral withdrawal from Gaza in 2005, its Gaza settlements were frequent targets for short-range mortar and rocket fire from nearby Palestinian towns.
Rockets only became the go-to weapon for Hamas after the military barrier that Israel began building around and through the occupied West Bank in 2003 made it harder for suicide bombers and gunmen to cross into Israel and carry out attacks.
Hamas and Islamic Jihad smuggled in factory-grade missiles via the Egyptian Sinai until the 2013 ouster of Islamist Mohammed Mursi, Egypt's first democratically-elected president. After he was replaced by Egypt's current president, Abdel Fattah al-Sisi, Cairo largely choked off that route by destroying tunnels into Gaza.
Egypt's crackdown triggered what one Israeli official called a strategic shift by Hamas to develop local rocket fabrication capabilities with Iranian assistance, provided both by Iranians visiting Gaza and Gazans traveling abroad.
Now, Israeli and Palestinian sources say, the guerrillas use Iranian funding and instruction to make rockets inside Gaza that have ranges of 200 km (125 miles) or more, some with warheads carrying hundreds of kilograms of TNT and shrapnel.
One Iranian security official said Hamas now had at least three underground factories to produce rockets in Gaza.
In the conflict's final days, Islamic Jihad leader Ziad Al-Nakhala boasted about his group's ability to improvise weapons from everyday materials.
"The silent world should know that our weapons, by which we face the most advanced arsenal produced by American industry, are water pipes that engineers of the resistance turned into the rockets that you see," he said on Wednesday.
'SUITCASES OF MONEY'
Money, in many ways, is not the issue.
Qatar, with Israeli acquiescence, has provided substantial funding to Hamas in recent years, by some tallies, millions of dollars a month, chiefly to pay administrative salaries, some of which can then be siphoned off.
"It's not rocket science, so to speak. A guy from Qatar comes every month with his suitcases of money accompanied by Israeli soldiers to pay Hamas administrative staff. That then disappears," said the senior European official.
An Iranian diplomat in the region said millions of dollars were handed over to Hamas representatives almost every month, either carried into Gaza or neighboring countries.
"It does not mean money always came from inside Iran. We have businesses (in the region) that funded Hamas and it's not a secret," the diplomat said, speaking on condition of anonymity.
A western official who follows Hamas activities closely said the group was able to tap investment portfolios worth hundreds of millions of dollars in companies across the Middle East.
"It controls about 40 companies in Turkey, UAE, Sudan, Saudi Arabia and Algeria which deal mainly in real estate and infrastructure," the official said.
A second official said the group was also able to obtain resources from charities sympathetic to its cause across Europe.
A U.S. Treasury spokesperson said Washington will continue to work to identify and sanction individuals and entities that support Hamas, while continuing to press foreign partners to implement its sanctions and take action against the group themselves.
U.S. President Joe Biden said on Thursday that aid would be sent quickly to Gaza, but coordinated with the Palestinian Authority - Hamas' Western-backed rival in the occupied West Bank - "in a manner that does not permit Hamas to simply restock its military arsenal".
That is easier said than done.
It would likely require on-the-ground monitoring, and it is not obvious whether Hamas would permit that or who might do it.
Dennis Ross, Washington's former lead diplomat on Israeli-Palestinian peace, said someone, possibly the Egyptians and others, would need to have a physical presence in Gaza to inspect imported goods and monitor their use.
"If Hamas says 'no' then you put the spotlight on them," he said, adding one could pressure the militants by saying, "We'd like to be providing material to Gaza, but Hamas won't permit it."
An Israeli official was blunt about the challenge.
"Someone has to find a better way to monitor what's going in, how it's supervised and what it's used for," he said. (Reporting Jonathan Saul in Jerusalem, John Irish in Paris, Arshad Mohammed in Washington and Parisa Hafezi in Dubai; Additional reporting by Nidal al-Mughrabi in Gaza, Stephen Farrell, Dan Williams and Rami Ayyub in Jerusalem, and Daphne Psaledakis in Washington; Writing by Arshad Mohammed; Editing by Daniel Wallis)
