The 1994 Paris Protocol on Economic Relations between Israel and the Palestine Liberation Organization (PLO) supposedly aimed to achieve two objectives: to enhance the parties’ interest in peace and to strengthen the Palestinian economy. Twenty years after, neither of these goals were realized. If anything, the prospects of achieving them worsened over time. This study argues that the protocol’s failure was largely due to the overall political and territorial context within which it was implemented. This context was so restrictive and damaging for the Palestinian side that any alternative economic arrangement which could have been negotiated between the parties in 1994 would have been equally incapable of delivering a different outcome.