Israeli Finance Minister Bezalel Smotrich announced on Tuesday he would be canceling a waiver allowing Israeli banks to do business with their Palestinian counterparts in Judea and Samaria, in a move that could potentially collapse the Palestinian Authority’s economy.
Smotrich said the decision was made against the background of the “delegitimization campaign” led by the P.A. against the Jewish state.
The announcement came just hours after Australia, Canada, New Zealand, Norway and the United Kingdom announced they would be imposing personal sanctions on the finance minister and Israeli National Security Minister Itamar Ben-Gvir, who ran on a joint slate with Smotrich.
The sanctions against the two, which have long been promoted by the P.A. as part of its global lawfare campaign against Jerusalem, came in response to accusations that Smotrich and Ben-Gvir had “incited violence” against Palestinian Arabs, the five countries claimed.
Speaking with Israel’s Channel 14 News broadcaster on Tuesday night, Smotrich declared: “As far as I’m concerned, let the [Palestinian] Authority collapse—it is an enemy.”
“It’s unacceptable that we are financing a system that transfers money to terrorists who murder our citizens,” he said of Ramallah’s “pay-for-slay” fund, which provides monthly stipends to terrorists and their families.
“I’m halting the clearance funds [collected on behalf of the P.A.] and ending economic relations. This is not a personal punishment; it is a state response to aggression,” the Religious Zionist Party head added.
The waiver, which Smotrich signed in the past under pressure from the Biden administration, extends the indemnity to Israeli correspondent banks that transfer money to P.A. banks in Judea and Samaria. The deal shields Israeli financial institutions with relations to the P.A. from lawsuits stemming from charges of supporting terrorism.
In April 2024, Smotrich threatened to topple the Palestinian economy in response to Ramallah’s push for unilateral statehood and support for the International Criminal Court case against Israeli political leaders.
The P.A. is “working against Israel with political terrorism and promoting unilateral measures around the world,” he told fellow ministers. “If this causes the P.A. to collapse, let it collapse.”
Smotrich signaled in his interview with Channel 14 on Tuesday that “local municipal administrations” could be established in Palestinian villages and cities across Judea and Samaria after the P.A. goes under.
Per accords signed in the 1990s between Jerusalem and P.A. leader Mahmoud Abbas’s Palestine Liberation Organization, the shekel is the primary currency in Judea and Samaria, alongside the Jordanian dinar.
Some 1 billion shekels (around $286 million) in annual tax revenue that Israel collects on behalf of the P.A. goes towards its pay for slay policy.
