update deskIsrael-Palestinian Conflict

Smotrich prevents collapse of PA economy

The decision was made as a tradeoff for Prime Minister Benjamin Netanyahu's approval to legalize several outposts in Judea and Samaria.

Israeli Finance Minister Bezalel Smotrich speaks with Prime Minister Benjamin Netanyahu at a Cabinet meeting at the Prime Minister's Office in Jerusalem, June 18, 2023. Photo by Amit Shabi/POOL.
Israeli Finance Minister Bezalel Smotrich speaks with Prime Minister Benjamin Netanyahu at a Cabinet meeting at the Prime Minister's Office in Jerusalem, June 18, 2023. Photo by Amit Shabi/POOL.

Israeli Finance Minister Bezalel Smotrich has extended a waiver shielding Israeli banks with ties to the Palestinian Authority from lawsuits stemming from charges of supporting terrorism.

The decision to extend the waiver was reportedly made during a Thursday Cabinet meeting as a tradeoff for Prime Minister Benjamin Netanyahu’s approval to legalize several outposts in Judea and Samaria.

The waiver, which the finance minister signed for a four-month period, extends indemnity to Israeli correspondent banks that transfer money to Palestinian Authority financial institutions in Judea and Samaria.

Smotrich also agreed to unfreeze the last three months of tax funds withheld from the P.A., a senior official in Jerusalem told reporters.

Late last month, Smotrich called for a series of punitive steps against the P.A. in response to its push for unilateral statehood and support for the International Criminal Court case against Israel.

Smotrich’s proposals came hours after Norway, Ireland and Spain declared their official recognition of “Palestine,” in decisions that the P.A. and the Hamas terrorist group welcomed.

Ramallah is “working against Israel with political terrorism and promoting unilateral measures around the world—I cannot continue to transfer funds to them. If this causes the P.A. to collapse, let it collapse,” Smotrich said.

In addition, Smotrich, who leads the Religious Zionism Party, demanded that Netanyahu take steps to bolster Judea and Samaria communities, including the immediate approval of 10,000 new housing units, establishing a new town for each country recognizing “Palestine” and advancing a proposal to strengthen Israel’s hold on the area.

U.S. Treasury Secretary Janet Yellen vowed to use “all diplomatic efforts” to thwart the plans. “I’m particularly concerned by Israel’s threats to take action that would lead to Palestinian banks being cut off from their Israeli correspondent banks,” she said on May 23.

“These banking channels are critical for processing transactions that enable almost $8 billion a year in imports from Israel, including electricity, water, fuel and food, as well as facilitating almost $2 billion a year in exports on which Palestinian livelihoods depend,” Yellen stated.

The Israeli Security Cabinet on Thursday night regularized the legal status of five Jewish outposts located beyond the pre-1967 Green Line—Evyatar, Givat Asaf and Sde Efrayim in Samaria, and Adorayim and Heletz in Judea.

Steps to be taken against the P.A. included canceling exit permits for officials to leave the territory and increased enforcement against illegal Arab construction in Israel-controlled Area C of Judea and Samaria.

“After weeks of discussions, the Israeli government promoted an appropriate response to the anti-Israeli measures led by the Palestinian Authority,” a statement from Smotrich’s office said, adding that “the Security Cabinet authorized one outpost for every country that unilaterally recognized Palestine as a state in the last month.

“The Palestinian Authority joined Hamas in trying to harm Israel in Israel and in the world and we will fight it,” the statement continued. “For those who needed proof, we got it on October 7. A Palestinian state in the heart of Israel is an existential danger.”

The statement made no mention of the minister’s decision to drop his demand for financial sanctions.

The government’s decision received praise from Yesha Council leader Israel Ganz, who credited Netanyahu with “making history, which is an integral part of the victory that the Jewish people need.” Ganz also thanked Smotrich, “who led the big move with skill and wisdom.”

Almost 1 billion shekels ($265 million) in tax revenue that Israel collects on behalf of the Palestinian Authority yearly finances the latter’s “pay for slay” policy, under which Ramallah disburses monthly stipends to terrorists and their families, legal documents revealed in February.

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