update deskU.S.-Israel Relations

Yellen vows to stop Israel from cutting off PA banks from financial system

The US treasury secretary spoke a day after her Israeli counterpart moved to halt revenue transfers to Ramallah.

Janet Yellen, then chair of the Federal Reserve, testifies before the House Financial Services Committee, Nov. 4, 2015. Credit: Federal Reserve.
Janet Yellen, then chair of the Federal Reserve, testifies before the House Financial Services Committee, Nov. 4, 2015. Credit: Federal Reserve.

U.S. Treasury Secretary Janet Yellen vowed on Thursday to use “all diplomatic efforts” to thwart Israeli Finance Minister Bezalel Smotrich’s plans to cut Palestinian Authority banks off from the Jewish state’s financial system.

“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 in prepared remarks at a press conference ahead of the G7 Finance Ministers and Central Bank Governors meeting in Stresa, a resort town on Lake Maggiore in northern Italy.

“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 continued.

“Israel’s withholding of revenues that it collects on behalf of the Palestinian Authority also threatens economic stability in the West Bank. We and our partners need to do everything possible to increase humanitarian assistance to Palestinians in Gaza, to curtail violence in the West Bank, and to stabilize the West Bank’s economy,” she said.

Smotrich on Wednesday called for a series of punitive steps against the Palestinian Authority in response to its push for unilateral statehood and support for the International Criminal Court case against the Jewish state.

In a letter to Prime Minister Benjamin Netanyahu, the finance minister announced his intention to immediately halt the transfer of all monthly tax revenues that Jerusalem collects on behalf of the P.A.

The announcement came hours after Norway, Ireland and Spain declared their recognition of a Palestinian state, in decisions that the P.A. and the Hamas terrorist organization welcomed.

Oslo in recent months has been serving as an intermediary to transfer some funds earmarked for the P.A. that Israel froze in the wake of the Oct. 7 Hamas-led terrorist massacre in the country’s south.

“Norway was the first to unilaterally recognize a Palestinian state today, and it cannot be a partner in anything related to Judea and Samaria. I intend to stop the transfer funds and demand the return of all funds transferred,” Smotrich wrote to the prime minister.

Approximately 1 billion shekels ($272 million) has been parked in Norway over the past three months, while Jerusalem transfers some 600 million shekels ($163 million) to Ramallah directly every month.

“The Palestinians are 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,” Ynet cited Smotrich as saying.

The finance minister also decided to cancel a waiver shielding major Israeli banks with business ties to Ramallah from lawsuits stemming from charges of supporting terrorism, a move that the United States previously warned would collapse the Palestinian Authority’s economy.

In addition, Smotrich, who is also leader of the Religious Zionism Party leader, demands that Netanyahu take a series of steps to bolster Jewish communities in Judea and Samaria, 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.

Smotrich is also requesting that the government permanently revoke all VIP travel passes for P.A. officials and impose additional sanctions on those leading the campaign against Israel in international bodies.

“I and many other ministers have made an unequivocal demand to take severe measures against the Palestinian Authority for its unilateral actions against Israel, including its pursuit of unilateral recognition of statehood at the U.N. and through bilateral agreements with several countries and the legal battle it’s waging against the State of Israel in the international court at The Hague to stop the war,” wrote the minister.

“I don’t intend to allow officials to dismiss the issue. There’s urgency for an immediate response that will impose a significant cost on the P.A. for its actions and deter it and other countries,” he said.

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