update deskU.S.-Israel Relations

Yellen discusses Palestinian banking with Israeli FM at NATO

The U.S. treasury secretary “emphasized the need for Israel to maintain economic stability in the West Bank.”

U.S. Treasury Secretary Janet Yellen testifies in Washington before the House Committee on Financial Services, July 9, 2024. Photo by Chris Kleponis/AFP via Getty Images.
U.S. Treasury Secretary Janet Yellen testifies in Washington before the House Committee on Financial Services, July 9, 2024. Photo by Chris Kleponis/AFP via Getty Images.

In a meeting on the sidelines of the NATO Summit in Washington on Wednesday, Janet Yellen, the U.S. treasury secretary, told Israeli Foreign Affairs Minister Israel Katz that her department remains committed strongly to the Jewish state’s security.

The U.S. official “emphasized the need for Israel to maintain economic stability in the West Bank by regularly transferring clearance revenues to the Palestinian Authority and ensuring that correspondent banking relations between Israeli and Palestinian banks remain uninterrupted,” a U.S. readout of the meeting reads.

Yellen also discussed the department’s executive order in February “holding individuals and entities accountable for perpetrating, inciting or financially supporting violence throughout the West Bank.” (The Biden administration refers to Judea and Samaria as “the West Bank.”)

She also discussed the Treasury’s “actions to disrupt Iran and its proxies including Hezbollah and Hamas.”

Israeli Finance Minister Bezalel Smotrich late last month 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 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.

In late May, 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 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.

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 said.

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