Middle East

Israeli cabinet clashes over payments to Palestinian Authority

Dispute over whether to transfer funds deepens faultlines in Netanyahu coalition

Israel's prime minister Binyamin Netanyahu with defence minister Yoav Gallant at a press conference in Tel Aviv last week. Photograph: Abir Sultan/EPA

James Shotter in Jerusalem
Thu Nov 2 2023 - 20:09

Senior members of the Israeli cabinet have clashed over payments Israel makes to the Palestinian Authority, as the war with Hamas exacerbates faultlines in Binyamin Netanyahu’s rightwing coalition.

Ultranationalist finance minister Bezalel Smotrich said earlier this week that he had directed officials to halt the transfer of funds to the PA – which exercises limited autonomy in parts of the occupied West Bank – claiming it supported Hamas’s devastating attack on Israel last month.

But in a press conference on Wednesday evening, defence minister Yoav Gallant insisted Israel should send the funds as soon as possible, arguing that the PA played a key role in maintaining stability in the West Bank, which Palestinians seek as the heart of a future state but which has been under Israeli military occupation since 1967.

“It is appropriate to transfer the funds to the Palestinian Authority immediately so they will be used by its forces and by sectors ... that are dealing with the prevention of terrorism,” said Mr Gallant, a member of Mr Netanyahu’s Likud party.

READ MORE

The spat within the Israeli government comes as western and Arab diplomats have been discussing the need to bolster the PA, partly in the hopes that it would help contain unrest in the West Bank, but also to act as a counterweight to Hamas.

US secretary of state Antony Blinken said this week that it would make sense for an “effective and revitalised Palestinian Authority to have governance and ultimately security responsibility for Gaza”.

The PA has condemned the killing of civilians, but its leadership has stopped short of denouncing Hamas for the October 7th attack.

Under the Oslo Accords – interim peace agreements signed between the Israelis and Palestinians in the 1990s – Israel collects various taxes on behalf of the Palestinians and transfers the funds each month to the PA. According to the PA finance ministry, the transfers in the first nine months of this year have averaged around Shk730 million (€173 million) per month.

The cabinet spat underscores the divisions in Mr Netanyahu’s government, between those who want to bolster the PA and see it as a stabilising force in the West Bank, and religious nationalists such as Mr Smotrich, who regard the PA as an impediment to their ambitions to fully annex the territory.

Mr Gallant’s intervention follows pushback against Mr Smotrich’s move by the US, Israel’s key ally and security guarantor, with Mr Blinken saying during a hearing in Washington this week that the PA’s lack of financial resources was undermining its position.

“The Palestinian Authority is doing everything it can to keep security and stability in the West Bank,” Mr Blinken said. “It is vastly under-resourced. This is another aspect of the problem.”

Israel has previously withheld funds for the PA. Days after Mr Netanyahu’s government came to power in December, Mr Smotrich signed a decree to withhold payments, saying he had “no interest” in whether the PA continued to exist after it launched international legal measures against Israel over the country’s occupation of the West Bank.

Raja Khalidi, director-general of Mas, a West-Bank-based economic think-tank, said that if Mr Smotrich’s threats to cut funding were carried out, they would have a severe impact on both the PA’s ability to function and its wider economy.

“If this is not just a theatrical gesture ... that’s going to cause problems for the budget. Maybe not this month – they maybe have reserves somewhere – but in a month or two,” he said.

“The question then is at what point will the PA be unable to pay its obligations to the banks and the 150,000 people on its payroll? And at what point does that trigger something else, [such as] a complete collapse of aggregate demand?” – Copyright The Financial Times Limited 2023

LATEST STORIES