Oct 31, 2023 - World

U.S. asked Israel to release withheld Palestinian tax revenues

Palestinian President Mahmoud Abbas speaks during a meeting with French President on Oct. 24, 2023 in the West Bank city of Ramallah. Photo: Christophe Ena/POOL/AFP via Getty Images

The Biden administration expressed alarm over Israeli Finance Minister Bezalel Smotrich's decision to suspend the transfer of Palestinian tax revenues to the Palestinian Authority, two U.S. officials said.

Why it matters: The tax revenues Israel collects for the Palestinian Authority under an agreement between the parties are a major source of income for the PA, which is already in a financial crisis.

  • The U.S. is concerned that suspending the transfer of the money will further destabilize the Palestinian Authority and its security services in the occupied West Bank, where 125 Palestinians have been killed since the start of the war, according to the Palestinian Ministry of Health in Ramallah.
  • Last week President Biden warned Israeli Prime Minister Benjamin Netanyahu the growing tension in the West Bank could impact the already complicated war in Gaza.

The latest: Secretary of State Tony Blinken on Tuesday told the Senate Appropriations Committee that the Biden administration urged the Israeli government to provide the Palestinian Authority with the resources it needs, including the tax revenues.

  • "We asked them to release [the money]," Blinken said.
  • "The Palestinian Authority is doing everything it can to keep security and stability in the West Bank. It is vastly under sourced. This is another aspect of the problem," he said.

Behind the scenes: U.S. officials asked officials in Netanyahu's office and Ron Dermer, Netanyahu's minister for strategic affairs, for clarification about the decision, the U.S. officials said.

  • "We told them that such a move undermines the Palestinian Authority and the stability in the West Bank and goes against Israeli interests. We can't just let everything collapse," a U.S. official said.
  • The Israeli Prime Minister's Office and Smotrich's office declined to comment.

Driving the news: On Monday, Smotrich, a far-right ultranationalist, sent a letter to Netanyahu stating his decision to suspend the transfer of the monthly tax revenues that Israel collects for the Palestinian Authority.

  • The tax revenues amount to about $150 million per month and include a value-added tax for goods that enter the Gaza Strip.
  • Smotrich wrote to Netanyahu that the Palestinian Authority didn't condemn the Oct. 7 Hamas terrorist attack and noted some Palestinian officials welcomed it.
  • He also wrote that the Palestinian Authority has resumed its campaign against Israel in the International Criminal Court since the Gaza war started.
  • "The Palestinian Authority has proved again that it is a terror supporting organization and therefore the tax revenues will be used against Israel. In this reality it is unthinkable that we continue transferring the money like nothing happened," Smotrich wrote, adding the transfer of funds will be suspended until the security cabinet discusses the issue.

The big picture: Last July the Israeli security cabinet passed a decision to take steps to prevent the collapse of the Palestinian Authority.

  • Netanyahu said at the time that it is in Israel's interest that the Palestinian Authority continue to function.
  • Smotrich, who didn't vote in favor of the cabinet decision to strengthen the Palestinian Authority, supports dismantling the PA.
  • In an interview in October 2015, Smotrich said the Palestinian Authority is a burden for Israel while Hamas is an asset.
  • Smotrich, who represents the settler movement in the Knesset, thinks a strong Hamas and a weak Palestinian Authority will decrease international pressure on Israel to establish an independent Palestinian State.

What to watch: Israeli officials said that Blinken will arrive in Israel on Friday and meet with Netanyahu and other Israeli officials.

Editor's note: This story has been corrected to reflect that U.S. officials asked officials in Netanyahu's office, not Israel's national security adviser, Tzachi Hanegbi, about the decision. It was also updated with comments made by U.S. Secretary of State Antony Blinken on Tuesday.

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