Israel has begun using tax money it collects on behalf of the Palestinian Authority to pay off existing Palestinian debts, according to senior officials who spoke to Israeli media outlets Monday night.

An unidentified Israeli official who spoke to Walla News said Jerusalem had embarked on the economic “punishing steps” that were agreed to by the cabinet following last week’s announcement of a reconciliation pact between Hamas and Fatah.

He said the PA had been informed of the move, which he claimed was “only a first step.”

A senior Palestinian official who spoke on condition of anonymity to Ynet Monday confirmed that Jerusalem had informed Ramallah over the weekend that the Israeli government would begin to use tax funds collected on behalf of the PA to offset debts owed by the PA to Israel at the end of the current month. The PA notably owes about 1 billion shekels ($285 million) to the Israel Electric Company.

The government is now considering additional sanctions against the PA, including the revocation of VIP access documents for certain Palestinian officials. Such access passes allow the officials to travel relatively freely through Israel, the West Bank and Gaza.

Prime Minister Benjamin Netanyahu said Sunday that Israel will be looking for alternative paths toward peace with the Palestinians, and insisted that he will not negotiate with any Palestinian government that is backed by Hamas.

If a negotiated peace proves impossible because of the makeup of the Palestinian government, “then we will seek other ways,” Netanyahu told CNN. “I am not going to accept a stalemate. I won’t accept another Palestinian state that is an Iranian offshoot of Iran, firing missiles in our cities… But I do seek a two states for two peoples solution. If I can’t have it right away with this Palestinian government, then we will seek other ways.”

The current round of Israeli-Palestinian peace talks, which was set to expire Tuesday, was suspended by Jerusalem last Thursday after Hamas and Fatah agreed a day earlier to form a unity government within five weeks and hold subsequent elections.