Issue has been at heart of US-Israel friction in recent days

Cabinet said to discuss Smotrich plan to transfer funds to PA through third party

Security cabinet yet to vote on framework, which could see tax revenues Israel collects on PA’s behalf transferred via Norway on condition Ramallah does not send any money to Gaza

Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich during a cabinet meeting convened to approve the 2024 amended state budget, January 15, 2024. (Haim Zach, GPO)
File: Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich during a cabinet meeting convened to approve the 2024 amended state budget, January 15, 2024. (Haim Zach, GPO)

The security cabinet on Thursday discussed a proposal by Finance Minister Bezalel Smotrich to transfer funds earmarked for the Palestinian Authority to a third party that would then transfer them to Ramallah, but did not hold a vote to enact the possible move, Hebrew media outlets reported.

In November, the cabinet approved a partial transfer of funds to the Palestinian Authority while retaining nearly half the initial amount — corresponding to the sum the PA uses to pay its employees in the Gaza Strip — with Finance Minister Bezalel Smotrich steadfastly refusing to transfer the funds, claiming the cash could be transferred to Hamas.

The PA has refused to accept any of the funds — which are tax revenues collected by Israel on the PA’s behalf — as long as the money for services and employees in Gaza is not included. Despite prolonged US pressure for Israel to release the monies, Smotrich has remained adamant in his position.

In an unsourced report on Thursday, Channel 12 said that the finance minister has developed a proposal for the money to be transferred to a third party, such as Norway, before being handed over, allowing Israel to not be directly responsible for its transfer.

The transfer would be made on the condition that Norway — or another third country — and the United States ensure that none of the money is in turn transferred to the Gaza Strip, Channel 12 reported.

If the PA makes such transfers, Israel will cease handing over any further tax revenues, under the terms of Smotrich’s reported plan.

Head of the Otzma Yehudit party, National Security Minister Itamar Ben Gvir, leads a faction meeting at the Knesset in Jerusalem on January 1, 2024 (Yonatan Sindel/Flash90)

This possibility was discussed in the security cabinet Thursday night, according to reports, as well as in a meeting with Smotrich, Prime Minister Benjamin Netanyahu, and Strategic Affairs Minister Ron Dermer.

The ministers were reported to broadly agree with the suggested solution, although according to the Ynet news site, National Security Minister Itamar Ben Gvir opposed the framework since it could not guarantee the funds would not reach Gaza either directly or indirectly.

Ben Gvir was said to request more details on the plan before agreeing to vote in favor.

Visiting Israel last week, Secretary of State Antony Blinken urged Israel to transfer the funds: “Those are their revenues,” he said at a January 9 press conference. The PA “should have them.”

Blinken said the PA needed the money to pay its employees, some of whom do essential work in the West Bank. He cited the PA security forces, who he said were trying to keep peace, security and stability in the West Bank — and that’s “profoundly in Israel’s interests.”

Responding four days later, Netanyahu claimed some of the money owed had in fact been transferred to the PA: “It is sitting in their bank account.” The PA had not withdrawn it, however, he said, “because they insist that we give money to people in Gaza, and we don’t want to give money to people who helped or could help Hamas in the murders it carried out or will carry out. So we don’t give that money.”

The dispute over the issue was also reportedly at the heart of an angry phone call between US President Joe Biden and Netanyahu last month — since when the two men have not spoken.

For months, the security establishment, including Defense Minister Yoav Gallant, has urged Netanyahu to reverse a cabinet decision made after October 7 to withhold the tax revenues as well as to prevent the return of some 150,000 Palestinians who were working inside Israel and the settlements.

 

The former decision was taken as part of an effort by Israel to disconnect from Gaza because some of the tax revenues are used to pay services and employees in the Strip. The latter decision was taken as a security precaution following the Gaza-ruling Hamas’s terror onslaught, in which some 1,200 Israelis were brutally killed and roughly 240 were taken hostage.

The security establishment has warned that the policies risk causing the collapse of an already cash-strapped PA, which would leave Israel responsible for providing services to millions of Palestinians in the West Bank. Those warnings have increased over the past week, with security chiefs also warning of a potential surge in terrorism.

Netanyahu has not budged on the matter amid pushback from far-right ministers Ben Gvir and Smotrich, whose support he needs to maintain his coalition.

The Israel Defense Forces has continued to operate throughout the West Bank and police have been on high alert in Israel, in light of concerns about a possible escalation of violence. Earlier this week, two Palestinians from the Hebron area in the West Bank who were illegally working in Israel carried out a deadly terror attack in Ra’anana, killing an elderly woman and wounding 17 others.

The Ra’anana car wash where they employed was on Friday ordered closed for a month.

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