Kerry warns of PA collapse without Israeli-withheld taxes

Secretary of state says Ramallah could halt security cooperation, with ‘potential of serious ripple effects’ in the region

The US fears that without a cash injection, the Palestinian Authority could collapse, entailing serious security implications for Palestinians, Israelis, and others in the region, Secretary of State John Kerry said Saturday.

He warned that the possibility of the Palestinian government halting security cooperation with Israel or disbanding because of its economic predicament was real and could have negative consequences even outside Israel and the West Bank.

“If the Palestinian Authority ceases or were to cease, security cooperation – or even decide to disband as a result of their economic predicament, and that could happen in the near future if they don’t receive additional revenues – then we would be faced with yet another crisis that could also greatly impact the security of both Palestinians and Israelis,” Kerry said. “And that would have the potential of serious ripple effects elsewhere in the region.”

Kerry discussed the issue with British Foreign Secretary Philip Hammond in London. He said the US “has been reaching out to key stakeholders in order to express these concerns.”

Israel has been withholding tax revenue from the Palestinians since they decided to join the International Criminal Court last month.

But US options are limited. Its relationship with Israel is strained amid their leaders’ dispute over Iran. And it has little leverage with Arab and European governments at a time it can offer little additional financial support itself because of opposition in Congress.

Under a 1994 economic agreement, Israel agreed to transfer tens of millions of dollars each month to the PA in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports.

Although the sanction has been imposed many times, it has rarely lasted more than one or two months, except in 2006 when Hamas won a landslide victory in Palestinian elections. On that occasion Israel froze the funds for six months.

Blocking the money deprives the PA of more than two-thirds of its monthly budget, excluding foreign aid, and prevents it paying its roughly 180,000 employees, which costs almost $200 million (£170 million) a month.

Washington has already urged Jerusalem to reconsider the move, as have the European Union and the United Nations.

AFP contributed to this report.