UN envoy warns Smotrich’s steps against PA could ‘upend the entire Palestinian financial system’

UN Mideast envoy Tor Wennesland expresses alarm over the financial state of the Palestinian Authority against the backdrop of steps taken by far-right Finance Minister Bezalel Smotrich.

“Announcements by Israel’s finance minister that he intends to continue blocking the transfer of all clearance revenues to the PA, and to take measures that would end correspondent banking relations between Israeli and Palestinian banks at the end of this month threaten to plunge the Palestinian fiscal situation into an even greater crisis, potentially upending the entire Palestinian financial system,” Wennesland tells the UN Security Council during its monthly meeting on the Israeli-Palestinian conflict.

Smotrich has sought to punish the PA for its support for targeting Israel at The Hague and its payments to terror convicts and their families. He has withheld a large portion of Palestinian tax revenues that Israel is obligated to transfer to Ramallah on a monthly basis. He has pledged to withhold the remainder of those funds, which amount to 70% of the PA’s annual income, until the Israeli government passes a series of sanctions against Ramallah.

The cabinet was supposed to vote last week on these sanctions, but was delayed until this week, an Israeli official told The Times of Israel, adding that Smotrich is expected to subsequently release a portion of the Palestinian tax revenues and extend indemnity to Israeli correspondent banks that transfer money to Palestinian banks in the West Bank.

However, the Israeli official acknowledged that Smotrich could well choose to withhold more Palestinian funds in subsequent months, demanding a “price tag” each time in exchange for their release — a scenario that could hamper US efforts to convince Arab and European allies to donate to the PA, so it can be financially stable enough to implement long-needed reforms and return to governing Gaza.

In his address to the Security Council, Wennesland also notes Smotrich’s recent transfer of of legal powers in the West Bank to a civilian administrator, which has prompted accusations that the government is advancing the de-facto annexation of the West Bank.

“That the appointment and delegation of authority is expected to expedite Israeli settlement expansion and regularization under Israeli law of illegal outposts is concerning, is in clear contradiction of previous agreements and undermines prospects for a two-state solution,” Wennesland says.