US Treasury chief urges Israel to extend Israeli-Palestinian banking relationship

US Treasury Secretary Janet Yellen says the Biden administration has “worked to hold the Iranian regime accountable for its destructive behavior across the region by sanctioning terrorist actors including Hamas, the Houthis, and Hezbollah, with over 1,000 Iran-related sanctions since 2021 and multiple rounds of designations in recent weeks.”

“Earlier this month, we took additional decisive action to intensify pressure on Iran in response to Iran’s attack on Israel, expanding sanctions to target Iran’s efforts to channel revenues from its energy industry to finance deadly activities,” Yellen says during a press conference at the 2024 Annual Meetings of the International Monetary Fund and World Bank.

“We are more broadly focused on doing what we can to increase stability in the region, including by working to ensure that legitimate aid flows reach Gaza, imposing sanctions on Israeli violent extremist settlers, and pressing Israel to maintain vital correspondent banking relationships with Palestinian banks.”

“We look forward to the Israeli cabinet extending the waivers to preserve correspondent banking relationships for banks in the West Bank by the end of the month deadline to support economic stability in the West Bank,” Yellen adds in a not-so-subtle push for Israel to extend the correspondent banking agreement, which is set to expire on October 31.

Yesterday, a US official told The Times of Israel that the Biden administration had concluded that the Palestinian Authority has met the requirements laid out by Israel for extending indemnification needed to allow Israeli banks to continue conducting transactions with Palestinian banks.

The recognition from the US is aimed at pushing the Israeli government to extend the framework, known as the corresponding banking agreement, with the Palestinians for at least another year.

The US has said that failure to approve the waiver allowing Israeli banks to conduct transactions with their Palestinian counterparts risks an economic crisis in the West Bank and the collapse of the Palestinian Authority.

The agreement is set to expire on October 31, after Finance Minister Bezalel Smotrich agreed to extend it for only three months over the summer, despite US pressure for a much longer period. As the deadline approaches, the US has grown increasingly worried that Smotrich won’t agree to extend it further.