US Treasury chief warns against cutting off Palestinian banks after Smotrich threat

US Treasury Secretary Janet Yellen says she is concerned by a threat from Israel to cut off Palestinian banks from their Israeli correspondent banks, a move that would close a critical lifeline for the Palestinian economy.

Yellen says in prepared remarks ahead of a G7 finance ministers meeting in Italy that the US and its partners “need to do everything possible to increase humanitarian assistance to Palestinians in Gaza, to curtail violence in the West Bank, and to stabilize the West Bank’s economy.”

Finance Minister Belazel Smotrich has indicated that Israel may not renew a waiver that expires on July 1 that allows Israeli banks to process shekel payments for services, and salaries tied to the Palestinian Authority.

Yellen says keeping the Israeli-Palestinian banking relationships open is important to allowing battered economies in the West Bank and Gaza to function and help ensure security.

“These banking channels are critical for processing transactions that enable almost $8 billion a year in imports from Israel, including electricity, water, fuel, and food, as well as facilitating almost $2 billion a year in exports on which Palestinian livelihoods depend,” Yellen says.

She adds that Israel’s withholding of revenues collected on behalf of the Palestinian authority also threatens the West Bank’s economic stability.

“My team and I have also engaged directly with the Israeli government to urge action that would bolster the Palestinian economy and, I believe, Israel’s own security,” Yellen says.