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Pushback: Israel withholds Palestinian revenue, approves new settlements

The Israeli moves came in response to the Palestinians’ successful bid to be recognized at the United Nations as a state. 

By Staff writer / December 2, 2012

Palestinians wave flags as they celebrate their successful bid to win UN statehood recognition in the West Bank city of Ramallah, Sunday. Israel on Sunday roundly rejected the UN endorsement of an independent state of Palestine, announcing it would withhold more than $100 million collected for the Palestinian government to pay debts to Israeli companies.

Majdi Mohammed/AP



Israeli Prime Minister Benjamin Netanyahu’s government struck a $120 million blow to the cash-strapped Palestinian Authority today and further undermined its territorial claims, announcing plans to move forward with a controversial settlement that would effectively divide the West Bank in two.

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The moves came in response to the Palestinians’ successful bid last week to be recognized at the United Nations as a state. After Palestinian Authority (PA) President Mahmoud Abbas received a standing ovation for a speech in which he repeatedly referred to Israel’s “racist, colonial occupation,” Mr. Netanyahu today characterized the Nov. 29 UN vote as an attack on Zionism and the state of Israel.

The Israeli moves caught many off guard, including some dismayed government officials, and caused some to sound a funeral toll for the peace process.

The rhetoric and threats underscore longstanding barriers to peace that persist even as the window for a two-state solution is fast closing, with both sides accusing the other of inciting hatred. But they also reflect the Israeli prime minister’s upcoming battle to win reelection in a country that has shifted significantly to the political right – even as he is mindful of US pressure to refrain from provocative initiatives.

“Netanyahu is now stuck between the anvil and the hammer,” says former Israeli diplomat Ilan Baruch. “[He] is struggling to keep the right around him in one bloc and for that he needs to pay political currency, so he needs to make noises that sound like a commitment fulfilled to a very hawkish agenda.”

The financial punishment

As the custodian of PA tax revenues, Israel wields significant financial leverage over the PA thanks to an annex of the Oslo Accords known as the Paris Protocol.

The PA owes Israel roughly 800 million shekels ($210 million) in unpaid electricity bills and has yet to pay November salaries. It was counting on 460 million shekels ($120 million) in November tax revenues to meet payroll. But today Israel’s minister of Finance announced that rather than transfer the tax revenues to the PA, it would deduct that amount as a down payment on the PA’s overdue electricity bill.

While Israel had threatened to withhold tax revenues if the Palestinians pursued their UN bid, it also has expressed concern that the deep and chronic economic crisis in the West Bank could spark greater restlessness – and thus a potential threat to Israel’s security.

The territorial blow

On Friday, the day after the UN vote, Israel announced it was authorizing 3,000 new homes in East Jerusalem and the West Bank. Even before that announcement, Israel had already registered the highest number of building tenders issued in any year of the past decade, according to an analysis by Peace Now, which opposes settlement construction.

Netanyahu’s government had issued tenders for 3,046 new buildings in East Jerusalem and the West Bank, more than double the amount from last year, and five times the number in 2010.


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