Palestinians raise stakes in financial face-off with Israel

The spat comes at a critical time financially for Palestinians, who are no longer receiving aid from the United States following the PA’s fall out with the Trump administration.
Sunday 05/05/2019
Palestinian President Mahmoud Abbas (R) chairs a cabinet meeting in Ramallah, April 29. (DPA)
A line in the sand. Palestinian President Mahmoud Abbas (R) chairs a cabinet meeting in Ramallah, April 29. (DPA)

LONDON - Palestinian Authority officials, facing financial pressure from Israel and the United States, doubled down in their resistance to demands dictated by Tel Aviv and Washington and asked Arab countries to fill the gap in funds needed to sustain their troubled economy.

Under the 1994 Paris Protocol, Israel was given authority to collect taxes on imports into the Israeli-occupied West Bank and Gaza Strip, which it would transfer to the Palestinian Authority (PA) each month.

Since February, however, Israel has withheld 5% of the $180 million-$190 million in tax revenues. Israel said the deducted sum represents the amount paid by the PA to families of Palestinians jailed by Israel for security reasons. Israel said it hopes the move pressures the PA into halting the payments, thus discouraging Palestinians from attacking Israelis.

The PA said it would either accept all of the tax transfers or none, rejecting the reduced payment from Israel. It said many Palestinians in Israeli jails are “freedom fighters” who have internationally recognised rights to resist military occupation.

The PA also argued that it cannot punish families of those clearly involved in wrongdoing. The PA has frequently accused Israel of collective punishments, which is counter to international law.

In the occupied territories, there is widespread public sympathy towards Palestinians in Israeli jails and the PA, which is often perceived as too accommodating to Israeli security concerns, fears a public backlash if it stops payments to the families.

“We’re talking about a very principled issue for the Palestinian people,” Qadri Abu Bakr, chairman of the Prisoners Affairs Commission of the Palestine Liberation Organisation, told Haaretz.

The Israeli public has been shifting towards the political right and wants harsher measures against Palestinians.

The spat comes at a critical time financially for Palestinians, who are no longer receiving aid from the United States following the PA’s fall out with the Trump administration over the relocation of the US Embassy to Jerusalem.

The PA accused the United States of withholding funds to impose a yet-to-be-unveiled peace deal that does not end the Israeli occupation nor establish an independent Palestinian state.

The standoff will likely threaten the interests of Palestinians and Israelis alike.

The PA slashed the salaries of government employees in February, March and April. “Unless they find a solution… it will be a disaster for the Palestinian economy,” Palestinian Economy Minister Khalid al-Asili told Reuters.

UN Under-Secretary-General for Political Affairs Rosemary DiCarlo warned the UN Security Council that the crisis could lead to “a financial collapse of the Palestinian Authority.”

The prospect of the collapse of the PA would not be in Israel’s interest, observers warned.

“Israel takes it for granted that it has not experienced any major terrorist attack for years now,” Avraham Sela, professor emeritus of international relations at the Hebrew University of Jerusalem, told Reuters. “Coordination with the PA is invaluable for Israel’s security.”

While Israeli politicians are fiery in their rhetoric against the Palestinian leadership, Israeli security officials are more concerned about the potential disintegration of the PA.

“Israeli security officials believe that barring drastic rescue measures, Palestinian President Mahmoud Abbas will step down regardless of whether he quits of his own free will or is forced out by mass protests over the failure of funding-strapped institutions to carry out their tasks,” wrote columnist Shlomi Eldar in Al-Monitor.

“Israel has pushed the PA into an economic crisis and possible collapse and now it must rush to save Abbas from the economic collapse in order to prevent an escalation into chaos — an escalation the outcome of which no one can predict,” Eldar said.

The chaos would not only mean an end to security coordination between the PA and Israel but it would return Israeli troops to all areas of the West Bank, which would risk wider and more direct confrontations.

“If the PA goes down, it will be Israel that fills the vacuum. We’ll have a pre-Oslo occupation,” wrote David Rosenberg in an opinion article in Haaretz.

In risking its own downfall, the PA has apparently hedged some bets by relying on additional aid from Arab countries. On April 21, it secured a pledge of $100 million per month from the Arab League. “The Arabs need to be engaging actively at this critical time,” said Abbas.

Arab aid is not enough to cover the PA’s needs nor is it sustainable. Abbas is likely to be waiting for Israeli Prime Minister Binyamin Netanyahu to reverse his government’s decision on the tax fund deductions.

If a compromise it not reached, the consequences could be dire for both leaders.