JERUSALEM // Israel is considering once more withholding tax revenue from the Palestinians as punishment for a decision by the United Nations' human-rights watchdog to investigate illegal Jewish settlements.
Israel and the United States are still furious at the Palestinian Liberation Organisation (PLO) for seeking statehood at the UN and winning membership of the important UN cultural organisation Unesco, which now allows the Palestinian flag to fly alongside those of other members.
Now 36 countries on the 47-member UN Human Rights Council have voted to investigate the effect on Palestinians of the half-million Jewish settlers in the occupied Palestinian territories of East Jerusalem and the West Bank.
Ten countries abstained and only the United States voted no. Neither the Israelis nor the Palestinians are members. All countries except Israel consider its settlements illegal.
Eight Israeli cabinet ministers were expected yesterday to discuss a range of punishments against the Palestinian Authority (PA) for the decision. Israeli officials did not say why, but on Friday Israel's foreign minister, Avigdor Lieberman, said the Palestinian strategy was one of "diplomatic terrorism".
"We are dealing with Al Qaeda terror on the one hand and diplomatic terror by Abu Mazen on the other," he said. The PA president Mahmoud Abbas, also known as Abu Mazen, has been an advocate of non-violent opposition to Israel's four-decade military occupation.
Ghassan Khatib, a PA spokesman, said he knew of no Palestinian lobbying to persuade the council to investigate the settlements, although he welcomed the decision.
Israeli retaliation is likely to include suspending disbursement of vital tax revenues of about US$100 million (Dh367m) a month that Israel collects on behalf of the PA, which could cripple the already financially strapped organisation.
Israel temporarily did this twice last year, retaliating against the Palestinians' statehood-recognition bid in the UN and a reconciliation accord struck in May between Hamas, which runs Gaza, and Fatah, who control the PA.
The PA has a serious cash shortage that could force it to slash wages for its 150,000 employees and raise taxes, said Samir Abdullah, general director of the Palestine Economic Policy Research Institute, a non-governmental institution in Ramallah.
PA officials were forced to increase taxes on high earners this year, mainly because promised aid from Arab countries and the United States was not delivered.
The US suspended US$147 million in aid to the PA in August as punishment for the statehood-recognition effort, although American politicians expressed readiness on Friday to release part of that on condition the money was not used for such projects as building roads, tourism promotion and scholarships for Palestinian students.
Unpaid donor aid has pushed the PA dangerously close to bankruptcy, the International Monetary Fund warned this month in a report that expressed particular concern about the authority's half-billion dollar financing gap.
"If Israel stops paying the PA its money again, this will be a catastrophe," Mr Abdullah said.
Israel's deputy foreign minister, Danny Ayalon, said yesterday Israel may be less harsh. It has "many resources but we will act with discretion and will not shoot from the hip", he said.
But he rejected allowing any member of the UN Human Rights Council's fact-finding mission into Israel.
He criticised the council for what many Israelis consider its anti-Israel bias. Tension came to a head three years ago when it formed a committee headed by Richard Goldstone, a South African judge, to investigate allegations of war crimes during Israel's three-week war on Gaza, Operation Cast Lead, which began in December 2008.
Investigators found strong evidence of war crimes committed by Israel and militants operating in the Hamas-controlled Gaza Strip. Mr Goldstone later backed away from the conclusions, but he was the only member of the committee to do so.