TEL AVIV // Israel yesterday decided to continue withholding about US$100 million (Dh367 million) of tax revenues that it owes to the Palestinian Authority, two weeks after it suspended the transfer in protest of Palestine's admission to a major United Nations agency.
The money is important to the cash-strapped Palestinian Authority and was bound to spur further financial troubles for the West Bank-based government. The Palestinian Authority uses much of the money to pay the tens of thousands of people that it employs, including police scattered throughout the Israeli-occupied territory charged with maintaining security arrangements with Israeli authorities.
The Israeli decision was passed by a narrow margin in a vote in the security cabinet, reflecting discord on the issue. The main disagreement was between Ehud Barak, the defence minister, who claims the suspension would hurt Israel by prompting instability in the West Bank, and the Finance Minister Yuval Steinitz, a hardliner who wants to punish the Palestinians for initiating unilateral moves for international recognition.
Mr Barak was reportedly worried that extending the freezing of the customs, border and income taxes would lead to anger and violence among West Bank Palestinians. Israel must collect the funds for the Palestinians as part of the 1993 Oslo Accords and release them every month.
The cut-off of funds was first announced on November 1, a day after the United Nations Educational, Scientific and Cultural Organisation, or Unesco, accepted Palestine as a member, infuriating Israel and the US because it handed the Palestinians more international legitimacy. The money is usually transferred in the first three days of the month and its suspension took place right before a Muslim holiday. Salam Fayyad, the Palestinian prime minister and a respected economist, had said he would borrow from local banks to make sure government workers were paid before the holiday began.
The Palestinians' request for admission to Unesco had been part of a broader effort to gain UN recognition of their independent statehood, a request officially submitted in late September.
Unesco has encountered significant financial difficulties after accepting Palestine's membership, with the US ceasing its transfer of some $60m to the agency and Canada following suit. The US and Canada altogether accounted for about a quarter of the total contributions to the agency.
After the US and Canadian fund suspensions, Ban Ki-moon, the secretary-general of the UN, had warned that "millions" of beneficiaries in the world could be hurt if Palestine's admission into other UN agencies led to further cut-offs of contributions.
In the meantime, the Palestinians were facing an uphill challenge with their bid for UN recognition, as the institution's top body appears to be deadlocked over the request.
On Friday, the Security Council adopted a report that said its members had failed to agree on the Palestinian application. Riyad Mansour, the Palestinian UN envoy, told reporters over the weekend they would "intensify" their efforts for UN recognition and were "dead determined to succeed".
The US, a permanent member of the UN Security Council, has vowed to veto the Palestinian request should it come up for a vote and has lobbied intensively along with Israel to prevent the Palestinians from garnering the necessary nine votes out of 15 to approve membership.
Mahmoud Abbas, the president of the Palestinian Authority, was due to meet Arab League officials tomorrow to decide whether to seek a Security Council vote after all or try for an upgraded observer status with a statehood recognition vote by the wider general assembly.
Israel's decision to continue withholding funds came as Israeli officials met in Jerusalem with representatives of the Mideast Quartet, made up of the US, UN, European Union and Russia. The Quartet has hoped to bridge the rift between Israel and the Palestinians and return the two sides to the negotiation table.
However, prospects for a renewal of peace talks - in deadlock for more than a year after Israel rejected the Palestinian demand to freeze Jewish settlement expansion in the West Bank - appeared to be dim. On Sunday, Mr Abbas told David Hale, a US envoy, that the Palestinians would not resume talks unless Israel ceased all settlement activity and halted construction of Jewish homes in mostly Arab East Jerusalem. Mr Abbas also said that Israel must accept that the borders of the future Palestinian state would be based on the Israeli frontiers that existed before the 1967 Arab-Israeli war.
