Isabel Kershner
The New York Times
January 30, 2013 - 1:00am

Israel has decided to transfer tax and customs revenues collected last month on behalf of the Palestinian Authority to help ease the economic crisis there, a senior Israeli government official said on Wednesday.

This reverses an earlier decision to use the revenues to offset at least part of the Palestinian debts to Israeli utility companies as a punitive measure following the Palestinians’ successful bid to upgrade their status at the United Nations to that of a nonmember observer state in late November.

But the official emphasized that the decision was “a one-time event” and was “not an indication of what Israel might do next month.”

The decision to transfer the funds came after a meeting on Monday between Prime Minister Benjamin Netanyahu and Tony Blair, the envoy of the so-called quartet of Middle East peacemakers that groups the United States, the European Union, the United Nations and Russia. In a statement after the meeting, both men pledged to work on peace and security issues.

Nour Odeh, a spokeswoman for the Palestinian Authority, said that Palestinian and Israeli officials were scheduled to hold a regular technical meeting on Wednesday where they would calculate the amount of revenues collected and owed. Revenues usually amount to around $100 million a month.

The Palestinian Authority, a self-rule body with limited control over parts of the West Bank, has been in financial crisis for about two years, largely because of a drop in donor funds, and it has been struggling to pay its 150,000 government workers their full salaries on time, leading to growing restiveness and strikes.

Israel’s decision to withhold the transfers after the United Nations move was expected, but special funds pledged by Arab states to the authority as a so-called “safety net” after the diplomatic clash with Israel have not yet materialized.

Israel has withheld transfers of Palestinian tax revenues at least five times before, sometimes for weeks and, after the outbreak of the Palestinian uprising in 2000, for two years. But this was the first time that Israel had used the money, which constitutes about two-thirds of the authority’s income, to pay off Palestinian debts to the Israel Electric Corporation and other Israeli providers without the consent of the authority.

The prime minister of the Palestinian Authority, Salam Fayyad, called in December for a voluntary boycott of Israeli goods by Palestinian consumers in what he called a “logical response” to the Israeli measure because the tax revenues are accrued on Palestinian trade with Israel. The call did not appear have had much impact either in the Palestinian territories or on the Israeli economy.

Israel’s former foreign minister, Avigdor Lieberman, had said in December that it would take four months of tax revenues collected by Israel for the Palestinian Authority to repay its debts. He had threatened that no money would be transferred from Israel to the authority until the debts were paid.

In a statement released by the Palestinian Authority cabinet after a meeting on Tuesday, the withholding of tax revenues was described as “Israeli piracy.” The cabinet said that government workers would be paid the remaining half of their November salaries in the next two days, “if work is resumed in the ministries, at the least by those responsible for executing the salary payment procedures.”

The cabinet also “affirmed the urgency for our Arab brethren to accelerate the implementation of their commitments to support the state treasury,” according to the statement.

Israel is engaged in a delicate balancing act since it does not have an interest in seeing the Palestinian Authority collapse, officials there have said. In the weeks before the United Nations action, they said, Israel advanced money to the Palestinian Authority in response to calls for help and to provide some relief ahead of a Muslim holiday.


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