Israel cuts off Palestinian tax funds as relations hit new low

Israel has withheld part of its $75m (£38m) monthly tax revenue payment to the Palestinian Authority after a diplomatic offensive by the Prime Minister, Salam Fayyad, designed to stop the continued expansion of Jewish settlements.

The move appeared to mark a new low in relations between Israel and a moderate Palestinian leadership increasingly disillusioned by the lack of progress in talks with Ehud Olmert's government.

Israel has accused Mr Fayyad, who is widely respected by Western governments, of trying to "undermine" its relations with Europe. The Palestinian Prime Minister has written to all EU prime ministers urging them to shelve plans to upgrade the EU's relationship with Israel until it ceases to "flout its international obligations", including those on settlement construction in East Jerusalem and the West Bank.

Israeli officials expressed deep "regret and disappointment that our Palestinian interlocutors with whom we are working for a common goal – especially Prime Minister Fayyad – are spending time and energy to undermine Israel's bilateral relations with the EU".

The EU, whose foreign ministers will discuss the issue at a meeting in Luxembourg on 16 June, is already split over whether to deepen technical and political ties with Israel. Israel is seeking a series of new joint technical committees and regular high-level political meetings with the EU.

The Israeli Finance Minister, Roni Bar-On, initially withheld the full monthly payment owed to the Authority after Mr Fayyad also wrote in similar terms to the Paris-based Organisation of Economic Co-operation and Development urging it to suspend current negotiations on Israel's application for full membership.

Yesterday Mr Bar-On relented by agreeing to transfer a large portion of the money tomorrow. Israel says the remainder that it is withholding is part of a $50m debt owed by the Palestinians for electricity supply, but it had not made such a deduction before and Israeli sources did not deny that it relates to Mr Fayyad's approach to the OECD.

This week, the Palestin-ian President, Mahmoud Abbas, called for a "national dialogue" with Hamas. Western officials see the move as a significant overture despite declarations by his aides that he was still insisting on Hamas ceding the absolute control of Gaza it seized in June last year.

One theory was that having been persuaded not to attempt a reconciliation with Hamas because he would lose the fruits of any negotiations with Israel, Mr Abbas was beginning to think that the progress of talks so far made that an empty threat.

The Israeli Housing Ministry has confirmed that despite complaints by the US, EU and the UN, it plans 884 more housing units in East Jerusalem settlements.

According to reports of Mr Fayyad's letter to the EU prime ministers he says "Now – more than ever – is the time for the EU to act on the principled position that it reaffirmed again .. that Israeli settlement activity anywhere in the [occupied territories], including East Jerusalem, is illegal" and "threatens the viability of an agreed two-state solution".

Mr Fayyad, who also condemns Israel's failure to implement the 2004 advisory opinion of the International Court of Justice that the route of the separation barrier through parts of the West Bank was illegal, says an unconditional EU upgrade would be seen as rewarding "unlawful behaviour".

The monthly payments of tax revenues that Israel collects on behalf of the PA were witheld for more than a year after Hamas won legislative elections in 2006 but reinstated after Mr Abbas installed an emergency government under Mr Fayyad when Hamas seized full control in Gaza.

And renewed warnings of a possible large-scale military invasion of Gaza further threaten the faltering negotiations between Mr Abbas and Mr Olmert. Yesterday, a Palestinian militant was killed and an Israeli soldier wounded in a exchange of fire at the Gaza border.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Joe Cocker performing on the Stravinski hall stage during the Montreux Jazz Festival, in Montreux, Switzerland in 2002
musicHe 'turned my song into an anthem', says former Beatle
News
Clarke Carlisle
sport
Sport
footballStoke City vs Chelsea match report
Arts and Entertainment
theatreThe US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
News
Coca-Cola has become one of the largest companies in the world to push staff towards switching off their voicemails, in a move intended to streamline operations and boost productivity
peopleCoca-Cola staff urged to switch it off to boost productivity
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Austen Lloyd: Regulatory / Compliance / Exeter

Excellent Salary: Austen Lloyd: Exeter - An excellent opportunity for a Solici...

Ashdown Group: IT Support Technician - 12 Month Fixed Term - Shrewsbury

£17000 - £20000 per annum: Ashdown Group: IT Helpdesk Support Technician - 12 ...

The Jenrick Group: Maintenance Planner

£28000 - £32000 per annum + pension + holidays: The Jenrick Group: Maintenance...

The Jenrick Group: World Wide PLC Service Engineer

£30000 - £38000 per annum + pesion + holidays: The Jenrick Group: World Wide S...

Day In a Page

Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there