Israel refuses to pay $100m to Palestine

Israeli cabinet ministers yesterday refused to hand over $100m in duties it owes to the Palestinian Authority (PA) despite warnings that the punitive withholding of the funds could jeopardise the country’s security.

Despite speculation that Israel would heed international calls to end the freeze it imposed two weeks ago in retaliation for the PA’s securing membership of Unesco, a majority of the ministers decided to keep it in place.

The decision was taken against the clear advice of the Defence Minister Ehud Barak, reflecting the strong concerns of the Israeli military that the freeze will threaten the salaries of Palestinian security personnel whose co-operation with Israel has significantly helped to keep the peace in the West Bank.

But the Finance Minister Yuval Steinitz, a hawkish advocate of the freeze, carried the day in ensuring the policy was not changed. The monthly payments of around $100m are of mainly customs revenues Israel collects on behalf of the Palestinians under interim agreements.

Republican US Congress representatives are still holding up another $400m of annual funding for the Palestinians, in aid and budget support, though another $200m for security use has been paid after lobbying by the Obama adminstration and the international Quartet envoy Tony Blair.

Yesterday’s Israeli decision followed separate meetings held by Tony Blair with Palestinian and Israeli representatives, which once again failed to resolve the impasse between the two sides.

The Palestinians, sceptical that talks will reach any conclusion, say they will only enter negotiations if there is a freeze on Jewish settlements and agreement that a two state solution will be based on 1967 borders. Israel says it wants negotiations “without preconditions”.

Palestinian negotiator Saeb Erekat said after the meeting that “Israeli settlements and the two-state solution are mutually exclusive." An Israeli official said the Palestinians “must understand that there are costs involved in adopting negative policies.”

Without explicitly confirming that the freeze was also being sustained because of the Palestinian stance over negotiations, the official said that Israel was seeking to convince the Palestinians that it was “unsustainable.”

Diplomacy involved “both carrot and stick,” the official said.