US’s Yellen warns against Israeli financial moves in Palestine
US Treasury Secretary Janet Yellen criticised Israel for its intention to withhold revenues collected on behalf of the Palestinian Authority and cautioned against severing Palestinian lenders from their Israeli correspondent banks, Bloomberg reported. Yellen emphasised that these actions “threaten economic stability in the West Bank.”
According to Yellen, the correspondent banks play a vital role in processing transactions that support significant imports from Israel, totalling nearly $8 billion annually, including essentials like electricity, water, fuel, and food. Additionally, they facilitate around $2 billion in exports crucial for Palestinian livelihoods.
Yellen’s remarks follow statements made by Israeli Finance Minister Bezalel Smotrich, urging Prime Minister Benjamin Netanyahu to impose “harsh punitive measures” against the PA.
This push for punitive measures intensifies amidst Israel’s war in Gaza, with some members of Netanyahu’s coalition accusing the PA of hostility towards Israel.
The economies of the West Bank and Gaza rely on Israeli banks for conducting business transactions.
Under the Oslo Accords, Israel is obligated to maintain this financial channel. However, Israeli lenders, such as Bank Hapoalim B.M. and Israel Discount Bank, have sought relief from this arrangement for over a decade due to legal risks associated with potential violations of international restrictions on funding terrorist organisations and money laundering.
Yellen expressed her anticipation that other countries will also voice concerns about the adverse effects of such actions on the West Bank economy, adding that it would also negatively impact Israel. She pledged diplomatic efforts to ensure the continuation of this arrangement.
Notably, the Israeli government grants its banks immunity from criminal prosecution domestically and promises to indemnify them against civil lawsuits. The compensation agreement, which expired in March and was extended until June, hangs in the balance, with Smotrich indicating reluctance towards its renewal. If the agreement is not renewed, Israeli banks will withdraw from the arrangement entirely.
