Theft and Blackmail: Israel Blocking Transfer of Palestinian Funds

Many things are going to be overshadowed at least for a few days by the big news of Osama bin Laden’s death. One of them, though in the headlines in Israel, was already getting less attention than it deserved.

The scandalous announcement by Israel’s Minister of Finance, Yuval Steinitz (Likud) that Israel was going to stop payment of taxes levied on behalf of the Palestinians as punishment for the Fatah-Hamas unity dealis nothing short of grand larceny.

On the surface, it might seem to make sense, even if one disagrees with it as a tactic. The argument would be that the PA now encompasses a terrorist organization and Israel would be within its rights to block the funds flowing to that government as they might be diverted for militant uses. After all, doesn’t the US freeze assets of terrorist groups? What’s the difference?

Well, there’s a big difference.

The funds that Israel is withholding are comprised of Value Added Taxes (VAT) and other levies which Israel collects on behalf of the PA, under the Oslo Accords. Sounds like Israel is doing the Palestinians a favor, doesn’t it?

But when you think about how this state of affairs came to be, a different picture emerges.

When Israel took over the West Bank in 1967, it obviously assumed responsibility for basic services in that area. No one was praising the job they did, to be sure, but services were delivered throughout the Occupied Territories. That was the case until 1994.

In that year, the Palestinian National Authority was formed, and the West Bank was divided into four sections: Areas A, B and C and East Jerusalem. Basic civil services in Areas A and B as well as in Gaza were handled by the Palestinian Authority, and this is true to this day.

But the PA’s ability to collect taxes is severely limited. The VAT on imports to the West Bank is collected at Israeli ports. Israel is also supposed to send back the value-added tax that Palestinians pay for Israeli goods, as well as any excise taxes that Palestinians have to pay for fuel, cigarettes, and alcohol.

Palestinians who work in Israel provide another important source of revenue for the PA. According to the Protocol on Economic Relations, the PA gets back more than three-quarters of the money withheld from the paychecks of Palestinians who work across the border.

So, a system was put in place wherein Israel would collect taxes and pass them on to the PA, after taking out the money Palestinians pay for Israeli utilities (phone and electricity, for instance, are bought from Israeli companies). The Israelis and Palestinians meet monthly and figure out the money and Israel passes on the payment.

These payments are not gifts or grants; they are wholly made up of money that rightly belongs to the Palestinians, and are only in Israel’s hands in the first place because of the occupation. Nor are these funds placed in Israeli hands in order that the Palestinians should get some added financial gain, as is the case, for instance, with Syrian assets in US or European banks. That is a very big difference between the practice of freezing assets (whatever one thinks of the policy) of a foreign power as a punitive measure and what Israel is doing with these funds.

Israel agreed to a system where it would help deliver funds that are, from beginning to end, Palestinian in order that Palestinians would relieve Israeli of the burden of administering civil services in parts of the West Bank. The money Israel sends monthly to the PA constitutes some 70% of the Palestinian budget.

By rights, then, if Israel wants to withhold those funds, then Israel should simultaneously take responsibility for all the things those funds pay for. That is, after all, the responsibility of the occupying power.

And of course, that is the root of the problem, not only in this episode, but between Israel and the Palestinians in general in the Oslo era. Palestinians would have no recourse if Avigdor Lieberman, or in bygone days, Meir Kahane, were elected Prime Minister. Indeed, Israel’s most powerful political party, the Likud coalition, explicitly opposes a two-state solution and insists on controlling all of what they call “Judea and Samaria.” And they put those stances into action, politically, especially now that they are the largest party in Israel’s ruling coalition.

Israel has twice imposed sanctions on the PA for the mere inclusion of Hamas, before any opportunity to see how the Palestinian government would act either with Hamas in control of the Legislative Council (although Mahmoud Abbas would still have been President and in charge of dealing with Israel) or, as it is today, in a mere partnership in a technocratic caretaker government.

This is not an attempt to compare Likud and Hamas. Rather it is a comparison of the vast canyon that is the difference in power between Israel and the Palestinians, and the equally yawning gap between them in terms of options for action. That is a situation that cannot lead to a peaceful resolution, if for no other reason than it leaves Israel without sufficient incentive to compromise.

That is what this issue of Israel withholding Palestinian revenues illustrates. And it’s an important lesson to learn. Israel might relent on this issue; Netanyahu has not yet weighed in on it. But the very fact that Israel can simply take away 70% of the Palestinians’ own legitimate revenues cannot be ignored.

In the immediate term, this is nothing less than collective punishment. These are funds the people of the West Bank depend on. And it is theft, even if Israel does not put the money in its own figurative pocket. If I take your money, it’s stealing, even if all I do is put it in a box to return to you after you’ve done as I demand.

Israel may well have the right to decide for itself who it will or won’t talk to. But it does not have the right to dictate who may or may not participate in Palestinian politics. They may refuse to talk to whoever is in control of the PA, but they may not decide who can or cannot participate.

But they do have the power to hold a figurative gun over the Palestinians’ heads to try to force them to relent. And they’re using it.

I wish Hamas was not part of the Palestinian body politic, but they are. I can understand why Israel would oppose their political participation. But there has to be a cry of protest when Israel threatens to simply take away 70% of the Palestinians’ revenue unless the Palestinians populate their government only with those approved by Israel.

This money is legitimately Palestinian. Israel must not be allowed to hold it hostage.