Smotrich's move to cut bank ties risks Palestinian supply crisis

Arab News

a day ago

JERUSALEM: An Israeli move to cut off cooperation with Palestinian banks could halt the supply of essential goods such as food and fuel to the Palestinian territories, the Palestinian Monetary Authority said on Wednesday.
Israeli Finance Minister Bezalel Smotrich ordered the cancelation of a waiver on cooperation between Israeli and Palestinian banks on Tuesday.
This move risks the Palestinian banking system, trade, and overall economy. Israeli banks Hapoalim and Israel Discount Bank work with Palestinian banks.
Some 53 billion shekels ($15.2 billion) were exchanged at Palestinian banks in 2023, official data show.
Israeli Finance Minister Bezalel Smotrich ordered the cancelation of a waiver on cooperation between Israeli and Palestinian banks on Tuesday.
Canceling the waiver would require approval by Israel's security Cabinet. No date for a vote has been set, and it was not clear whether it would pass.
The PMA said it was following developments and warned that such disruption posed a serious threat to Palestinian access to basic goods and services.
It noted it has ongoing coordination with the political leadership and international community to safeguard correspondent banking relationships.
'These efforts are vital to ensuring the continuity of commercial transactions and the payment of essential imports and services, including food, electricity, water, and fuel,' the PMA said.
Smotrich said his decision came against the 'delegitimization campaign' by the Palestinian Authority against Israel globally.
The waiver had allowed Israeli banks to process shekel payments for services and salaries tied to the Palestinian Authority, without the risk of being charged with money laundering and funding extremism.
Without it, Palestinian banks would be cut off from the Israeli financial system.
The PMA said depositors' funds within the Palestinian banking sector are secure and that the banking system remains integrated with the global financial network through a broad range of correspondent banks and continues to provide services to individuals and businesses domestically and internationally.
Smotrich, under US pressure, had in late 2024 signed a waiver to extend cooperation between Israeli and Palestinian banks through November 2025.
In the past, Smotrich sought to end the waiver but ultimately signed it due to pressure from the US and Prime Minister Benjamin Netanyahu.
His latest decision came hours after the UK and four other nations imposed sanctions on him and another far-right minister, accusing them of inciting violence in the West Bank.
The sanctions included a freeze on assets and travel bans.
Israel's Foreign Minister Gideon Saar said the action by the five countries was 'outrageous.'