US Treasury Secretary Janet Yellen warned Thursday of the risk of a “humanitarian crisis” if Israel cuts off a crucial financing channel to the occupied Palestinian territories.
“I’m particularly concerned by Israel’s threats to take action that would lead to Palestinian banks being cut off from their Israeli correspondent banks,” she told reporters in Stresa in northern Italy, G7 finance ministers are to meet.
“These banking channels are critical for processing transactions that enable almost $8 billion a year in imports from Israel, including electricity, water, fuel, and food, as well as facilitating almost $2 billion a year in exports on which Palestinian livelihoods depend.”
Asked what the United States and G7 might do in response, Yellen said she had written to Israeli Prime Minister Benjamin Netanyahu months ago about the economic situation in the occupied West Bank.
“And as I said, I believe it would create a humanitarian crisis in due course if Palestinian banks are cut off from Israeli correspondence,” she said.
“Certainly, this is a view that we will voice.”
Yellen said the issue may be discussed at the G7, adding: “I expect other countries to express concern about the impact of such a decision on the West Bank economy.
“I think this would have a very adverse effect also on Israel.”
She also repeated US concerns about Israel blocking money it collects for the Palestinian Authority, saying it “threatens economic stability in the West Bank”.
Under peace agreements, brokered in part by Norway in the 1990s, Israel collects money for the Palestinian Authority, which exercises limited autonomy in parts of the West Bank.
But Israel has blocked transfers since shortly after the October 7 attacks by Hamas, which runs the Gaza Strip.
– ‘Norway cannot be partner ‘ –
On Wednesday, Norway, with Ireland and Spain announced it would recognise a Palestinian state from May 28, a move that has angered Israel.
Following the decision, Israeli Finance Minister Bezalel Smotrich threatened to stop transferring tax funds to the Palestinian Authority and to end Norway’s role facilitating the transfers.
“Norway was the first to unilaterally recognise a Palestinian state today, and it cannot be a partner in anything related to Judea and Samaria,” Smotrich wrote to Netanyahu in a letter on Wednesday, using the Biblical term for the occupied West Bank.
“I intend to stop transferring the funds to (Norway) and demand the return of all the funds transferred” until now, he added, without specifying how much money had been sent to Norway as part of this agreement.
He also said that he “does not intend to extend the indemnity to correspondent banks that transfer funds from the end of the coming month”
The Israeli cabinet this year approved a plan to transfer to Norway, Palestinian tax funds designated for the Palestinian Authority for its staff in Gaza.
Some Israeli officials, especially far-right ministers like Smotrich, have called for stopping the fund transfers out of concern that they could be utilised by Hamas, which Israel is fighting in Gaza over the October 7 attacks.
