Israeli Finance Minister Bezalel Smotrich has directed his ministry to cancel a waiver allowing Palestinian banks to operate, threatening the livelihoods of millions of Palestinians, just hours after he was sanctioned by several Western governments for his incitements of violence in the occupied West Bank.
Smotrich has ordered the cancellation of a waiver allowing Israeli banks to cooperate with Palestinian banks and process payments tied to the Palestinian Authority without being accused of funding supposed terrorism.
The move would have devastating effects on the Palestinian economy, effectively paralyzing it and punishing the estimated 3 million Palestinians who live in the occupied West Bank. Because the Palestinian Authority does not have its own currency or central bank as part of Israel’s apartheid system, the waiver cancellation isolates Palestinian banks from the global banking system.
The Palestinian Monetary Authority warned on Wednesday that Smotrich’s order could disrupt or block “the continuity of commercial transactions and the payment of essential imports and services, including food, electricity, water and fuel.”
The waiver is typically signed yearly, and Smotrich has threatened numerous times in the past to cancel the agreement, but has historically relented, last year caving under U.S. pressure to extend the waiver.
Israeli ministers said the expansion is aimed at preventing the establishment of a Palestinian state.
The EU has condemned the move, urging Smotrich to reverse his decision.
“The European Union is deeply concerned by the instruction by Israel’s finance minister Smotrich to cancel the waiver on cooperation with Palestinian banks, which could cut them off from the Israeli financial system, devastate an already crippled Palestinian economy, and may lead to the collapse of the Palestinian Authority,” said EU spokesperson Anouar El Anouni in a statement.
Smotrich’s order this week came just hours after the U.K., Australia, Canada, New Zealand, and Norway announced they were sanctioning Smotrich and National Security Minister Itamar Ben Gvir over “repeated incitements of violence” against Palestinians in the occupied West Bank.
This includes the ministers’ massive expansion of illegal Israeli settlements in the region, the U.K. said in a statement, with Smotrich recently announcing the largest single settlement expansion since the Oslo Accords.
Smotrich struck a defiant tone in response to the sanctions, saying the U.K. is imposing sanctions “because I’m thwarting the establishment of a Palestinian state. There couldn’t be better timing than this.”
Indeed, Smotrich blamed waiver cancellation on the Palestinian Authority, saying that the move is in response to its condemnation of Israel’s illegal settlement expansion. In a statement, his office said that that opposition is part of an international “delegitimisation campaign against the State of Israel.”
UN human rights experts have previously said that cancelling the waiver would amount to an indiscriminate punishment of the entire Palestinian population and represent a violation of international law.
The move would “exacerbate the ongoing humanitarian catastrophe, and affect all fundamental human rights, including the right to food, right to water and sanitation, right to health, freedom from torture and the right to life,” two UN experts wrote when Smotrich threatened the revocation of the waiver last year.
Smotrich routinely implements punishments on Palestinians as a population. Last year, in response to foreign governments saying that they would recognize Palestine as a state, Smotrich said, “for every country that unilaterally recognises a Palestinian state, we will establish a settlement.”
Israel has already devastated the Palestinian economy in numerous other ways. Israel’s genocide in Gaza has caused economic collapse in the Strip that, even if Israel’s offensive were to stop now, would take 350 years to come back from, the UN has previously found.
Meanwhile, the West Bank’s economy has also fallen amid Israel’s escalated violence in the region, with unemployment tripling amid the Gaza genocide, the UN has reported — with this downturn compounding on decades of poverty and deprivation imposed by Israel’s apartheid regime.
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