Israel suspends tax transfers to Palestinians, citing Hamas fears

May 1, 2011

Israel moved against the reconciliation agreement between the Palestinian factions Fatah and Hamas on Sunday, with the country’s finance minister saying he would delay the transfer of tax funds collected for the Palestinian Authority until it proves the money will not reach Hamas.

The minister, Yuval Steinitz, said that he had postponed meetings between his staff and Palestinian officials and that the tax transfers, which constitute most of the authority’s revenue, would be put on hold until the destination of the money is clarified.

Fatah, the party of Palestinian Authority President Mahmoud Abbas, and the militant Islamist group Hamas, which rules the Gaza Strip, initialed an agreement last week to set up an interim government backed by both factions to prepare for elections.

A formal signing is expected Wednesday in Cairo.

“The burden of proof is on them to clarify to us if one treasury is being created for Hamas and Fatah,” Steinitz said in an interview with Army Radio. “Are there guarantees that none of the money we transfer will reach a terrorist organization to purchase missiles or finance firing of rockets?’’

Israel and the United States consider Hamas, which has carried out suicide bombings and fired rockets at Israel from the Gaza Strip, to be a terrorist organization.

The State Department said last week that the United States was continuing its assistance programs to the Palestinian Authority for now and would assess a new Palestinian government based on its policies.

The taxes and customs duties handed over by Israel are collected on goods sold to Palestinians and on imports to the Palestinian Authority that pass through Israeli ports and border crossings.

The funds are transferred under an economic agreement that is part of the 1993 Oslo accords.

The transfers, more than a billion dollars a year, make up 70 percent of the revenue of the Palestinian Authority, said Ghassan Khatib, a spokesman for the Palestinian government.

He said that revenue provides two-thirds of the authority’s budget.

Palestinian Prime Minister Salam Fayyad said Israel’s move would not deter Palestinian unity efforts.

“We will definitely not stop the reconciliation because of the threats,” he told reporters Sunday, adding that the Palestinians were in contact with “international parties . . . to stop Israel from taking these steps.”

Saeb Erekat, an aide to Abbas and the former chief Palestinian negotiator, accused Israel of acting in bad faith even before Palestinians had formed their new government.

“This is the Palestinian taxpayers’ money, not Israeli money, and Israel has no right to withhold it,” Erekat said by telephone.

Israel has suspended tax transfers to the Palestinian Authority in the past, after the outbreak of the second Palestinian uprising in December 2000, and again in February 2006, after Hamas won Palestinian parliamentary elections.

The latest economic sanction is part of a broader effort by Israel to counter the effects of the rapprochement between Hamas and Fatah, which has undermined Israel’s drive to isolate Hamas politically and geographically in the Gaza Strip.

An announcement last week by Egypt that it planned to open its border crossing with Gaza caused concern in Israel, which has blockaded the territory and heavily restricted movement of goods and people between the coastal strip and Israel in an effort to squeeze Hamas and undermine its rule.

One Israeli official, who spoke on the condition of anonymity because of the sensitivity of the subject, said Sunday that Egypt’s planned opening of the border could pose an additional security worry for Israel, already concerned by what it says is the steady smuggling of arms into the Gaza Strip.

“In the past, despite the efforts of the Egyptian government, Hamas has succeeded in building a very dangerous military terrorist machine,” the official said. “If there were no longer an Egyptian effort to prevent that from happening, how much more formidable would the Hamas threat be?”

But another official, who also spoke on the condition of anonymity, said that it was unlikely Egypt would allow an uncontrolled flow of people and goods across the border and that the Egyptians, for their own reasons, are “very worried” about arms smuggling across the frontier.

The border between Egypt and Gaza is already honeycombed with smuggling tunnels, through which goods and weapons have moved for years, so the formal opening of the border would not make “a fundamental difference” in that respect, the official said.

He added that an opening of Gaza’s border with Egypt would leave Israel less vulnerable to criticism of its blockade. “Gaza will become more dependent on Egypt and less on Israel, which from an Israeli point of view is fine,” he said.

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