JERUSALEM — Under heavy international pressure, Israel said Wednesday that it will release withheld tax revenue to the Palestinian Authority, averting a cash shortfall that the Palestinian prime minister had warned would have a “devastating” economic impact.
A statement from the office of Israeli Prime Minister Benjamin Netanyahu said that, after a meeting of senior ministers, he had approved the transfer of the tax funds, about $100 million each month, “following the cessation of unilateral steps by the Palestinian Authority.”
“In the event that the Palestinian Authority resumes taking unilateral steps, the transfer of funds will be reassessed,” it said.
The Israeli government suspended the tax transfers a month ago after the Palestinians won admission as a member state to the cultural agency UNESCO as part of a broader bid for recognition of statehood at the United Nations. An application for admission to the world body as a full member has been bogged down in the Security Council.
Israel and the United States oppose the Palestinian moves at the United Nations, saying a Palestinian state should emerge from peace negotiations with Israel.
An Israeli official, who spoke on the condition of anonymity because he was not authorized to discuss the matter publicly, said that the decision to release the tax funds was made after information received by the government indicated that the Palestinians were “putting on hold” efforts to join other international organizations.
Palestinian officials have said that they have no immediate plans to seek membership in other U.N. agencies, but Palestinian Authority President Mahmoud Abbas asserted this week that he remains committed to the bid for full U.N. membership.
Senior U.S. officials and U.N. Secretary General Ban Ki-moon had pressed Netanyahu to release the tax funds. A similar call was made by Tony Blair, the representative of a group of Middle East mediators known as the Quartet, which is composed of the United Nations, the United States, the European Union and Russia.
The tax revenue includes customs duties Israel collects on behalf of the Palestinian Authority for imports coming through Israeli ports, value-added taxes levied on large Palestinian purchases of Israeli goods and excise taxes on fuel sold to the Palestinians. The funds are transferred under an economic agreement that followed the 1993 Oslo accord between Israel and the Palestinians.
Palestinian Authority Prime Minister Salam Fayyad warned this week that he would be unable to pay the salaries of tens of thousands of civil servants because of the cutoff of the tax funds, which he said would have a “devastating indirect impact throughout the whole [Palestinian] economy.”
Ghassan Khatib, a Palestinian government spokesman, said the funds make up two-thirds of the Palestinian Authority’s domestic revenue. He declined to comment on the Israeli announcement, saying that a response would come after the transfer of the money, usually handed over at the start of each month.
Senior Israeli military officials have cautioned that failure to pay the salaries of Palestinian officers could undermine security in the West Bank, where Israeli and Palestinian forces cooperate to prevent attacks on Israelis. Defense Minister Ehud Barak said Monday that the tax funds contributed to the stability of the Palestinian Authority and its security services.
Israel has withheld tax transfers to the Palestinian Authority for varying periods in the past as a punitive measure. The last time was in May, after Abbas’s Fatah faction signed a reconciliation agreement with the militant Islamist group Hamas, which rules the Gaza Strip.