During the G-7 finance summit held in Stresa, Italy, the finance ministers of the Group of Seven (G-7) voiced their concerns and urged Israel to refrain from disrupting “vital financial transactions” in the occupied Palestinian territories. The potential severing of ties with Palestinian banks by Israel has sparked worries, prompting the G-7 to take action.
In a formal statement released after the discussions, the G-7 ministers called upon Israel to take the necessary steps to ensure that correspondent banking services between Israeli and Palestinian banks remain intact. They emphasized the importance of preserving these services to facilitate essential financial transactions, as well as critical trade and services in the region. Additionally, the ministers called for the release of withheld clearance revenues to the Palestinian Authority in light of its pressing fiscal requirements. They also appealed to Israel to remove or ease other measures negatively impacting commerce in order to prevent further deterioration of the economic situation in the West Bank.
US Treasury Secretary Janet Yellen was among those expressing concern at Israel’s potential actions, highlighting the risk of a potential “humanitarian crisis” if the banking channels were disrupted. Yellen stressed the importance of these banking channels in processing transactions amounting to almost US$8 billion a year in imports from Israel, including essential resources such as electricity, water, fuel, and food. Furthermore, she noted that these channels also facilitate almost US$2 billion a year in exports, upon which Palestinian livelihoods depend.
Tensions escalated following Israeli Finance Minister Bezalel Smotrich’s announcement that he intended not to renew a vital arrangement between financial institutions, which is set to expire soon. This decision has further raised concerns about the potential impact on financial stability in the region. Dr Yellen reiterated her concerns and revealed that she had raised them with Israeli officials, emphasizing the critical role of maintaining financial stability for the welfare of the Palestinian population.
Moreover, Mr Smotrich also issued threats to cease the transfer of tax funds to the Palestinian Authority and to terminate Norway’s role in facilitating these transfers. This move follows Norway’s recent decision to join Ireland and Spain in recognizing a Palestinian state, which has escalated the existing tensions. Under the peace agreements brokered in the 1990s, Israel is responsible for collecting money for the Palestinian Authority, which has limited autonomy in parts of the West Bank. However, these transfers have been halted by Israel in the aftermath of the attacks by Hamas on Oct 7.
The Israeli Cabinet has endorsed a plan to redirect tax funds designated for the Palestinian Authority to the Palestinian staff in Gaza through Norway. The decision to bypass the Palestinian Authority has sparked further concerns about the potential consequences and ramifications of such actions. The debate around the fund transfers and their potential utilization by Hamas has reignited discussions about the broader political and security implications of these financial transactions.
The developments in Israel-Palestine relations remain complex and multifaceted, with implications for not only the economic stability of the region but also its broader political landscape. The G-7’s unified stance on urging Israel to safeguard Palestinian banking services highlights the international community’s attention to the repercussions of such decisions and the need to preserve financial stability for the welfare of the Palestinian population.