Israel could soon release frozen Palestinian funds

By AMY TEIBEL | November 28, 2011 | 8:25 AM EST

Israel's Prime Minister Benjamin Netanyahu attends the weekly cabinet meeting in his office in Jerusalem Sunday, Nov. 27, 2011. (AP Photo/Baz Ratner, Pool)

JERUSALEM (AP) — Prime Minister Benjamin Netanyahu hinted Monday that Israel might soon release tens of millions of dollars owed to the Palestinians, according to officials who heard him testify before an influential parliamentary panel.

Israel has refused to transfer the money to punish the Palestinians for their attempts to join the United Nations. The Palestinians recently were accepted to the U.N. cultural agency, UNESCO, as part of a broader effort for recognition as a full U.N. member state.

Western donor nations, and even Israel's own Defense Ministry, have urged Netanyahu to release the money.

In a closed hearing, Netanyhau told the parliament's foreign affairs and defense committee on Monday that Israel was "considering the possibility of renewing the transfer of money to the Palestinians" because they appear to have suspended their efforts at the U.N., the officials said. That would change if the Palestinians revive those efforts, one official said.

The officials spoke on condition of anonymity because the meeting was closed.

The Palestinians applied for U.N. membership in September, but the statehood bid has stalled after they failed to marshal the required support of nine of the Security Council's 15 members.

The Palestinians have said that as a backup plan, they will seek a lesser upgrade to nonmember observer status, but so far have not taken any action. Netanyahu said it appears the Palestinians have put these efforts on hold, since they have not approached the General Assembly or any additional U.N. agencies about membership.

Israel believes creation of a Palestinian state must be achieved through negotiations and charges that the U.N. bid is one of a series of steps to bring unwarranted pressure on the Jewish state.

The Palestinians say Israel's sanctions are having severe effects.

The Palestinians say they desperately need the money to keep their government afloat. Without it, they have to borrow from banks to pay monthly salaries of tens of thousands of civil servants.

In accordance with interim peace deals, Israel collects some $100 million in customs, border and some income taxes each month on behalf of the Palestinians and relays them to the West Bank government. The transfers were suspended on Nov. 3 in reaction to the UNESCO admission.

The international community has been pushing Israel to release the money, and the Israeli Defense Ministry has warned the withholding of the cash could threaten the stability of the Palestinian government in the West Bank.

The Palestinian Authority employs tens of thousands of people, including security forces whose work at preventing attacks on Israelis has won praise from Israel and the United States.

The Palestinian prime minister, Salam Fayyad, warned this week that he would not be able to pay the coming month's salaries and said the withholding of the money is causing grave damage to the Palestinian economy. The Palestinian Authority is the largest single employer in the Palestinian territories.

Speaking to reporters Monday, Fayyad said he had not heard from Israel on whether it would soon release the money. He said he hoped the money would come "not a day too soon" because of the crisis.

Netanyahu told the committee on Monday that "Israel has no interest in bringing about the collapse of the Palestinian Authority," the officials said.

International efforts to restart peace negotiations between Israel and the Palestinians have not succeeded. The Palestinians demand that Israel first stop building in the West Bank and east Jerusalem, occupied areas the Palestinians want for a future state. Israel rejects any preconditions for talks.