Pushback: Israel withholds Palestinian revenue, approves new settlements

Israeli Prime Minister Benjamin Netanyahu’s government struck a $120 million blow to the cash-strapped Palestinian Authority today and further undermined its territorial claims, announcing plans to move forward with a controversial settlement that would effectively divide the West Bank in two.

The moves came in response to the Palestinians’ successful bid last week to be recognized at the United Nations as a state. After Palestinian Authority (PA) President Mahmoud Abbas received a standing ovation for a speech in which he repeatedly referred to Israel’s “racist, colonial occupation,” Mr. Netanyahu today characterized the Nov. 29 UN vote as an attack on Zionism and the state of Israel.

The Israeli moves caught many off guard, including some dismayed government officials, and caused some to sound a funeral toll for the peace process.

The rhetoric and threats underscore longstanding barriers to peace that persist even as the window for a two-state solution is fast closing, with both sides accusing the other of inciting hatred. But they also reflect the Israeli prime minister’s upcoming battle to win reelection in a country that has shifted significantly to the political right – even as he is mindful of US pressure to refrain from provocative initiatives.

“Netanyahu is now stuck between the anvil and the hammer,” says former Israeli diplomat Ilan Baruch. “[He] is struggling to keep the right around him in one bloc and for that he needs to pay political currency, so he needs to make noises that sound like a commitment fulfilled to a very hawkish agenda.”

The financial punishment

As the custodian of PA tax revenues, Israel wields significant financial leverage over the PA thanks to an annex of the Oslo Accords known as the Paris Protocol.

The PA owes Israel roughly 800 million shekels ($210 million) in unpaid electricity bills and has yet to pay November salaries. It was counting on 460 million shekels ($120 million) in November tax revenues to meet payroll. But today Israel’s minister of Finance announced that rather than transfer the tax revenues to the PA, it would deduct that amount as a down payment on the PA’s overdue electricity bill.

While Israel had threatened to withhold tax revenues if the Palestinians pursued their UN bid, it also has expressed concern that the deep and chronic economic crisis in the West Bank could spark greater restlessness – and thus a potential threat to Israel’s security.

The territorial blow

On Friday, the day after the UN vote, Israel announced it was authorizing 3,000 new homes in East Jerusalem and the West Bank. Even before that announcement, Israel had already registered the highest number of building tenders issued in any year of the past decade, according to an analysis by Peace Now, which opposes settlement construction.

Netanyahu’s government had issued tenders for 3,046 new buildings in East Jerusalem and the West Bank, more than double the amount from last year, and five times the number in 2010.

If an additional 3,000 tenders are issued by Jan. 1, tenders this year would total more than 6,000, far outstripping the second-highest annual total of the past decade – 2,512 in 2003, under former Prime Minister Ariel Sharon.

Splitting the West Bank

But more concerning to peace proponents was a separate Israeli move to advance plans to develop a bubble of land east of Jerusalem known as E1.

The area, if developed, would connect East Jerusalem to the largest Israeli settlement, Maale Adumim, which stretches deep into the West Bank. Such a bloc of Israeli-controlled territory would divide the northern half of the West Bank from the southern half, and separate both halves from East Jerusalem. See map (pdf).

Critics say that would make it impractical, if not impossible, to establish a viable Palestinian state with a capital in East Jerusalem.

“No move has dictated the borders of Israel-Palestine more conclusively than E1 because this is not something that is incremental,” says Daniel Seidemann, an Israeli attorney and founder of Terrestrial Jerusalem, which tracks developments that could jeopardize a two-state solution. “This is a game changer, and possibly a game ender.”

'Occupied' or 'disputed'?

Israel conquered East Jerusalem and the West Bank in the 1967 war against its Arab neighbors. It has since annexed East Jerusalem and declared Jerusalem to be its eternal and undivided capital. Palestinians refer to the West Bank as occupied and rightfully theirs; after all, accepting a state on pre-1967 borders amounts to only 22 percent of historic Palestine, they say.

But Netanyahu’s government has taken to calling the territory “disputed,” and cast the UN vote as unilaterally declaring Palestinian territory to include everything within the pre-1967 borders instead of resolving the precise territory in final-status negotiations as called for by the 1993 Oslo Accords.

“It’s taking the territorial parameter and defining the territorial parameter without the Palestinians having to give up on anything – refugees, demilitarization, any of the issues that are important to us,” says Mark Regev, spokesman for the prime minister’s office.

But Palestinians say that Israel’s steady encroachment on East Jerusalem and the West Bank, where the population of Israelis has roughly doubled to more than 500,000 since Oslo, is blatant unilateralism.

Israel did not explicitly agree to halt settlement construction in previous peace blueprints. But in the so-called Oslo II agreement of 1995, it was agreed that “the two sides view the West Bank and the Gaza Strip as a single territorial unit, the integrity and status of which will be preserved during the interim period.”

Palestinians and their supporters argue that the growth of settlements, and related infrastructure such as roads, are undermining the integrity of the West Bank – and thus the prospects for a two-state solution.

“I don’t see settlement activity as compatible” with that part of Oslo II, says Mr. Seidemann. “For me this is all about pizza…. You order a pizza, and the pizza comes, and then you talk about how do you divide the pizza – except that one side can eat the pizza while the negotiations are going on. Does that augur well for a fair division of the pizza?”