A rash, anti-Israel move by a bloc of Western countries could end up bankrupting the Palestinian Authority. Sometimes, the law of unintended consequences works in surprising – and satisfying – ways.
On Tuesday, Britain, Canada, Norway, Australia, and New Zealand imposed sanctions on Israeli ministers Itamar Ben-Gvir and Bezalel Smotrich. Last month, British Prime Minister Keir Starmer, in a joint statement with the leaders of France and Canada, warned of impending sanctions against Israel over its conduct in the ongoing war in Gaza. In addition, Britain suspended free trade agreement negotiations with Israel due to its policies in Judea, Samaria, and Gaza, summoned the Israeli ambassador for a formal rebuke, and sanctioned several settlers, organizations, and affiliated entities.
In response, Smotrich ordered the cancellation of indemnity protections previously granted to international banks working with Palestinian Authority banks. “The days of feeding the hand that bites us are over,” said sources close to Smotrich. “The British and their allies should start grasping the consequences of their actions.”
Make no mistake: When Australia, Canada, New Zealand, Norway, and the United Kingdom impose sanctions on Ministers Ben Gvir and Smotrich, democratically elected representatives of the Israeli people, they are not just targeting individuals. They are launching a direct assault on… pic.twitter.com/BwvVlNOUu8
— Awesome Jew (@Awesome_Jew_) June 10, 2025
DOWN WITH THE WHITE PAPER
Smotrich responded to the sanctions imposed against him during the inauguration of the new settlement Mitzpe Ziv in the Hebron Hills: “While I’m here, I’ve just heard that Britain has decided to sanction me because I’m blocking the establishment of a Palestinian state. The timing couldn’t be better.
“Our response will be both practical and verbal—expressing our clear contempt for the White Paper. Britain once tried to stop us from settling the very cradle of our homeland, and we will not let it happen again. With God’s determination, we will continue to build and expand.”
The 1939 White Paper was a British policy document presented to Parliament by Secretary of the Colonies Malcolm MacDonald in May 1939, just four months before Hitler invaded Poland. It marked a dramatic shift in British policy in Mandatory Palestine. The White Paper proposed the establishment of a single state for both Jews and Arabs, imposed severe restrictions on Jewish immigration—at a time when European Jews were desperately seeking refuge from Nazi persecution—and limited Jewish land purchases from Arabs.
Published on May 17, 1939, and approved by the House of Commons on May 23 by a vote of 281 to 181, the document was met with widespread outrage from the Jewish community in Eretz Israel. They viewed it as a betrayal of the promises made in the Balfour Declaration and a direct threat to the Zionist enterprise. In protest, it was scornfully dubbed the “Black Paper.” The land restrictions outlined in the White Paper were later formalized in the Land Law issued by the British High Commissioner on February 28, 1940.
During his tenure as Finance Minister, Smotrich frequently used Israel’s indemnity guarantee to correspondent banks that intermediate between international and PA banks as a political lever.
This included efforts to blunt the harsh effects of U.S. sanctions imposed under the Biden administration on settlers in Judea and Samaria, helping to preserve their ability to engage in routine economic activity. Similarly, the regularization of the Evyatar settlement and four additional settlements during the Biden administration was made possible, in part, by extending Israel’s guarantee to correspondent banks from three to four months.
Since 2017, only two Israeli banks––Hapoalim and Discount––have acted as correspondents for transferring funds to and from the Palestinian Authority. This arrangement stems from the U.S. Taylor Force Act—named after an American tourist murdered in a terrorist attack in Israel—which prohibits the transfer of U.S. funds to the PA as long as it continues its “pay-to-slay” policy of financially rewarding terrorists and their families.
For @theSNP, I welcomed the sanctioning of Ben Gvir and Smotrich but pointed out the absurdity of sanctioning Israeli ministers for their ‘”repellent and monstrous” views while continuing to supply them with weapons they need to carry out their “repellent and monstrous” plan. pic.twitter.com/RibEodKEt1
— Brendan O’Hara MP (@BrendanOHaraMP) June 11, 2025
PA CORRUPTION – RINGS A BELL?
The Israeli government grants these two banks criminal immunity for their dealings with the Palestinian Authority, alongside a financial guarantee from the Finance Ministry of up to 5 billion shekels in indemnity in case of legal action. As part of the arrangement, the Palestinian Authority was expected to implement measures to increase financial transparency within its institutions and to combat illicit funds. Since 2017, the Finance Ministry has automatically been renewing this guarantee every six months.
However, after taking office, Smotrich conducted a review that revealed the Palestinian Authority had failed to fulfill any of its commitments to implement transparency measures. This failure significantly increased the legal risk—as well as the potential financial liability—for the Israeli government, which remains obligated to indemnify banks facilitating economic ties with the PA.
The result was a glaring contradiction: while the Biden administration was imposing sanctions on settlers in Judea and Samaria—ostensibly to combat so-called “Jewish terrorism”—it simultaneously pressured Israel to maintain a financial safety net for correspondent banks and the PA financial system. All this, despite the ongoing Palestinian Authority funding of terrorism targeting Israeli citizens.
And you thought Joe Biden was a friend of Israel.
The Palestinian Authority has claimed that it reformed its institutions and ended terror-supporting practices. However, Israel maintains this is merely a front, asserting that funds continue to flow from the PA to the families of terrorists—essentially preserving the “pay-for-slay” system under a different guise.
DOWN WITH THE PA
“In light of the delegitimization campaign the Palestinian Authority is waging against the State of Israel on the international stage, I have instructed the Accountant General, Yahli Rotenberg, to cancel the indemnity provided to correspondent banks working with banks in Palestinian Authority territories,” Finance Minister Bezalel Smotrich announced late Wednesday night.
The directive could have far-reaching consequences: it would effectively end cooperation between Israeli and PA banks—a move that could trigger the economic collapse of the Palestinian Authority.
Here’s a hypothetical example: If a bank in Ramallah sends money to a customer in England through Bank Hapoalim or Discount Bank, and a problem arises—such as money laundering—the English bank could face legal action from the UK government. Under the indemnity agreement, the Israeli bank promises to compensate the English bank for any damages or losses resulting from that transaction.
Following Finance Minister Smotrich’s directive, the two Israeli banks will cease providing indemnification to PA banks. This move could swiftly trigger the economic collapse of the Palestinian Authority’s financial operations. But the impact goes beyond just banking: many Israeli companies maintain trade and service relationships with PA entities. For instance, if an Israeli factory sells food products to a merchant in Ramallah, that merchant would no longer be able to pay via transfers from a PA bank. Consequently, credit lines would dry up, goods would stop flowing, and the PA’s economy could rapidly slide into recession.
The Finance Minister’s directive to revoke protections for Palestinian Authority banks’ activities abroad is not an impulsive decision, but rather a calculated step in a broader, long-term strategy aimed at dismantling the PA—an entity Smotrich views as the poison fruit of the Oslo Accords.
Smotrich has routinely withheld funds from the PA, particularly those designated for the families of terrorists. He also deducts transfers intended for Gaza, including public-sector salaries, on the grounds that such money either supports or inevitably reaches Hamas. In addition, he offsets debts owed by the PA for electricity, water, and any other outstanding obligations he can identify.
This is part of a political balancing act. When the PA lodges complaints against Israel at international forums like the UN, Smotrich retaliates by freezing or delaying payments. The U.S. under Biden often intervened, urging Israel to release funds to avoid the economic collapse of the PA. Smotrich adjusted accordingly: when the pressure from Washington mounted, he eased up; when it subsided, he found new reasons to clamp down again.
Following the outbreak of the October 7 war, Smotrich entirely froze tax transfers to the PA in the first half of 2024. It was only in June of last year that he released a portion of the funds. According to the World Bank, before the war, Israel deducted approximately 200 million shekels monthly from the PA’s tax revenues. As of June, that figure has surged to around half a billion shekels per month—slashing the PA’s monthly tax income by roughly 50%.
The financial picture grows even grimmer when factoring in the 150,000 PA Arabs who used to work in Israel—primarily in construction—who lost their entry permits after October 7. Their inability to repay debts, combined with deep cuts to civil service salaries, and pensions, and a slowdown in private sector activity, has brought the PA economy to the brink of collapse.
I know who I’m voting for in 2026.
