WASHINGTON – US Treasury Secretary Janet Yellen and seven foreign counterparts sent Israeli Prime Minister Benjamin Netanyahu a letter, obtained by Axios, warning that his far-right Finance Minister Bezalel Smotrich might be about to cause the collapse of the Palestinian economy.
A key deadline looms: Smotrich has until October 31 approve an extension of the financial correspondence between banks in Israel and the West Bank, without which the Palestinian banking system could implode.
The US and many of its allies are concerned Smotrich won’t sign off, and that the collapse of the banking system could have dangerous ripple effects — potentially including the fall of the Palestinian Authority and a security crisis in the West Bank.
The Treasury Department and the Israeli prime minister’s office didn’t immediately respond to questions about the letter.
Smotrich, one of the most radical politicians ever to serve in an Israeli government, has made a number of demands of the Palestinian banks to prevent the illicit funding of terrorism.
The US and its allies have been working to address those demands, and the Biden administration told Israel last week it had determined that the Palestinian banks had met the conditions Smotrich set out, US officials say.
Nevertheless, it remains unclear whether Smotrich will give Israeli banks the necessary authorization to continue working with Palestinian banks.
Yellen and her counterparts from Japan, Canada, the EU, the UK, the Netherlands, Australia, and France wrote to Netanyahu on October 25 “in the spirit of partnership.”
