U.S. fears Palestinian ruin as Israel denies funds

The United States voiced fears Thursday that the Palestinian Authority may be teetering on the brink of collapse because of a lack of funding, as Israel withholds taxes and donor aid stalls.

Washington has been in urgent talks with regional leaders as well as other stakeholders in the frozen Middle East peace process in a bid to try to release more funds.

“It’s true we’re very concerned about the continued viability of the Palestinian Authority if they do not receive funds soon,” State Department spokeswoman Jen Psaki told reporters.

Such funds would include the resumption of monthly Israeli transfers of Palestinian tax revenues, or additional donor assistance, she said.

In January, Israel suspended $127 million in tax revenues which should have been transferred to the Palestinian Authority as punishment for its move to join the International Criminal Court (ICC).

The Palestinians’ membership in the ICC, which takes effect on April 1, sets the scene for potential legal action against Israelis for alleged war crimes, in a move which has infuriated the Jewish state.

But the Palestinian economy has also been hit by a slowing of aid funds, as donors have failed to make good on $5.4 billion promised at a Cairo conference in October to help rebuild the impoverished Gaza Strip after last year’s 50-day war.

The IMF reported last month that the war between Israel and Gaza drove the Palestinian economy of Gaza and the West Bank into its first contraction since 2006.

Psaki warned that if the Palestinian Authority ceased security cooperation with Israel “or even decides to disband, as they have said they may do as early as the first week of March,” it could trigger a dire situation.

“We could be faced with a crisis that could gravely impact both the Palestinians and the Israelis, with potentially serious ripple effects...,” she said.

U.S. officials have been in talks with counterparts from the EU, U.N., Russia and the Arab League to discuss the situation.

U.S. Secretary of State John Kerry met Thursday with the head of the Arab League, Nabil al-Arabi, praising him as a “solid partner” in many issues including the Middle East peace process.

Israeli-Palestinian talks have stalled since Kerry’s dogged bid for a comprehensive peace treaty collapsed spectacularly in April.

Psaki acknowledged that given the situation it “would not seem possible to get further assistance to the Palestinian Authority through Congress in the near future.”

Washington was warning partners “about the importance of stability in the region and the implications that go well beyond security,” she added.

“Hundreds of thousands of students could be without teachers, hospitals could cease to function... The cost to both Palestinians and Israelis could be immense in both financial and human terms.”