Israeli Finance Minister Ends Palestinian Bank Waiver After Western Sanctions

Israeli Finance Minister Bezalel Smotrich has canceled a critical waiver that allowed Israeli banks to correspond with Palestinian banks, a move that risks collapsing the Palestinian economy reliant on Israel's banking system. This decision came shortly after five Western countries — Australia, Canada, New Zealand, Norway, and the United Kingdom — imposed sanctions on Smotrich and fellow far-right Minister Itamar Ben-Gvir for inciting violence against Palestinians in the West Bank. The sanctions target individuals accused of promoting extremist settler violence that undermines both Palestinian rights and the two-state solution, with the Western ministers emphasizing their continued support for Israel's security while condemning such incitement. Smotrich linked his cancellation of the indemnity to the Palestinian Authority's international campaigns against Israeli settlements, framing it as retaliation against what he calls a delegitimization campaign. The Palestinian economy's heavy dependence on Israeli shekel transactions means that without this correspondence banking agreement, the PA could face a cash economy and increased instability, a concern raised by Western governments and Israeli security officials alike. Additionally, Smotrich has threatened to interfere with the Bank of Israel's independence over restrictions on settlers' bank accounts due to international sanctions, raising fears that such actions might isolate Israel from the global banking system.