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Israel to Use Withheld Palestinian Tax Income to Pay Electric Co Debt

Smoke rises from Jenin in the occupied West Bank, during clashes between militants and the Palestinian Authority's security forces, inside the Jenin refugee camp, on January 12, 2025. (Photo by JAAFAR ASHTIYEH / AFP)
Smoke rises from Jenin in the occupied West Bank, during clashes between militants and the Palestinian Authority's security forces, inside the Jenin refugee camp, on January 12, 2025. (Photo by JAAFAR ASHTIYEH / AFP)
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Israel to Use Withheld Palestinian Tax Income to Pay Electric Co Debt

Smoke rises from Jenin in the occupied West Bank, during clashes between militants and the Palestinian Authority's security forces, inside the Jenin refugee camp, on January 12, 2025. (Photo by JAAFAR ASHTIYEH / AFP)
Smoke rises from Jenin in the occupied West Bank, during clashes between militants and the Palestinian Authority's security forces, inside the Jenin refugee camp, on January 12, 2025. (Photo by JAAFAR ASHTIYEH / AFP)

Israel plans to use tax revenue it collects on behalf of the Palestinian Authority to pay the PA's nearly 2 billion shekel ($544 million) debt to state-run Israel Electric Co (IEC), Finance Minister Bezalel Smotrich said on Sunday.

Israel collects tax on goods that pass through Israel into the occupied West Bank on behalf of the PA and transfers the revenue to Ramallah under a longstanding arrangement between the two sides.

Since the Hamas-led attack on Israel on Oct. 7, 2023, triggered the war in Gaza, Smotrich has withheld sums totaling 800 million shekels earmarked for administration expenses in Gaza.

Those frozen funds are held in Norway and, he said at Sunday's cabinet meeting, would instead be used to pay debt owed to the IEC of 1.9 billion shekels, Reuters reported.

"The procedure was implemented after several anti-Israeli actions and included Norway's unilateral recognition of a Palestinian state," Smotrich told cabinet ministers.

"The PA's debt to IEC resulted in high loans and interest rates, as well as damage to IEC's credit, which were ultimately rolled over to the citizens of Israel."

The Palestinian Finance Ministry said it had agreed for Norway to release a portion of funds from an account held since last January with 1.5 billion shekels, calling money in the account "a punitive measure linked to the government’s financial support for Gaza.”

The ministry said as part of the deal, 767 million shekels of the Norwegian-held funds will pay Israeli fuel companies for weekly fuel purchases over the coming months. A similar amount will be used to settle electricity-related debts owed by Palestinian distribution companies to IEC.

Smotrich has been opposed to sending funds to the PA, which uses the money to pay public sector wages. He accuses the PA of supporting the Oct. 7 attack in Israel led by Hamas, which controlled Gaza. The PA is currently paying 50-60% of salaries.

Israel also deducts funds equal to the total amount of so-called martyr payments, which the PA pays to families of militants and civilians killed or imprisoned by Israeli authorities.

The Palestinian finance ministry said 2.1 billion shekels remain withheld by Israel, bringing the total withheld funds to over 3.6 billion shekels as of 2024.

Israel, it said, began deducting an average of 275 million shekels monthly from its tax revenues in October 2023, equivalent to the government’s monthly allocations for Gaza.

"This has exacerbated the financial crisis, as the government continues to transfer these allocations directly to the accounts of public servants in Gaza," the ministry said.

It added it was working with international partners to secure the release of these funds as soon as possible.

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Arab World

Iraq PM Says He Will Sign Security Deal with Britain

Iraqi Prime Minister Mohammed Shia al-Sudani attends an event marking the Iraqi Police Day at the Police Faculty in Baghdad, Iraq, January 9, 2024. (Anadolu Agency/Pool via Reuters /File Photo)
Iraqi Prime Minister Mohammed Shia al-Sudani attends an event marking the Iraqi Police Day at the Police Faculty in Baghdad, Iraq, January 9, 2024. (Anadolu Agency/Pool via Reuters /File Photo)
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Iraq PM Says He Will Sign Security Deal with Britain

Iraqi Prime Minister Mohammed Shia al-Sudani attends an event marking the Iraqi Police Day at the Police Faculty in Baghdad, Iraq, January 9, 2024. (Anadolu Agency/Pool via Reuters /File Photo)
Iraqi Prime Minister Mohammed Shia al-Sudani attends an event marking the Iraqi Police Day at the Police Faculty in Baghdad, Iraq, January 9, 2024. (Anadolu Agency/Pool via Reuters /File Photo)

Iraqi Prime Minister Mohammed Shia al-Sudani said on Monday he would sign a bilateral security deal with Britain as well as a strategic partnership accord as he headed to London for an official visit against a backdrop of historic shifts in the Middle East.

Iraq is trying to avoid becoming a conflict zone once again amid a period of regional upheaval that has seen Iran's allies Hamas degraded in Gaza, Hezbollah battered in Lebanon and Bashar al-Assad ousted in Syria.

A rare ally of both Washington and Tehran, Iraq's balancing act has been tested by Iran-backed Iraqi armed groups' attacks on Israel and on US troops in the country in the aftermath of the outbreak of the Israel-Hamas war on Oct. 7, 2023.

That has led to several rounds of tit-for-tat strikes that have since been contained, but some Iraqi officials fear an escalation after US President-elect Donald Trump takes office on Jan. 20.

"It is definitely an important timing, both as it concerns the path of Iraq's relations with the UK and as a result of the development of the (regional) situation, which requires more consultations," Sudani told Reuters on Monday while en route from Baghdad to London.

Sudani said the security deal between the UK and Iraq would develop bilateral military ties after last year's announcement that the US-led coalition set up to fight ISIS would end its work in Iraq in 2026.

The UK, Iraq’s former colonial ruler, is a key member of the coalition.

ISIS was territorially defeated in Iraq in 2017 and in Syria in 2019 though concerns remain high that it may reconstitute in remote areas of Iraq and exploit a power vacuum in Syria after Assad's ouster by opposition factions last year.

Regarding the strategic partnership agreement, Sudani said: "This is one of the key moments in relations between Iraq and the UK. I can describe it as the beginning of a new era in ties." He did not elaborate.

The visit will also see the signing of major agreements with British companies, he said.

"This is not a protocol trip," he added.

Iraq previously signed a strategic partnership deal with the US that aimed to expand relations beyond the military ties established after the US-led invasion of Iraq in 2003, which the UK also joined.

Violence has subsided in recent years and much of the country is enjoying relative stability, though the economy remains highly dependent on public-sector wages financed almost entirely by oil, leading to periodic crises when prices fall.

Sudani has tried to focus on rebuilding Iraq's war-damaged infrastructure and expanding ties with Western and Arab states while balancing relations with neighboring Iran, which backs an array of Iraqi armed groups but also provides crucial power and gas.

Mohammed Najjar, investment advisor to the prime minister, told Reuters that Iraq saw forging deals with Western and Arab states as a key way to prevent conflict.

“We are placing economy at the core of our national security policy,” he said, noting the purposefully business-heavy agenda of the visit despite tumult in the Middle East.