US Presses Israel to Safeguard Palestinian Economy Amid Threat of Financial Crisis
Washington’s concerted efforts to prevent economic collapse in the West Bank have reached a critical juncture as the Israeli government’s decision not to renew a crucial banking waiver threatens to unleash a financial crisis that could destabilize the region.
US Sanctions and Pressure on Israel
The US administration has issued an executive order providing legal grounds for sanctioning non-US citizens undermining peace and stability in the West Bank. This move comes as Democratic Senator Chris Van Hollen of Maryland has called for Washington to impose sanctions on Israeli National Security Minister Itamar Ben Gvir, who has been accused of promoting settler violence.
Sanctions Packages Against Extremists
US officials have hinted that they are developing sanctions packages against Ben Gvir and fellow extremist Bezalel Smotrich, which could be implemented swiftly. However, there is concern that such a move might embolden the duo, leading to the very outcome the US seeks to avoid.
Preventing Economic Catastrophe
To prevent an economic catastrophe, Israel must extend the banking waiver for at least a year, experts say. Failure to do so would have severe consequences, including the collapse of the Palestinian economy and potential unrest in the West Bank.
Israeli Security Agencies Oppose Smotrich’s Plan
The Israeli military, Shin Bet, and Mossad have all reportedly opposed Smotrich’s plan, warning Prime Minister Benjamin Netanyahu of scenarios ranging from reduced security cooperation with the PA to escalating violence and Hamas exploiting public discontent.
Impact on Israel’s Economy
Israel’s own economy could feel the impact of a Palestinian economic collapse, with potential disruptions in trade, payment settlements, and increased transaction costs. The World Bank has warned that informal financial transactions could surge, further destabilizing the region.
US Pressure on Netanyahu’s Government
US officials should intensify pressure on Netanyahu’s government to renew the waiver, emphasizing the urgent need for action. While Treasury Secretary Janet Yellen has publicly expressed alarm, senior US officials are reportedly lobbying Israeli officials privately.
Alternative Measures and Contingency Plans
If Israel refuses to renew the waiver, the US, European Union, and Arab states should prepare alternative measures to mitigate the economic fallout in the West Bank. This could include injecting foreign currency into the Palestinian Central Bank or creating special mechanisms for financial clearing and payment.
The US could also consider providing comfort to Israeli banks by issuing a guidance letter from the Department of Justice, assuring them that they will not face enforcement action for facilitating transactions with Palestinian banks.
Deadline Approaches
As the deadline for renewal approaches on July 1, the stakes are high. Failure to act could unleash a severe financial crisis and economic collapse in the West Bank, causing irreparable harm to the Palestinian population.
Urgent Action Required
The US should urge Israel to renew the waiver, clarifying the consequences of inaction for bilateral ties. Contingency plans should also be prepared in case Israel refuses or renews the waiver for a significantly shorter period.
Conclusion
In this critical moment, decisive action is required to prevent economic catastrophe and promote stability in the West Bank and beyond.