After months of discussion: Israel and PA agree to transfer frozen funds to Norway trust fund

Israel refuses transfer without control for fear that PA will send money to Hamas

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The Israeli government and the Palestinian Authority have agreed to implement a mechanism to ensure that so-far frozen funds collected by Israel on behalf of the PA will only be used in the West Bank and won’t reach Gaza, according to Israeli media reports.

The U.S.-backed plan proposes that Israel will transfer the funds to Norway, which will send them to the PA but only with the express permission of the Israeli government.

Israel regularly collects taxes and customs duties on behalf of the PA, which transfers part of it to its employees in the Gaza Strip, despite the Hamas takeover in 2007, as well as to family members of convicted terrorists.

Since the Hamas massacre on Oct. 7, the PA added some 3,500 terrorists and their family members to the list of people who qualify to receive the monthly stipends, according to the Jewish News Syndicate

The funds transferred to Gaza are estimated at about NIS 275 million ($73 million) per month.

In the aftermath of the Hamas massacre on Oct. 7, Israeli Finance Minister Bezalel Smotrich refused to continue the transfer of funds until a suitable control mechanism was found.

In November, the Israeli cabinet voted to transfer only part of the funds, minus the amount that the PA used to send to Gaza, however, the PA refused to the partial sum.

Even in the face of heavy pressure by the U.S. Biden administration, which envisions a reformed PA to take over Gaza after the war, Smotrich remained steadfast in his refusal to transfer the funds.

On Sunday, the Israeli cabinet finally approved the third-party transfer to Norway and, despite initial skepticism, the PA has signaled its agreement as well.

“The money or its consideration will not be transferred under any circumstances, except with the approval of Israel’s finance minister, not even through a third party,” the Prime Minister’s Office said in a statement.

“Any violation of the agreement allows the finance minister to immediately freeze” all of the funds, the statement continued, adding that the U.S. would act as a guarantor of the mechanism.

Hussein al-Sheikh, a senior official in the PA who is seen as being close to its president, Mahmoud Abbas, initially called on the international community to stop what he called “piracy” and to force Israel to transfer all of the funds.

“Any reduction in our financial rights or any conditions imposed by Israel that may hinder the Palestinian National Authority from providing for our people in Gaza is rejected by us,” al-Sheikh said.

On Sunday, Sky News Arabia reported that the PA had reversed its decision and accepted the mechanism, with a Palestinian source adding the PA would continue to pay “pensioners and needy families in Gaza” from its funds.

“Not a single shekel will go to Gaza,” Smotrich tweeted on Sunday. “And this time with American backing for the policy that I have been leading from day one.”

The latest agreement solves one of the many points of contention between the Biden administration and the Israeli government that have cropped up during the ongoing war.

The freezing of the PA’s funds threatened to further destabilize the organization and its already-weakening hold on security in the West Bank, an issue that has repeatedly caused Israeli security officials to raise an alarm in recent months.

U.S. Secretary of State Antony Blinken had urged Israel to transfer the funds during his visit to Israel last week.

The PA needed the funds to pay its security forces, who were trying to maintain stability in the West Bank, which is ultimately in Israel's interest, according to Blinken.