Netanyahu Set to Hand Over $100 Million in Palestinian Tax Money

Lieberman fights PM over release of PA tax revenues but foreign minister backs down from threat to topple Netanyahu's coalition.

Prime Minister Benjamin Netanyahu appears ready to come down from his high horse: A month after the forum of eight senior ministers decided to freeze $100 million in tax revenues collected by Israel on behalf of the Palestinian Authority, the Israeli premier seems set to release the funds in coming days.

While Foreign Minister Avigdor Lieberman remains completely against the move, and intends to fight it, he has retracted his threat to dismantle the coalition if the funds are indeed released.

Benjamin Netanyahu - Emil Salman - 23.11.2011
Emil Salman

The issue of the tax revenues transfer to the PA has been a classic example of Netanyahu's modus operandi over the past three years. First, he balks at making a decision; then, he comes under political pressure from Lieberman and is dragged into making a decision he doesn't really like; thereafter, he takes heavy flak from abroad; and finally, he returns to the original decision but fails to receive any credit for it.

"In the case, too, of the Palestinian funds, Netanyahu got the short end of the stick twice," said a senior Israeli official who has been involved in the issue in recent weeks.

For the past two weeks, Netanyahu has been keen to release the funds. Fear of a political defeat at the hands of Lieberman, however, has held him back.

On Sunday, at last, Netanyahu appeared close to a decision. Speaking at a meeting of the Knesset Foreign Affairs and Defense Committee, he announced he was considering releasing the money and that the cabinet would convene over the coming days to discuss the matter. Netanyahu's reasons for his reversal - a suspension of Palestinian activities at the UN, coupled with the fact that a Fatah-Hamas reconciliation does not appear to be on the horizon.

Lieberman was quick to respond: "I have heard numerous infantile remarks about it being their money - as if with the money, they are free to murder or preach for the murder of Jews," the foreign minister said at a meeting of his Yisrael Beiteinu faction.

Nevertheless, Lieberman did back down on Sunday from the threats he made last week. "We will vehemently oppose the release of the funds," he said. "We won't quit the government and we won't create a crisis, but we will do everything we can to prevent the money from being transferred."

The cabinet is set to discuss the matter in coming days - perhaps even on Tuesday. Netanyahu appears at this stage to have a majority for the decision to release the funds, but a source close to Lieberman said the foreign minister would fight hard. "The Yisrael Beiteinu ministers will vote against," the source said. "The decision has yet to pass, and we will try to convince the Likud ministers to oppose it, too."

The transfer of the Palestinian tax money is a technical matter that Israel carries out on a monthly basis in keeping with agreements with the PA. The funds are Palestinian money, the freezing of which is tantamount to stealing. For some unknown reason, Netanyahu has managed to turn a technical matter into a political dispute that has almost ended in a coalition crisis.

Instead of taking a decision on the matter and instructing Finance Minister Yuval Steinitz to sign the bank transfer, Netanyahu decided to bring the matter up for discussion by the forum of eight senior ministers on November 1, following Palestine's acceptance as a fully fledged member of UNESCO. The discussion ended with a decision to freeze the funds.

Netanyahu quickly realized, however, that freezing the funds was a mistake, and tried to rectify things by bringing the matter up for discussion in the cabinet two weeks later. But the premier was blindsided by his foreign minister, who, together with Steinitz, tried to force an official vote on a contrasting decision.

Attorney Isaac Molho, Netanyahu's adviser, saw where things were heading and recommended that the prime minister immediately remove the issue from the agenda. A vote to officially freeze the funds would make it impossible to release them, Molho advised.

The saga went on for another 10 days, during which the bureaus of both Netanyahu and Defense Minister Ehud Barak were bombarded with daily calls from foreign ministers from abroad, urging that the money be released. Netanyahu also came under pressure from Barak, who sometimes discussed the matter with him several times a day. Barak was supported by the entire defense establishment, which unanimously warned Netanyahu that failure to release the funds would lead to a flare-up of violence in the West Bank.

On Sunday, Barak sounded satisfied: "I am pleased some rethinking was done in light of the change in circumstances, and the fact that the Palestinians have backed down from some of their steps at the UN," he said. "This is the right opportunity to put this matter behind us and transfer the funds."