Yellen urges Israel to restore economic ties with West Bank

Treasury Secretary Janet L. Yellen said Tuesday that she personally urged Israeli Prime Minister Benjamin Netanyahu to increase trade relations with the West Bank, saying it was important for the economic well-being of Israelis and Palestinians.

Ms. Yellen’s plea was outlined in a letter she sent to Mr. Netanyahu on Sunday. It was the most explicit public expression of his concern about the economic consequences of the war between Israel and Hamas. In the letter, Yellen warned of the consequences of the erosion of basic services in the West Bank and called on Israel to restore work permits for Palestinians and reduce trade barriers in the West Bank.

“These actions are vital to the economic well-being of both Palestinians and Israelis,” Yellen said at a news conference in Brazil ahead of a meeting of G20 finance ministers.

Ms. Yellen said she told Mr. Netanyahu that she was concerned that Israel’s actions would “seriously harm the West Bank economy, reduce revenues and at the same time have a negative impact on Israel.”

The letter came as the cabinet of the Palestinian Authority, which administers part of the Israeli-occupied West Bank, resigned on Monday in hopes of being able to restructure and potentially take over administration of Gaza after the end of the war. Negotiations between Israel and Hamas also resume this week in Qatar as that country’s mediators, along with the United States and Egypt, work on a deal to release some hostages held by Hamas in Gaza in exchange for Israel’s agreement to a temporary ceasefire. fire.

Senior Biden administration officials have been trying to find a solution to the conflict in Gaza, which health officials say has killed about 29,000 Palestinians. Ms. Yellen has largely focused on tracking the economic implications of the war and dealing with sanctions that the Treasury Department has imposed on Hamas and those involved in its financial network.

While the Biden administration is concerned about the humanitarian crisis unfolding in Gaza, it increasingly fears that economic unrest in the West Bank will fuel violence and further deteriorate standards of living there. The war has already taken a toll on the Israeli economy, which contracted by almost 20 percent in the fourth quarter of last year.

Ms. Yellen’s letter highlights steps the United States has taken to disrupt Hamas’ financial networks and how Israel benefits from an economically stable West Bank. She also said the suspension of permits for West Bank workers had led to significant unemployment while harming the Israeli economy.

The Treasury secretary called on Israel to ensure tax revenues reach Palestinians in the West Bank.

Since Hamas’ brutal attack on Israel on October 7, the Israeli government has withheld tax revenues it collects on behalf of the Palestinians. Traditionally, this money was redistributed to the Palestinian Authority, which used it to finance its operating budget. Israel had previously frozen and then released these tax revenues during periods of conflict with the Palestinians.

White House national security communications adviser John Kirby said last month that President Biden had discussed with Mr. Netanyahu the need to ensure that tax revenues are available to pay security force salaries. Palestinians in the West Bank.

Ms. Yellen said Tuesday she was encouraged that revenue was starting to flow to the West Bank. That money began flowing in following an agreement between Israeli and Palestinian officials earlier this month. use Norway as a temporary intermediary to transfer tax funds that Israel had frozen.

“The United States has urged the Israeli government to provide customs clearance revenues to the Palestinian Authority to fund basic services and support the economy in the West Bank,” Yellen said. “I am happy to hear that an agreement has been reached and funds have started to flow. This must continue.

The Treasury Secretary said the war in Gaza has yet to have a significant impact on the global economy. She also addressed another conflict, Russia’s war in Ukraine, which has disrupted food and energy markets over the past two years, and called on Western allies to provide more aid to Ukraine.

Ms. Yellen expressed support for the idea of ​​using the Russian central bank’s $300 billion in frozen assets to support Ukraine and suggested that seizing those funds could be a viable option.

“I also believe it is necessary and urgent for our coalition to find a way to unlock the value of these stranded assets to support Ukraine’s continued resistance and long-term reconstruction,” Yellen said. “While we must act together and thoughtfully, I believe there are strong international legal, economic and moral arguments for moving forward. »

Group of Seven economic leaders discussed several options for how they could legally use Russian money to benefit Ukraine. Ms Yellen said directly seizing assets would be the “simplest possibility” but would require legislation in the United States and Europe to authorize such an act.