Israel is trying to collapse the Palestinian Authority. First step by destroying the Palestinian economy.
Palestinian Authority employees wait to withdraw cash from an ATM outside a Bank of Palestine branch in Khan Younis, southern Gaza, on 2 April 2020
Qassam Muaddi and the Mondoweiss Palestine Bureau write in Mondoweiss on 23 September 2025:
Following the wave of global recognitions of the State of Palestine from key Western and European nations, Israel has been stepping up its plans to render these gestures moot by implementing measures meant to cripple and delegitimize the Palestinian Authority (PA).
Earlier this month, Israel approved a massive settlement plan that would split the West Bank in two. Since October 7, 2023, it has plunged the PA into an economic crisis by withholding nearly 7 billion shekels (around $2 billion) in Palestinian customs money. And in recent months, the Israeli army has launched repeated invasions into the heart of Palestinian cities in the West Bank, ostensibly under PA control.
But Israel still hasn’t used its most important trump card in responding to the recent Western and global recognitions of a Palestinian state. It involves a piece of paper, and the person holding it is Israel’s hardline Finance Minister, Bezalel Smotrich.
Every year, the Finance Minister renews an indemnity letter allowing Israeli banks to accept money transfers from Palestinians in the West Bank, shielding Israeli banks from anti-terrorism laws they might be at risk of breaking by dealing with Palestinian banks. Smotrich has repeatedly threatened to revoke this letter in response to global sanctions against hardline Ministers like himself and Itamar Ben-Gvir, which could cause the collapse of the Palestinian banking sector — and possibly, the Palestinian Authority. Smotrich has recently been periodically renewing the letter in four-month stretches, using the intervals as pressure points to threaten the PA.
This is the spearhead of Israel’s campaign of economic warfare against Palestinians in the West Bank. Here’s why it could hasten the collapse of the PA and formally bring about a one-state apartheid reality.
Israel’s financial warfare against the Palestinian Authority
The Palestinian Authority’s stand-in for a central bank is the Palestinian Monetary Authority (PMA), which is prohibited from printing money or having its own currency under the economic agreements the PA signed with Israel during the Oslo Accords. This means that nearly every economic transaction Palestinians make has to go through Israel.