The Israeli Security Cabinet approved on Thursday a one-year extension for Israeli banks to maintain business relations with Palestinian banks in the West Bank. The extension will last until the end of November 2025.

Pressure from Biden administration and Western countries

The cabinet’s decision came in response to heavy pressure from the Biden administration and several Western countries, including the UK, France, and Germany, which warned that the Palestinian Authority (PA) was on the verge of economic collapse without the extension.
The National Security Council presented an opinion that halting banking ties would have "significant negative consequences" for Israel’s security and foreign relations. The opinion also warned of severe harm to the Palestinian economy and an increased risk of money laundering and terror financing.

Smotrich and Ben-Gvir opposed the move

Finance Minister Bezalel Smotrich opposed the extension, claiming the PA does not meet international standards for preventing terror financing and money laundering. However, Prime Minister Benjamin Netanyahu and most cabinet ministers supported the measure, leading to its approval.
National Security Minister Itamar Ben-Gvir, chairman of the Otzma Yehudit party, voted against the decision and criticized Smotrich, saying, “It’s unfortunate that my colleagues make declarations against the PA but vote differently. In my opinion, the PA should be dismantled, not supported to avoid economic collapse.”
Otzma Yehudit party head Itamar Ben Gvir holds a faction meeting in the Israeli parliament on November 18, 2024. (credit: CHAIM GOLDBEG/FLASH90)
Otzma Yehudit party head Itamar Ben Gvir holds a faction meeting in the Israeli parliament on November 18, 2024. (credit: CHAIM GOLDBEG/FLASH90)

Background and US-Israel discussions

The decision follows a previous cabinet resolution in late October to extend the banking ties for only one month. That decision was criticized by the US and other Western nations, which warned that short-term measures create uncertainty for international banks, Israeli businesses operating in the West Bank, and Palestinian citizens.
A source familiar with the matter said Israel initially limited the extension to one month as leverage, fearing the Biden administration might pursue resolutions on the Palestinian issue at the UN Security Council. However, US officials reassured Israel that no such resolutions would be advanced before January 20.

Balancing politics and stability

Despite Smotrich’s opposition, the cabinet’s decision underscores the priority placed on maintaining stability and addressing international concerns.

The move highlights ongoing tensions within Israel’s leadership over its approach to the Palestinian Authority, as well as the delicate balancing act between domestic politics and international pressures.