Washington, DC – Israel’s far-right Finance Minister Bezalel Smotrich directed his department to revoke legal protections that allow Israeli banks to work with Palestinian financial institutions, reportedly in retaliation for personal sanctions from several of Israel’s closest democratic allies.
With Palestinians in the occupied West Bank reliant on Israel’s currency and banking infrastructure, the move threatens to unravel the Palestinian economy, empower extremists and have profound destabilizing impacts. J Street Senior Vice President and Chief of Policy Ilan Goldenberg issued the following statement:
“Minister Smotrich’s action to essentially decimate the Palestinian banking system punishes everyday Palestinians and threatens chaos in the West Bank. Smotrich has long wanted to take this step and if not reversed, it will not only lead to Palestinian suffering but put every Israeli in greater danger.
Undercutting the Palestinian economy will crush businesses, drive up unemployment and undermine governance. That’s a feature, not a bug. Smotrich has been clear that he sees fueling collapse and chaos in the West Bank as a means to claim control and accelerate Israel’s takeover.
But this doesn’t just punish Palestinians, it endangers Israelis too. Israel’s own security officials have warned that forcing the West Bank into a cash economy will fuel desperation, erode oversight and make it easier for extremist groups to attract recruits and fund operations.
This government has it exactly backwards: It has a long track record prior to October 7 of enabling Hamas to stay in power in Gaza, while consistently seeking to undercut the Palestinian Authority, which cooperates with Israeli security services every day to help keep the peace. And since October 7, this government’s refusal to plan for a day after in Gaza that includes the Palestinian Authority has been at the root of its failure to build a viable replacement to Hamas in Gaza. The playbook’s clear: Deepen division between Gaza and the West Bank. Insist there’s no partner for peace.
J Street urges the Israeli government to reverse this reckless decision. It’s not just a moral and legal obligation, it’s also in Israel’s own security interests. President Trump also has a clear incentive to avoid further chaos. He should join US allies in making clear that attempts to crash the Palestinian economy and destabilize Palestinian governance are unacceptable and will be met with consequences. The only beneficiaries of more chaos are the extremists hoping to exploit it.”