Gaza Herald – Senior Palestinian officials presented an offer to Israeli Finance Minister Bezalel Smotrich, proposing to work toward lifting European sanctions against him in exchange for the release of billions of shekels in withheld Palestinian funds. The proposal was made four months ago amid a severe financial crisis facing the Palestinian Authority and economic measures imposed by Smotrich.
According to Israel Hayom, high-ranking figures within the Palestinian Authority initiated contact with individuals close to Smotrich through Hamza Daana, an aide to Mahmoud Abbas’s advisor, Mahmoud Al-Habbash. The offer involved signing a letter opposing sanctions imposed on Smotrich by the European Union, Britain, and France, and calling for their cancellation.
In return, the Palestinian officials requested the release of at least part of the approximately 11 billion shekels held by the Israeli Ministry of Finance, which are linked to Gaza and the West Bank. The goal was to alleviate the financial strain and enable the Authority to pay employee salaries. However, talks mediated by intermediaries reached a deadlock after Smotrich rejected the proposal.
The newspaper noted that Smotrich’s pressure on the Palestinian Authority operates through three parallel economic tracks: withholding funds, restricting Palestinian workers’ entry into the Israeli labor market, and tightening banking relations between Israeli and Palestinian banks. Smotrich has prevented Israeli banks from providing protection guarantees for transactions with Palestinian institutions, threatening the financial system.
Since the war began, Smotrich has deducted 275 million shekels from Palestinian funds previously transferred to Gaza. Since May 2025, when the Authority pushed for personal sanctions against Smotrich in Europe, he completely halted fund transfers. He has used the frozen money to compensate families of Israelis affected by Palestinian attacks and to settle debts owed by the Authority to the Israel Electric Corporation.
Sources close to Smotrich acknowledged that these economic measures coincide with security warnings from Shin Bet and the Israeli military regarding the potential collapse of the Palestinian Authority and the cessation of security coordination. Israeli security establishments fear deteriorating conditions in the West Bank due to the financial crisis.
Conversely, associates of Smotrich dismiss these assessments, arguing that the Palestinian Authority becomes more focused on survival during economic distress rather than engaging in confrontations, contrary to Israeli security predictions. The Palestinian Authority has not yet commented on the report.
This report was produced in the Gaza Herald newsroom.
