Israeli Finance Minister Yuval Steinitz. Photo: Beit Hashalom.

The Israeli Finance Ministry announced on Wednesday that 435 million shekels ($115 million) that were to be transferred to the Palestinian Authority (PA) in December would be used to compensate the Israel Electric Corporation for the more than 600 million shekels ($160 million) it is owed by the Palestinians.

The move comes a day after Foreign Minister Avigdor Lieberman said Israel would stop transferring tax revenues collected on behalf of the PA until at least March, in response to its statehood campaign at the United Nations last month, Israel Hayom reported.

In a statement on its website, the European Union insisted this week that Israel process its tax transfer to the Palestinians, because “Contractual obligations… regarding full, timely, predictable and transparent transfer of tax and custom revenues have to be respected.” At the same time, most EU countries—by voting in favor of “Palestine” as a nonmember observer state at the UN Nov. 29—approved a violation of the Palestinians’ contractual obligation to reaching a final status agreement with Israel through negotiations, according to the 1993 Oslo Accords.

Israel collects some $100 million a month in duties on behalf of the Palestinian Authority because the latter lacks its own facilities to handle overseas imports. The Hamas-controlled Gaza Strip is highly dependent on the Israeli grid because it lacks sufficient infrastructure to generate enough power on its own.

“The Palestinians can forget about getting even one cent in the coming four months, and in four months’ time we will decide how to proceed,” Foreign Minister Avigdor Lieberman said in a speech on Tuesday night. “Israel is not prepared to accept unilateral steps by the Palestinian side, and anyone who thinks they will extract concessions this way is wrong,” he said.

Left-wing Meretz party Member of Knesset Zahava Gal-On, however, said the tax funds “do not belong to the State of Israel but to the residents of the Palestinian Authority; the finance minister and the prime minister have overstepped their authority in a most egregious manner.”