Yellen Urges Israel to Restore Economic Ties to West Bank

Treasury Secretary Janet L. Yellen said on Tuesday that she had personally urged Prime Minister Benjamin Netanyahu of Israel to increase commercial engagement with the West Bank, contending that doing so was important for the economic welfare of both Israelis and Palestinians.

Ms. Yellen’s plea was outlined in a letter that she sent to Mr. Netanyahu on Sunday. It represented her most explicit public expression of concern about the economic consequences of the war between Israel and Hamas. In the letter, Ms. Yellen said, she warned about the consequences of the erosion of basic services in the West Bank and called for Israel to reinstate work permits for Palestinians and reduce barriers to commerce within the West Bank.

“These actions are vital for the economic well-being of Palestinians and Israelis alike,” Ms. Yellen said at a news conference in Brazil ahead of a gathering of finance ministers from the Group of 20 nations.

The letter came as the cabinet of the Palestinian Authority, which administers part of the Israeli-occupied West Bank, submitted its resignation on Monday in hopes that it could overhaul itself in a way that would enable it to potentially take over the administration of Gaza after the war there ends. Negotiations between Israel and Hamas are also resuming in Qatar this week as mediators from that nation, along with the United State and Egypt, work on a deal to release some hostages being held by Hamas in Gaza in exchange for Israel’s agreeing to a temporary cease-fire.

Senior Biden administration officials have been trying to mediate a resolution to the conflict in Gaza, which health authorities there say has killed approximately 29,000 Palestinians. Ms. Yellen has largely been focused on tracking the economic implications of the war and managing the sanctions that the Treasury Department has imposed on Hamas and those who are involved in its network of finances.

While the Biden administration has been concerned about the humanitarian crisis unfolding in Gaza, it is increasingly worried that economic unrest in the West Bank could fuel violence and further deteriorate living standards there. The war has already taken a toll on Israel’s economy, which contracted by nearly 20 percent in the fourth quarter of last year.

Ms. Yellen’s letter emphasized the steps that the United States has taken to disrupt the financial networks of Hamas and how Israel benefits from an economically stable West Bank. She also said that the suspension of permits for workers from the West Bank had led to significant unemployment while also harming Israel’s economy.

The Treasury secretary called on Israel to ensure that tax revenue is making its way to Palestinians in the West Bank.

Since Hamas’s brutal Oct. 7 attack on Israel, the Israeli government has been withholding tax revenues that it collects on behalf of Palestinians. Traditionally, that money has been distributed back to the Palestinian Authority, which used it to fund its operating budget. Israel has previously frozen and then released that tax revenue during periods of conflict with the Palestinians.

The White House national security communications adviser, John Kirby, said last month that President Biden had discussed with Mr. Netanyahu the need to ensure that the tax revenues are available to pay salaries for Palestinian security forces in the West Bank.

Ms. Yellen said on Tuesday that she was encouraged that revenue was starting to make its way to the West Bank. That money has started to flow following an agreement between Israeli and Palestinian officials earlier this month to use Norway as a temporary intermediary to transfer the tax funds that Israel had frozen.

“The United States has urged the Israeli government to release clearance revenue to the Palestinian Authority to fund basic services and to bolster the economy in the West Bank,” Ms. Yellen said. “I welcome news that an agreement has been reached and funds have started to flow. This must continue.”

The Treasury secretary said that the war in Gaza had not yet had a significant impact on the global economy. The United States, she said, is continuing to explore ways to get aid to innocent Palestinians and to strengthen the economy of the West Bank.