US Treasury Secretary Janet Yellen was very clear yesterday when she warned Israel that isolating the Palestinian National Authority financially would have catastrophic consequences. And she did it from Italy, in statements to the press before the opening of the meeting of the economic ministers of the G7, the seven richest democracies in the world, which began in the Piedmontese town of Stresa. According to Yellen, separating Palestinian banks from their corresponding Israeli banks would lead to a “serious humanitarian crisis.”

Yellen wanted to speak out after Israeli Finance Minister Bezalel Smotrich urged Prime Minister Beniamin Netanyahu to take “harsh punitive measures” against the Palestinian National Authority, including isolating it economically, for “its unilateral actions against Israel, as its goal of unilateral recognition” and his support for legal cases against Israel in international courts. Everything comes after the coordinated action of Spain, Norway and Ireland to recognize the Palestinian State on May 28. “When they act against Israel, there must be a response,” said Eytan Fuld, a spokesman for the minister.

The economies in the West Bank and Gaza do not have their own currency, but are based on shekels, Jordanian dinars or US dollars. Formally, they need Israeli banking entities to carry out commercial transactions. Two Israeli lenders, Bank Hapoalim and Israel Discount Bank, act as correspondent banks for this purpose, and according to the Oslo agreements, Israel must enable this financial channel.

These Israeli entities, the only ones in the country that maintain connections with Palestinian banks, are protected with an exemption that protects them from lawsuits in which the Palestinian National Authority is involved for alleged “transfer of funds to terrorist groups,” but the license expires on July 1 and Smotrich threatens not to renew it. The exemptions, until the Hamas attack on October 7, have been renewed annually since 2016.

“These banking channels are critical for processing transactions that enable nearly $8 billion a year in imports from Israel, including electricity, water, fuel and food, in addition to facilitating nearly $2 billion a year in exports on which the country depends. Palestinian livelihood,” Yellen noted.

The far-right Israeli minister has also begun to delay the transfer of some funds from the taxes that Israel collects from the Palestinian National Authority, funds that represent a large part of the Palestinian budget when Ramallah is already in a serious financial situation. This month he has only been able to pay half of the salaries of his officials. According to White House National Security Advisor Jake Sullivan, this is a strategic error because it “destabilizes the West Bank” as well as impedes “providing basic products.”

The issue will be discussed these days at the G7 meeting in Stresa, northern Italy, where Washington hopes that other countries will follow it in its criticism of Israel. The United Kingdom has already joined in expressing its concerns.