According to media reports, the Palestinian Authority is considering declaring bankruptcy due to its dire financial situation. A sharp decrease in international aid and $11 million in monthly tax revenues withheld by Israel—due to the PA’s prisoner and martyr payments policy—appear to be the impetus for the bankruptcy discussions between Palestinian Prime Minister Mohammad Shtayyeh and the Palestinian Finance Ministry. Neither of these severe challenges to the financial viability of the Palestinian Authority is new or surprising. But the acute possibility of financial collapse is merely one of many existential threats currently facing the Palestinian Authority, amid brazen attempts by the far-right figures driving policy in the Netanyahu Israeli government to hasten the PA’s demise. The implications of such an upheaval would be disastrous—not only for Palestinians, but also for Israel.

The current government certainly inherited a volatile Israeli-Palestinian arena and a Palestinian Authority whose power and competence had reached a historic nadir. In response to a wave of Palestinian terror targeting Israeli population centers, the Bennett-Lapid government had launched Operation Breakwater to combat militant activity in the heart of the West Bank’s large Palestinian cities—where formally the Palestinian Authority Security Forces (PASF), not the IDF, is responsible for security—in order to prevent terror attacks. While the operation may have succeeded in that regard, the increasing visibility and frequency of Israeli operations in hotspots like Jenin and Nablus have had the adverse effect of sidelining the PASF, undermining Palestinian governance, and inspiring the proliferation of armed militant groups. The Palestinian Authority has lost control over large swaths of its territory. Having failed to deliver Palestinian statehood, its raison d’être, the PA is increasingly seen by Palestinians as merely a subcontractor of the Israeli occupation rather than a state-in-waiting. Its notorious corruption and nepotism, opaque bureaucracy, inept administration, authoritarian practices, and perpetually delayed elections have significantly eroded its popular legitimacy. According to the latest poll from the Palestinian Center for Public Security Research, 77% of Palestinians believe that President Mahmoud Abbas should resign.

Nablus, the West Bank

The PA certainly bears responsibility for a great deal of these shortcomings. But Israel has done its part to weaken the Palestinian Authority and actually strengthen Hamas and other hostile actors in the Palestinian arena. From the (necessary, but regrettably unilateral) 2005 Gaza disengagement that left a power vacuum in the Strip, to the 2011 Gilad Shalit prisoner swap that saw over 1,000 Hamas terrorists released, to Netanyahu regularly facilitating suitcases of Qatari cash entering Gaza in the late 2010s, successive governments have pursued policies that strengthened Hamas while undermining the Palestinian Authority. Meanwhile, over the past decade, the mainstream Israeli center-right and right-wing have heightened their rhetoric against the Palestinian Authority as a terror-supporting government whose interests inherently run counter to Israel’s. Following the passage of the 2018 Taylor Force Act in the U.S., which banned U.S. funding from directly benefiting the PA in response to its prisoner and martyr payments policy, the Knesset advanced a similar measure to withhold tax revenues from the PA that it collects on its behalf in order to compensate for the funds that the PA pays to the families of those who commit acts of terror against Israelis. Regardless of the merit of such measures, they have exacerbated the Palestinian Authority’s dire financial straits and contributed to the current situation in which employees in the PA’s bloated public sector are only receiving 80% of their salaries. 

All of this is to say that the crisis currently threatening the PA’s viability was not born in 2023 and predates the sixth Netanyahu government. Nonetheless, the current Israeli government’s policies in the West Bank and in the Israeli-Palestinian writ large are already making matters far worse, to the extent that the PA’s very survival hangs in the balance. With Bezalel Smotrich and other far-right ministers driving government policy, over the last sixth months Israel has taken several steps to advance creeping annexation of the West Bank, bolster settlements in high-friction, densely populated Palestinian areas, and undermine prospects for Palestinian statehood, all of which result in a weaker PA. These include transferring oversight over Area C construction and other functions of the West Bank Civil Administration to Smotrich in his capacity as a civilian minister within the Defense Ministry, approving a record-breaking 13,082 settlement housing units in the past six months, and whitewashing a total of 12 illegal West Bank outposts with more yet to come. While it always faced nearly insurmountable bureaucratic barriers, the approval of Palestinian construction in Area C—especially in the periphery adjacent to Area A and B Palestinian towns and cities, into which natural expansion would typically occur—is now entirely out of the question. The dramatic rise in large-scale terror rampages by settlers against Palestinians, including this past week in Turmus Ayya, Umm Safa, Luban ash-Sharqiya, and elsewhere, has never enjoyed more open and unambiguous support from elements of the political echelon than it does now. Increased settlement construction and outpost legalization, settler violence against Palestinians, and bureaucratic changes to how Israel administers the West Bank are part of an effort to “defeat” the Palestinians and the Palestinian Authority in Area C while solidifying Israel’s dominance over the entire territory. The far-right ideologues in the government make no secret that they see the Palestinian Authority as the enemy, that Israel would be better off without it, and that Israeli-Palestinian cooperation stands in the way of their aspirations.

The illegal West Bank outpost of Evyatar by Yair Dov, licensed under a Creative Commons Attribution 4.0 (License linked to image)

Those aspirations, of course, are not to reduce bloodshed and maintain Israel’s security, because for all its faults, the Palestinian Authority remains Israel’s most essential partner on the ground in the security realm. Security cooperation with the Palestinian Authority Security Forces is one of the most effective tools that Israel has to maintain regional stability and combat and prevent Palestinian terror attacks. Security aside, if the PA were to collapse, the onus would be on Israel to fill the vacuum in Palestinian cities and pick up the tab for education, health, sanitation, and other basic services. In 2018, Commanders for Israel’s Security estimated that full annexation of the West Bank and the dismantlement of the PA would cost Israel nearly 15 billion dollars annually—not to mention the damage such a scenario would do to Israel’s Jewish and democratic character. As Netanyahu recently acknowledged to MKs behind closed doors, Israel needs the PA and has an interest in ensuring that it can still function, and that it should be prepared to “assist it economically.” Israel’s participation in security summits focused on de-escalation with the PA in Aqaba and Sharm el-Sheikh in February and March indicates that Netanyahu is willing to engage with the PA when security benefits outweigh his personal political costs.

But Netanyahu and other (very relatively speaking) doves like Defense Minister Yoav Galant and National Security Advisor Tzahi Hanegbi are not the ones setting government policy in the West Bank. And even if they were, Netanyahu’s view of the PA reflects how it is seen now by a good number of Palestinians: a useful tool for Israel to defray the cost of occupation, not a vehicle for statehood. Following February’s Aqaba summit, he immediately and unflinchingly disavowed his own government’s commitment not to advance settlement construction because his ideal PA is a subservient one that maintains quiet, not a political partner to which Israel has any sort of accountability. Flanked by partners who would be more than happy to watch the Muqata’a crumble to dust, Netanyahu is right to affirm the extent to which Israel relies on the PA and needs to prevent its collapse—financial, political, or otherwise. But undermining the PA’s political legitimacy at every turn puts its longevity in serious jeopardy, inevitably leaving Israel to pick up the pieces in managing a violent, undemocratic, binational reality.

The Muqata’a in Ramallah, the West Bank by PalestinianLiberator, licensed under a Creative Commons Attribution 3.0 (License linked to image)