Defense Minister Benny Gantz agreed on Monday to give the Palestinian Authority (PA) a NIS 500-million ($155-million) loan in a bid to save its economy as it finds itself in the doldrums and prevent its rival Hamas faction from gaining a foothold in the West Bank.
Israel, which collects taxes on behalf of the PA, has withheld roughly NIS 600 million ($186 million) in Palestinian tax revenue earlier this summer — this according to a 2018 law that requires the country to deduct stipends paid out by the PA to Palestinian terrorists and their families from tax revenue it collected from the Palestinians.
Israel will begin to repaying itself the loan out of the tax cache starting next June.
The arrangement was agreed upon by Gantz during a Sunday night meeting with Palestinian President Mahmoud Abbas in the West Bank city of Ramallah.
It was the highest-level meeting between Abbas and an Israeli minister to be made public since Israel's new government was formed in June and the highest-level meeting of an Israeli official to meet with Abbas since 2010.
Gantz is also said to have agreed to work with the PA to get approvals for thousands of undocumented spouses of Palestinians living in the West Bank who are facing deportation or arrest if caught. This group includes Palestinians who fled the Gaza Strip after Hamas' 2007 armed takeover of the seaside territory.
Hamas — an Islamist movement that controls the Gaza Strip and is defined as a terrorist group by Israel and the United States — has gained much popularity in the West Bank, controlled by Abbas' secular Fatah movement, especially following an 11-day war between the Gaza group and Israel.
A poll released in June found that around three-quarters of Palestinian surveyed viewed the Islamic militants as victors in a battle against Israel to defend Jerusalem and its holy sites.
It also found plummeting support for Abbas, who was sidelined by the war but is seen internationally as a partner for reviving the long-defunct peace process.
After the meeting, Prime Minister Naftali Bennett sought to play down any notion of a move towards renewed peace negotiations with the Palestinians.
A source close to the prime minister said that "there is no diplomatic process with the Palestinians, nor will there be one."
The session, which was not announced in advance, covered only "routine issues", according to the source. Hussein Al Sheikh, a member of Abbas' Fatah Central Committee, said the talks included "all aspects" of Palestinian-Israeli relations.
Gantz and Abbas convened two days after Bennett, who opposes Palestinian statehood, met in Washington with U.S. President Joe Biden, who backs the idea.
Bennett did not mention Palestinians in public remarks at the White House that focused largely on arch-enemy Iran's nuclear program.
Gantz has called in the past for resumption of a peace process with the Palestinians, who aspire to a state of their own in the West Bank and Gaza Strip, with East Jerusalem as its capital.
A White House statement said Biden reiterated to Bennett his support for a two-state solution to the Israeli-Palestinian conflict and "underscored the importance of steps to improve the lives of Palestinians".
But any renewed movement on the issue could shake the foundations of Bennett's government of left-wing, rightist, centrist and Arab parties that in June ended Benjamin Netanyahu's 12-year run as prime minister.
Reuters, The Associated Press contributed to this story.