Israeli and Palestinian negotiators convened Sunday in Jerusalem in the latest attempt to save teetering peace talks.
The meeting is attended by Chief Palestinian negotiator Saeb Erakat, Justice Minister Tzipi Livni, Prime Minister Benjamin Netanyahu’s special envoy Yitzhak Molcho and the head of Palestinian intelligence Majid Faraj will also attend the meeting.
Special US envoy Martin Indyk has returned to the US and is not present at the meeting.
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The teams last met on Thursday in a session presided over by Indyk, who has since returned to Washington for consultations while Israel observes the seven-day Passover holiday starting at sunset on Monday.
But following that meeting the peace process suffered a new blow when Israel said it would freeze the transfer of duties it collects on the Palestinians' behalf, in retaliation for their diplomatic offensive against Israel at the United Nations.
The monthly $111 million in taxes collected by Israel represents about two-thirds of the income received by the Palestinian Authority.
Israel was also suspending its participation with the Palestinians in developing a gas field off the Gaza Strip and putting a cap on Palestinian deposits in its banks, the Israeli official said.
The decision sparked concern in Washington.
"We’ve seen these press reports, but we have not seen an official public announcement by the Government of Israel," state department spokeswoman Jen Psaki briefed reporters on Friday.
"That said, we would regard such a development as unfortunate. We believe that the regular transfer of the Palestinian Authority’s tax revenues and economic cooperation between Israel and the Palestinian Authority has been beneficial and is important to the well-being of the Palestinian economy."
The talks hit an impasse two weeks ago when Israel refused to release as agreed a group of Palestinian prisoners and the Palestinians retaliated by seeking accession to several international treaties.
Elior Levy contributed to this report.