BEIT-UL-MOQADDAS - Israel said on Sunday it has suspended tax transfers to the Palestinians in response to Mahmoud Abbas's agreement to forge an alliance with the Islamic resistance movement Hamas.

According to Reuters, a senior Palestinian official in the occupied West Bank said Israel had no right to withhold Palestinian funds.
Asked about Israel's decision, Saeb Erekat, a senior Palestinian official, said, “Israel has started a war even before the formation of the unity government.”
Israeli Finance Minister Yuval Steinitz said he had suspended a routine handover of 300 million shekels ($88 million) in customs and other levies that Israel collects on behalf of the Palestinians under interim peace deals.
Israel had threatened sanctions last week in response to Acting Palestinian President Mahmoud Abbas's announcement of a unity deal with Hamas that envisages the formation of an interim government and elections later this year.
According to Xinhua, the Palestinian leadership censured Israel's decision to halt tax transfers. “This is clear financial piracy,” said Erekat, who is a member of the Palestine Liberation Organization's Executive Committee and the former chief Palestinian negotiator.
The accord with Hamas is an internal Palestinian matter, and “the Israeli decision is financial piracy that reflects Israel's dangerous intentions,” Erekat said.
He went on to say that Israel’s hasty response to the effort to form a Palestinian unity government provided evidence that “the Palestinian split served Israel's high interests.”
The Palestinian unity government will be a government of technocrats and will prepare for elections within a year, Erekat explained.
He also warned about the efforts to isolate the new government in the international arena.
Meanwhile, Acting Palestinian Prime Minister Salam Fayyad said the Israeli decision will not force the Palestinians to stop efforts to unite and reconcile.
Leaders of the two former rival Palestinian groups are expected to sign the accord in Cairo on Wednesday.
On Friday, Israeli Prime Minister Benjamin Netanyahu told Australian Foreign Minister Kevin Rudd that the Palestinian deal “was a step in the wrong direction.”
“Today, with the proposed unity government, it is not only that they refuse to confront people who call for the destruction of Israel, (but that) they have decided to embrace them,” Netanyahu said, according to The Jerusalem Post.
Under the Oslo Accords, the Israeli government administers tax and customs duty payments on behalf of the Palestinian Authority.
The U.S.-backed Israeli-Palestinian peace talks were revived in September 2010 but quickly fizzled after Netanyahu refused to extend a partial moratorium on the construction of settlements in the West Bank, territory Palestinians want as part of a future state.
Abbas has said he would return to negotiations only if construction in settlements in the West Bank and East Beit-ul-Moqaddas (Jerusalem), areas Israel captured in a 1967 war, was halted. Netanyahu has said that is an unacceptable precondition for talks.
The tax transfer mechanism provides Abbas's Palestinian Authority, which exercises limited self-rule in the West Bank, with $1 billion to $1.4 billion annually -- two-thirds of its budget.
“If the Palestinians can prove to us… that there is not a joint fund between the Palestinian Authority and Hamas in Gaza, I believe that we will reconsider the matter,” the Israeli finance minister said.
“We ask the entire world not to fund Hamas, so we must not do so, even indirectly,” he added.
Meanwhile, Israeli Deputy Prime Minister Silvan Shalom voiced concern at Egypt's decision to permanently reopen the Rafah border crossing into the Gaza Strip.
“It's a worrying development… The reopening of the Rafah crossing could allow the passage of arms and terrorists and we must prepare for important changes both in Egypt and at the regional level,” AFP quoted Shalom as saying on Israel's public radio on Sunday.
On Thursday, Egyptian Foreign Minister Nabil al-Arabi announced plans to permanently open the previously blocked Rafah crossing within 10 days.
Al-Arabi said that the decision was made to ease the Israeli siege on the Gaza Strip and alleviate the “blockade and suffering of the Palestinian people.”
Over 1.5 million people in the coastal strip have been living under an Israeli siege since June 2007.
Photo: Mahmoud Abbas (L) sits next to Saeb Erekat in Ramallah on April 28, 2011. (Reuters photo)