The cash-strapped Palestinian Authority is seeking international intervention to coax Israel into releasing over 2 billion dollars of its funds, while also weighing the limited diplomatic options it has in its own arsenal, an EU diplomat and a Palestinian official told The Times of Israel.

PA President Mahmoud Abbas’s deputy, Hussein al-Sheikh, penned a letter to European Union foreign ministers earlier this month requesting that they press the Israeli government to release roughly NIS 8 billion ($2.4 billion) in customs duties and other tax funds that belong to the PA, the two sources said.

In addition, the PA is considering extreme measures of its own to try and influence Israel, including halting security cooperation and even declaring a state of emergency in the West Bank, according to the sources.

The PA has periodically threatened to sever security coordination with Israel — which the IDF has long credited for helping maintain stability in the West Bank — and has followed through for brief periods of time, including in early 2023. But the step also risks harming the PA’s own standing in the territory by allowing the rise of rival Palestinian factions.

In addition, though a state of emergency in the West Bank could help bring international attention to the PA’s dire financial state — while limiting spending to an absolute minimum — the roll-back of public services could also backfire on the PA by sparking protests throughout the territory that it might not be able to contain.

The PA is also considering appealing to various international organizations to hold Israel accountable for the withheld funds or to unilaterally advance its independence, but those steps have done little to date to convince Israel to reverse policies aimed at scuttle chances for a two-state solution.

Due to the PA’s sub-state status, the Oslo Accords stipulate that Israel collect clearance revenues on the authority’s behalf and transfer those funds on a monthly basis to Ramallah. The PA is heavily reliant on the funds, which make up a majority of its annual budget.

In recent years, Israel has deducted large sums from the monthly transfers, saying they are equivalent to the funds that the PA had been sending to the families of Palestinian security prisoners and those killed carrying out attacks against Israelis — a policy that Abbas instructed be terminated earlier this year.

Since the outbreak of the Gaza war in October 2023, Israel has been deducting an additional portion that amounts to the funds that the PA uses to pay for services and the salaries of its employees in Gaza.

Those deductions and others have caused the withheld funds to balloon to over $2 billion.

That is largely due to the fact that since May, the Israeli transfers have stopped entirely — part of a package of steps taken by Finance Minister Bezalel Smotrich that, according to an Israeli official, were aimed at punishing the PA for a decision made by the United Kingdom to sanction him and fellow far-right minister Itamar Ben Gvir. Roughly NIS 900 million ($270 million) have been withheld since May alone.

Smotrich also directed his office to waive the indemnity that Israeli banks have been given to correspond with Palestinian banks. The cabinet has yet to finalize the move, which would likely cripple the economy in the West Bank where the overwhelming majority of exchanges are in shekels.

Smotrich has long been a proponent of collapsing the PA so that Israel can annex the West Bank without granting equal rights to the Palestinians who live there.

During a meeting last week in Brussels, EU foreign ministers raised their alarm over the withheld funds with Foreign Minister Gideon Sa’ar, the EU diplomat and the Palestinian official said.

Sa’ar in turn indicated that the issue was out of his control and that the ministers should reach out to Smotrich, who signs off on the monthly transfer of clearance revenues to the PA. Many Western governments however have refused to meet Smotrich, believing that to do so would legitimize his policies against Palestinians.

Smotrich has withheld transfers of PA funds for months at a time in the past before eventually acquiescing in exchange for various concessions. Last year, he agreed to extend the indemnity for Israeli banks to correspond with Palestinian ones, claiming that in exchange, he had received assurances from former US president Joe Biden’s administration that it wouldn’t allow a Security Council resolution against Israel to pass before the end of the term.

During Biden’s tenure, the US led the international effort to coax Israel to release PA funds when they were periodically withheld by Smotrich.

But the current American administration led by US President Donald Trump has shown far less interest in the issue, leaving the EU — whose members collectively are the largest donor to Ramallah — to pick up the gauntlet.

Two months ago, the PA invited the US to send a delegation to verify that it is indeed implementing a reform to what critics dubbed as the “pay-to-slay” system. Abbas signed a decree in February cancelling legislation that conditioned payments to security prisoners on the length of their sentence.

The US has yet to send any officials to conduct the certification process, and Israeli officials maintain that the old PA welfare system remains in place.

But in a potential shift in the Trump administration’s approach to the PA, US Ambassador to Israel Mike Huckabee met on Tuesday with Abbas’s deputy Hussein al-Sheikh in Ramallah. It was the first-ever meeting between the pair.

During Trump’s first term, the PA refused to meet with his ambassador to Israel David Friedman, who is an ardent supporter of Israeli settlements in the West Bank.

Huckabee holds similar views, and the decision to meet him pointed to a change of circumstances in Ramallah since Trump’s first term, when the PA adopted a more dogmatic approach to its ties with the US after a brief honeymoon period.

In addition to Israel’s withholding of clearance revenues, the West Bank economy has plummeted to alarming levels due to Israel’s withholding of entry permits for over 100,000 Palestinians who worked in Israel and its settlements before Hamas’s October 2023 attack triggered the ongoing Gaza war.

The relatively higher salaries that those workers received was an important boon for the Palestinian economy, which has been further hampered by mushrooming Israeli checkpoints throughout the West Bank that have negatively impacted commerce.

Additionally, Israeli limits on the banking sector have plunged the West Bank into a liquidity crisis, with Palestinian banks unable to offload excess shekels.

With its head barely above water, the PA appears resigned to meet with anyone it can in the Trump administration to recruit its help in securing funds from Israel.

Sheikh tweeted Tuesday that he and Huckabee discussed efforts to end the ongoing Gaza war — notably highlighting the need to release the Israeli hostages — in addition to urgently delivering humanitarian aid to the enclave amid mounting reports of deaths due to complications from malnutrition.

The pair also discussed the West Bank economic crisis, the PA’s financial crisis as well as rampant, unchecked settler violence in the West Bank, the senior Palestinian official said. “Ways to strengthen bilateral relations were explored as well as the importance of the American role in achieving stability, security, and peace in the region.”

Last week, PA Prime Minister Mohammad Musfafa held what was characterized as an emergency cabinet meeting to discuss steps that Ramallah could take to address the Israeli-spurred financial crisis.

While PA officials had weighed announcing more far-reaching steps, they faced pressure from Arab countries in the region, including Saudi Arabia, to hold off in the hope that Israel would release at least the $270 million withheld since May by the end of last week, the EU diplomat and Palestinian official said.

But Smotrich has yet to budge, and his office did not respond to repeated requests for comment.

Meanwhile, the EU’s foreign policy chief Kaja Kallas warned Tuesday that “all options remain on the table if Israel doesn’t deliver on its pledges” to increase the amount of humanitarian aid entering Gaza.

The Palestinian official, speaking on condition of anonymity, expressed his hope that the EU would also tie its decision on Israel sanctions to whether Smotrich agrees to release the PA’s clearance revenues.

A spokesperson for Kallas said they were looking into the matter but did not reply by the time this story was published.

Lamenting the current political dynamics in Jerusalem, the EU diplomat said that there was no “responsible adult” in the Israeli government willing to rein in Smotrich.

“[Prime Minister Benjamin] Netanyahu has not intervened because the US hasn’t asked him to,” the diplomat said.

Nurit Yohanan contributed to this report.