Yuval Steinitz, finance minister of Israel, announced that Israel would not transfer the $120 million collected for Palestine to the Palestinians but instead would send it to the Israel Electric Corporation and other Israeli bodies to pay down debts. The Israel Electric Company
was initially founded in 1923 as the Palestine Electricity Corporation. The IEC is now a state-granted monopoly, 99.85% owned by the Israeli government. Steinitz
"I have no intention of transferring the taxes due to the Palestinian Authority this month.They will be used to pay the PA debts to the Israeli electricity company and other bodies."
The Palestine Authority uses the tax money to help pay government salaries. Nicole Johnston of Al Jazeera said that 150,000 public service employees in Palestine are paid by the funds. These funds are governed by the 1994 Paris Protocols but Israel uses the funds as levers and punishment and has frozen payments to the Palestine Authority before during times of diplomatic tension. The funds constitute a considerable portion of the Palestinian budget.
The Israeli government warned that it would react against approval of observer status for Palestine at the UN. Israel claims that Palestine is leapfrogging negotiations and disregarding peace accords. The Palestinians say that the move should not interfere with any new talks. However, the continued extension of settlement construction by Israel will make it unlikely that any talks will occur in the near future.
said after the approval:
"The attack on Zionism and the State of Israel forces us to reinforce and speed up the implementation of the settlement plans in all the areas the government has decided to settle in. These are not my words, but the words of the government of Prime Minister Yitzhak Rabin in 1975 following the UN resolution that compared Zionism to racism."
Netanyahu added that Israel would:
"continue to build in Jerusalem and in all the places of the State of Israel's map of strategic interests. The PA's unilateral move at the UN is a blatant violation of agreements, and therefore the Israeli government rejects the General Assembly resolution."
Going to the UN is hardly a unilateral move. It is the Israeli actions that are unilateral. What Netanyahu is objecting to is any move that would go outside negotiations between Israel and the PA brokered by staunch U.S. ally the United States. The fierce reaction is to Palestinians resorting to a process that Israel cannot control.
The new housing construction will make it difficult for Palestinians to travel between towns. The 25km trip from Bethlehem to Ramallah will now be about 120km to go around the settlements. The move makes it difficult
for Palestinians to have any sort of contiguous state. The construction also places one more obstacle to resuming peace talks with Israel.
Many countries have objected
to Israel's new settlement construction including the United States. However, the U.S. is unlikely to actually punish Israel for its actions. The U.S. joined Israel in condemning the Palestinian move to achieve observer state status at the UN.