GOI WILLING TO PASS THE BUCK BUT NOT THE SHEKEL

C O N F I D E N T I A L TEL AVIV 000471 SIPDIS NEA/IPA S/EX TREASURY FOR GLASER, D. NSC FOR MICHAEL PASCUAL E.O. 12958: DECL: 02/26/2019 TAGS: EFIN KNNP KTFN KPAL PTER PREL IS SUBJECT: GOI WILLING TO PASS THE BUCK BUT NOT THE SHEKEL REF: A. 08 TEL AVIV 2713 ¶B. 08 TEL AVIV 2603 ¶C. 08 TEL AVIV 2447 ¶D. 08 TEL AVIV 2859 ¶E. JERUSALEM 259 Classified By: Amb. James Cunningham for reasons 1.4(b) and (d) 1.(C) BEGIN SUMMARY: Following Ambassador's and Econcouns' efforts to establish regular transfers of cash to Gaza with the Prime Minister's Office (PMO) and other high-level GOI officials (see reftels),econoff contacted David Zaken, Assistant Supervisor of Banks and Head of Off-Site Examination and Licensing at the Bank of Israel (BOI),to lobby for GOI approval of a transfer of funds to Gaza banks in March. Zaken told econoff on February 27 that he expects the Prime Minister's office (PMO) to approve transfer of approximately 50 million shekels (NIS) to Gaza in response to the Palestinian Monetary Authority's request for an NIS 254 million transfer to cover March salary and other obligations. Emboffs expect the transfer to take place barring a highly unlikely decision by the High Court to permit a legal challenge to go forward. END SUMMARY. 2.(U) During a February 27 discussion with econoff, David Zaken confirmed that the GOI had received the Palestinian Monetary Authority's (PMA) February 23 request for the transfer of NIS 254 million from Palestinian commercial banks in Ramallah to their branches in Gaza. He told econoff that PMO, MOD, BOI and Israeli security services were scheduled to meet on Sunday, March 1 to agree on a recommended response to the request. Zaken opined that the PMO would ultimately decide to approve transfer of about NIS 50 million to Gaza despite the much larger request, which Zaken considered to be an exaggeration of the Gazan banks' realistic needs. 3.(C) Zaken said that the PMO makes its final decision each month regarding the amount of cash that the GOI would ultimately approve for transfer into Gaza after considering the recommendations of the MOD, BOI, and security services. Zaken explained that the PMO historically approves the most conservative figure recommended to it by its advisors, usually the number suggested by the MOD on advice from the security services. Zaken has told econoff in previous discussions that the BOI bases its recommendations to the PMO on what it considers to be necessary to keep the Palestinian banking sector out of danger of collapse. The Israeli security services, however, base their lower recommended figure on security-related concerns. This lower figure has consistently been the one approved by the PMO. 4.(U) Zaken stressed that the BOI plays no role in the transfer of cash to Gaza except in its capacity as advisor to the PMO on the health of the Palestinian banking industry. He noted that the cash under discussion is already in the Palestinian banking system and emphasized that his institution has no mandate to help facilitate or otherwise physically transport bank notes already owned by Palestinian banks. The MOD is the only Israeli government authority to take part in the physical transfer as it must allow the cash through the Erez border crossing from Israel to Gaza. 5.(U) One possible turn of events that may effect the ability of the GOI to approve the PMA's request is a High Court decision on whether to hear a case brought by the Land of Israel Foundation (LIF) against the GOI after the last transfer of cash to Gaza. The LIF case claims that the GOI acted in a manner contrary to its own Anti-Money Laundering/Counter Finance of Terrorism (AML/CFT) legislation. The court has requested the PMO to provide a detailed explanation of the procedures used by the government to transfer cash to the Gaza Strip. The court is expected to rule next week on whether it will take this case, following a meeting on Monday between High Court Justice Rubinstein and Advisor to the Prime Minister, Shalom Turgeman. ********************************************* ******************** Visit Embassy Tel Aviv's Classified Website: http://www.state.sgov.gov/p/nea/telaviv ********************************************* ******************** CUNNINGHAM