By Dan Williams
JERUSALEM (Reuters) - Israel will give Palestinian President Mahmoud Abbas's administration around $100 million in tax revenues that had been withheld in retaliation for his statehood bid in the United Nations, Israeli officials said on Wednesday.
The sum is roughly a third of the funds Israel is meant to have transferred to the Palestinian Authority (PA) since November under interim peace accords, but has instead kept.
Israeli officials describe the handover as a one-time deal, signaling rightist Prime Minister Benjamin Netanyahu has not formally scrapped sanctions that have hurt the Palestinian Authority in the occupied West Bank and worried world powers.
The decision follows surprise setbacks for Netanyahu in a national election this month that, while giving him enough of a lead to head the next Israeli government, also set the stage for more moderate statecraft by boosting centrist challengers whom he must now consider as coalition partners.
Israel collects some $100 million a month in duties on behalf of the Palestinian Authority, money Abbas badly needs to pay public sector salaries. It began withholding the funds after Abbas, sidestepping stalled diplomacy, secured a Palestinian status upgrade at the United Nations in November.
PA tax authority official Ahmed al-Helou told Reuters that Israel spent the October levies to help pay off $200 million it says the Palestinians owe the Israel Electric Corporation.
Israel said last month it would withhold revenues from the PA until March at least.
The PA's economic troubles were raised this week in a meeting between Netanyahu and Tony Blair, peace envoy for the United States, United Nations, European Union and Russia, an Israeli official said.
Following those talks, the official told Reuters on condition of anonymity, "we have agreed to transfer one month's payment, because of the difficult financial situation there."
"This is a one-time decision and there is no decision yet on what will happen next," the official said.
RETURN TO NORMAL?
Al-Helou said he expected Israel to renew normal payments in mid-February, when the Palestinians hope to get back $114 million owed from December.
An Israeli Finance Ministry spokeswoman said she knew of no such decision. The handover of money announced on Wednesday, she said, represented January's levies.
Asked when the $100 million payment would be made, the spokeswoman said "possibly as soon as today".
Israel has previously frozen payments to the PA during times of heightened security and diplomatic tensions, provoking strong international criticism, such as when the U.N. cultural body UNESCO granted the Palestinians full membership in 2011.
Abbas's U.N. victory was a diplomatic setback for the United States and Israel, which were joined by only seven other countries in voting against upgrading the Palestinians' observer status to "non-member state", like the Vatican, from "entity".
Hours after the U.N. vote, Israel said it would authorize 3,000 new settler homes in the West Bank and East Jerusalem and expedite plans for thousands more in a sensitive area close to Jerusalem. Critics say these plans would kill off Palestinian hopes of a viable state.
Netanyahu's government looks likely to be replaced with a coalition more accommodating of the Palestinians. The runners-up in the January 22 vote, the centrist Yesh Atid and left-leaning Labour parties, both demand Israel try to revive stalled peacemaking.
(Additional reporting by Ali Sawafta in Ramallah; Editing by Mohammad Zargham and Rosalind Russell)