# Israel-Palestine diplomatic and financial tensions > Live situation record from CLSTR: https://clstr.news/situations/israel-palestine-diplomatic-and-financial-tensions > Updated: 2026-10-18T17:36:00.000Z. Sources: 4. Developments: 2. Tensions between the Palestinian Authority and Israeli Finance Minister Bezalel Smotrich have escalated through diplomatic condemnation and financial disputes. In late September, the Palestinian Embassy in Cyprus condemned statements by Smotrich, alleging his rhetoric advocated for the dissolution of Palestinian national identity and the application of Gaza-style military actions in the West Bank. The Embassy characterized these remarks as an incitement to “mass displacement, destruction, and the annexation of Palestinian territories.” By mid-October, reports emerged regarding a failed negotiation between Palestinian officials and Smotrich. Senior Palestinian Authority advisors reportedly proposed signing a letter opposing European Union, British, and French sanctions against Smotrich in exchange for the release of billions of shekels in withheld tax and clearing funds. The proposal was rejected by Smotrich, leaving the Palestinian Authority facing an acute financial crisis exacerbated by ongoing restrictions on Palestinian laborers and banking relations. ## Timeline ### 2026-10-18: Palestinian Authority offered deal to lift Smotrich sanctions for funds Palestinian Authority officials reportedly offered to lobby against European sanctions on Israeli Finance Minister Bezalel Smotrich in exchange for the release of billions in withheld funds. 2 sources. https://clstr.news/cluster/palestinian-authority-offered-deal-to-lift-smotrich-sanctions-for-funds ### 2026-09-28: Palestinian Embassy in Cyprus condemns Israeli Minister Smotrich The Palestinian Embassy in Cyprus has condemned Israeli Finance Minister Bezalel Smotrich, accusing his remarks of inciting military escalation and targeting the Palestinian National Authority. 2 sources. https://clstr.news/cluster/palestinian-embassy-in-cyprus-condemns-israeli-minister-smotrich --- Cite as: Israel-Palestine diplomatic and financial tensions. CLSTR, https://clstr.news/situations/israel-palestine-diplomatic-and-financial-tensions