Israel withholds funds, weighs lawsuits against Palestinians

(Reuters) - Israel has decided to withhold critical tax revenue from the Palestinians and is seeking ways to bring war crimes prosecutions in the United States and elsewhere against President Mahmoud Abbas and other senior figures, Israeli officials said on Saturday.

The moves are in retaliation for moves by the Palestinians to join the International Criminal Court (ICC) in The Hague, with the aim of prosecuting Israelis for what they consider war crimes committed on their territory.

On Friday they delivered documents to U.N. headquarters in New York on joining the Rome Statute of the ICC and other global treaties, saying they hoped to achieve "justice for all the victims that have been killed by Israel, the occupying power".

The ICC was set up to try war crimes and crimes against humanity such as genocide. Israel and the United States object to unilateral approaches by the Palestinians to world bodies, saying they undermine prospects for negotiating a peaceful settlement of the decades-old Middle East conflict.

In a first punitive response to Abbas' approach to the ICC, Prime Minister Benjamin Netanyahu decided in consultation with senior ministers on Thursday to withhold a monthly transfer of tax revenue totaling some 500 million shekels ($125 million), an Israeli official said on Saturday.

The funds are critical to running the Palestinian Authority, which has limited self-rule, and paying public sector salaries. Israel took a similar step in December 2012, freezing revenue transfers for three months in anger at the Palestinians' launch of a statehood recognition campaign at the United Nations.

Under interim peace deals from the 1990s, Israel collects at least $100 million a month in duties on behalf of the Palestinian Authority.

In addition to the revenue freeze, an Israeli official said Israel was "weighing the possibilities for large-scale prosecution in the United States and elsewhere" of President Abbas and other senior Palestinians.

Israel would probably press these cases via non-governmental groups and pro-Israel legal organizations capable of filing lawsuits abroad, a second Israeli official said, explaining how the mechanism might work.

Israel sees the heads of the Palestinian Authority in the occupied West Bank as collaborators with Hamas militant Islamists in Gaza because of a unity deal they forged in April, the officials said.

Netanyahu has previously warned that unilateral moves by the Palestinian Authority at the U.N. would expose its leaders to prosecution over support for Hamas, viewed by Israel as a terrorist organization.

Hamas "commits war crimes, shooting at civilians from civilian-populated areas," one official said, referring to the war in Gaza last summer in which more than 2,100 Palestinians and more than 70 Israelis died.

Palestinians seek a state in Gaza, the West Bank and East Jerusalem, lands Israel captured in the 1967 Middle East War.

Momentum to recognize a Palestinian state has built since Abbas succeeded in a bid for de facto recognition at the U.N. General Assembly in 2012, which made Palestinians eligible to join the ICC.

The United States, Israel's main ally, supports an eventual independent Palestinian state, but has argued against unilateral moves like Friday's, saying they could damage the peace process.

Washington sends about $400 million in economic support to the Palestinians every year. Under U.S. law, that aid would be cut off if the Palestinians used membership in the ICC to press claims against Israel.