Israel said Wednesday it will resume sending millions of dollars in customs duties to the Palestinian Authority, nearly a month after it froze transfers over the Palestinians' admission to UNESCO.
"Prime Minister Benjamin Netanyahu approved the renewal of the transfer of tax monies, for the time being, to the Palestinian Authority," the Israeli leader's office said in a statement.
"The decision was taken at the conclusion of the meeting of the ministers of the Forum of Eight in the wake of the cessation of unilateral steps by the Palestinian Authority," it said.
"In the event that the Palestinian Authority resumes taking unilateral steps, the transfer of funds will be reviewed."
The fund transfers were halted after Palestinian president Mahmud Abbas successfully secured Palestinian membership in the UN cultural agency UNESCO last month, over objections from Israel and Washington.
The victory came after he submitted a bid to join the United Nations as a full member, a request still being examined but likely to fail because of a US veto at the Security Council.
Israel's reference to the "cessation of unilateral steps" came despite Abbas's insistance in recent weeks that he remains committed to the UN bid, which the Jewish state has decried as way to avoid negotiations.
The Palestinians have said, however, that they are not currently seeking membership in any other UN agencies after UNESCO admitted them on October 30, prompting the Israeli freeze on the fund transfers the next day.
Netanyahu's inner cabinet has since met several times to discuss releasing the funds, but opposition from ministers including hawkish Foreign Minister Avigdor Lieberman has kept the freeze in place.
Lieberman was the sole member of the Forum of Eight on Wednesday to vote against releasing the money.
"This is an unfortunate decision that will not help in the rebuilding of the relationship between Israel and the Palestinians, but will rather allow the Palestinian Authority to use this money in order to encourage and commemorate terror," the foreign minister said in a statement after the vote.
"In addition, the PA is also continuing its activities against Israel in the international arena, including incitement, calling for boycotts and making unfounded accusations against Israel in the International Criminal Court in Hague," Lieberman added.
Israel had been expected to release the funds this week, after international criticism of the freeze and comments from Netanyahu.
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On Monday, the Israeli prime minister told his foreign and defence affairs committee that there had been "a respite on the Palestinian side from unilateral moves."
"We don't know how long this situation will continue, but things seem to have calmed down," said Netanyahu.
Defence Minister Ehud Barak has supported the resumption of the transfers.
"Our stance is that monies should be transferred, they belong to the Palestinians, are collected by us," he said on Monday. "I'm happy the issue is being rethought."
Palestinian negotiator Saeb Erekat said that the international community must pressure Israel not to repeat in future what he called its "piracy."
"This money belongs to us and it should no longer be blocked by the Israeli government, under any circumstances," he told AFP. "The world must ensure that Israel does not begin."
Tony Blair, representative for the international peacemaking Quartet, praised the decision to release the funds in a statement released on Wednesday afternoon.
"This is an important decision," said Blair, who represents the Quartet's members Russia, the European Union, United Nations and United States.
"I have discussed the importance of a smooth transfer of revenues with Prime Minister Netanyahu and other ministers in the Israeli government on many occasions."
"This is Palestinian money which is critical to sustaining the Palestinian Authority and should be transferred on a regular and predictable basis," he added.
Every month, Israel transfers tens of millions of dollars in customs duties which are levied on goods destined for Palestinian markets that transit through Israeli ports, and which constitute a large percentage of the Palestinian budget.
The transfers are governed by a 1994 agreement with the Palestinians.
But Israel often freezes the transfer of the funds as a punitive measure in response to diplomatic or political developments viewed as harmful.
The last time the monies were frozen was in May, shortly after Fatah signed an unexpected unity deal with Hamas, which rules the Gaza Strip.