Israel's decision to release frozen public funds to the Palestinians last week came after Germany insisted it did so as a condition for the completion of the sale of a submarine, a German newspaper reported Sunday.

The Welt am Sonntag quoted sources as saying Germany had told Israel it could not go ahead with the purchase of the submarine unless it made political concessions.

Open gallery view A dolphin submarine. Credit: Tomer Appelbaum

According to the report, aides of German chancellor Angela Merkel had confidentially informed leaders of opposition parties in parliament that Israel made a concession before Berlin approved the sale on Wednesday.

On the same day, the government of Prime Minister Benjamin Netanjahu said 100 million dollars in blocked revenues such as customs duties was being passed over to the Palestinian Authority. Israel had been withholding the funds in protest at Palestine's admission to the United Nations' cultural organization, UNESCO, on October 31.

The sale of the submarine, the sixth from a German high-tech dockyard to the Israeli Navy had been held up for a year.

Merkel has repeatedly appealed to Netanyahu to unblock the Israel-Palestinian peace process.

Read this article in Hebrew: דיווח: הפשרת הכספים לפלסטינים נעשתה בתמורה לצוללת הגרמנית