The security cabinet on Sunday approved the implementation of a law to cut over half a billion shekels in funds to the Palestinian Authority over its payments to terrorists and their families.

Applying the law has faced opposition from the security establishment, who worry it could destabilize the situation in the West Bank.

A statement from the security cabinet said that ministers agreed Prime Minister Benjamin Netanyahu could withhold NIS 502,697,000 ($138 million) in PA tax revenues, the amount Israeli officials say the PA paid out in stipends to attackers and their families in 2018.

Get The Times of Israel's Daily Edition by email and never miss our top stories Free Sign Up

Netanyahu also instructed security authorities to examine additional payments the PA is making in relation to terrorists and their families, the statement said.

“The amount frozen will be adjusted accordingly,” it noted.

The $138 million will likely be deducted incrementally over a 12-month period, according to local media reports.

Senior Palestine Liberation Organization official Ahmed Majdalani accused Israel and the United States, which has cut hundreds of millions of dollars in Palestinian aid, of an attempt at blackmail.

“The occupation government is seeking to destroy the national authority in partnership with the US administration of Donald Trump,” Majdalani said in a statement.

He described the move as “piracy.”

Acting Palestinian Prime Minister Rami Hamdallah responded to the cabinet decision by calling the witholding of funds “collective punishment.”

Economy and Industry Minister Eli Cohen, a member of the security cabinet, welcomed the decision.

“It can’t be that the families of terrorists who murdered Jews in cold blood, enjoy a stipend or wage for those acts of terror,” he said. “Today, in the cabinet, we stopped that absurdity.”

Israel collects around $127 million a month in customs duties levied on goods destined for Palestinian markets that transit through Israeli ports, and then transfers the money to the PA.

The law withholding the tax revenues, passed by the Knesset last year, is opposed by Israeli security officials who say further cuts to the PA budget could hurt security cooperation and destabilize the West Bank.

The government has refused to implement the measure, though politicians have faced public pressure to crack down on the PA’s payments, which are viewed as incentivizing terror attacks.

At the meeting, security officials warned ministers that Palestinian Authority President Mahmoud Abbas would not halt the payments but rather cut funding for the Gaza Strip, which is ruled by the Hamas terror group, Channel 12 television reported. Officials cautioned that a further cut to services in the enclave, already ravaged by economic and humanitarian difficulties, could ignite violence directed at Israel.

Such a development would shatter a fragile calm which has settled on the Israel-Gaza border following months of violent protests.

Netanyahu, who is seeking reelection this April, has come under increasing pressure to act in the wake of the brutal murder of an Israeli teen in a terrorist attack earlier this month.

Last week, he told ministers that he would deduct the payments immediately after he received permission from the security cabinet.

A West Bank-based Palestinian man, Arafat Irfayia, 29, was arrested the day after the body of 19-year-old Ori Ansbacher was found in a southern Jerusalem wood on February 7.

The case has sparked outrage across the country. Irfayia, who reenacted the events for investigators, claimed he murdered Ansbacher for Palestinian nationalistic reasons. Israel’s Shin Bet security agency said that during interrogation, he admitted also raping Ansbacher.

Agencies contributed to this report.