By Michelle Nichols
UNITED NATIONS (Reuters) - The United States accused the Palestinians on Friday of manufacturing a crisis by rejecting the first 2019 monthly tax transfer from Israel because it slashed a portion designated for financial support to families of militants jailed in Israel.
The United Nations Security Council met behind closed doors to discuss the issue at the request of Kuwait and Indonesia. U.S President Donald Trump's Middle East peace envoy Jason Greenblatt represented Washington at the meeting.
"It is entirely inappropriate to focus on Israel as the source of this crisis. It is the Palestinian Authority that has chosen to manufacture the current crisis," Greenblatt told the 15-member council, according to U.N. diplomats in attendance.
The U.S. mission to the United Nations declined to comment on Greenblatt's remarks. The Palestinians have condemned the Israeli decision as "piracy."
Greenblatt and White House adviser Jared Kushner have been working on a plan to mediate peace between Israel and the Palestinians. U.N. diplomats said Greenblatt gave no details of the plan on Friday.
Palestinians have refused to discuss any peace blueprint with the United States in the wake of Trump's recognition of Jerusalem as Israel's capital in 2017.
The Palestinian decision on the tax transfer came despite increasing cash flow troubles, caused in part by U.S. aid cuts, that could destabilise the Palestinian Authority, an interim self-government body set up following the 1993 Oslo accords between the Palestinians and Israel.
Under the interim accords, Israel collects taxes on imports into the Israeli-occupied West Bank and in the Gaza Strip, an enclave under Palestinian Islamist rule since 2007, and makes monthly transfers of the proceeds to the PA.
The tax transfers make up about half of the PA's budget, according to Palestinian Finance Ministry data. On Feb. 17, Israel announced a freeze on about 5 percent of that money affecting stipends the PA pays to families of Palestinian militants killed or jailed by Israel.
"It's a unilateral decision in violation of existing bilateral agreement," Kuwait's U.N. Ambassador Mansour al-Otaibi told reporters after the Security Council discussion.
According to diplomats, Greenblatt said the Palestinian payments to militants' families "creates incentives for further acts of terrorism." The United States passed legislation last year to reduce aid to the PA unless it stopped the pay-outs.
Greenblatt called on other council members to join the United States in urging the Palestinian Authority to end the payments, diplomats said.
(Reporting by Michelle Nichols at the United Nations; Editing by James Dalgleish)