This is all “very simple,” but — wouldn’t you know it! — a lot of people don’t seem to understand it. Or are pretending not to. But that’s ok, because Bezalel Smotrich’s more than willing to explain. By way of a straw man. And a flamethrower.

The Palestinian Authority’s financial system, such as it is, “is infected with terrorism up to its neck.” The US Treasury frowns on anyone caught transacting with intermediaries suspected of financing terrorism. In this case, “frowns on” means “tends to sanction.” Treasury sanctions are a financial death sentence. As such, nobody in their right mind would be caught dead transacting with the PA, or any other “murderous Arabs” for that matter.

The quotes are from a statement Smotrich issued on Thursday, when another point of contention arose between the Biden administration and Israel’s right-wing government.

At issue are Palestinian lenders and their correspondent banks in Israel. Actually, wait. Let me back up. At issue is International Criminal Court prosecutor Karim Khan (who requested arrest warrants for Benjamin Netanyahu and Yoav Gallant this week) and also Spain, Ireland and Oslo Accords host Norway (which on Wednesday recognized an independent Palestinian state).

Khan also requested warrants for Yahya Sinwar, Mohammed Deif and Ismail Haniyeh, who were accused by Khan’s office of “unconscionable crimes,” but paradoxically, that almost made the situation worse in the eyes of Israelis: Khan, Israel despaired, drew a tragic moral equivalence between a non-state actor which employs rape and murder to achieve political ends and a state actor which bombs and starves civilians to prove a point. “How dare you, sir!” as Jack Ryan might put it.

As for Spain, Ireland and Norway, they’re in the business of handing out “gold medals” for terrorists, according to Israeli foreign minister Israel Katz, who summoned the countries’ ambassadors for a “severe scolding” session, including a private screening of a video depicting the abduction (and “severe scolding”) of female Israeli soldiers by Hamas. (The optics of the bloody three-minute montage — which Hamas says contains incorrect translations, as if the group’s rhetoric on October 7 is what caused the war — are either awful or great, depending on your level of cynicism. Angry Arabs with rifles berating bound Israeli women is a powerful anti-Palestine propaganda message for the likes of Smotrich.)

Long story short, Smotrich had seen enough for one week, so he decided to dial down the tension — by throwing gas on a raging dumpster fire.

“I won’t allow bureaucrats to downplay the issue!” he shouted, in a letter to Netanyahu outlining half a dozen steps Israel should take in order to “exact a significant toll from the ICC” and “stop the momentum,” a reference to the ongoing shift in international opinion both towards the war and Palestinian statehood.

One of those steps entails halting the transfer of revenues to the PA and ending indemnity for the Israeli correspondent banks which facilitate those transfers. “The state of Israel takes upon itself the risk of lawsuits… due to its activities with the Palestinian banking system,” Smotrich said Thursday, describing the situation as “an indescribable absurdity.”

The problem for Smotrich is that Janet Yellen doesn’t agree. If you’re the finance minister of a foreign country and you’re trying to justify a controversial decision by reference to the threat of Treasury sanctions, you really need the Treasury Secretary to back you up. Instead, Yellen lambasted Smotrich.

Cutting off Palestinian lenders would “threaten economic stability in the West Bank,” she chided, addressing the media while preparing for a G7 meeting. Smotrich’s proposal, Yellen warned, would imperil the provision of electricity, water, fuel and food in the territory. It’d also effectively eliminate $2 billion of exports “on which Palestinian livelihoods depend,” as she put it. In addition, the PA would be further constrained in its capacity to pay salaries.

Of course, that’s the whole point. Smotrich wants all of that. And a lot more. Another one of the six steps he proposed to Netanyahu calls for one new West Bank settlement for every unilateral recognition of a Palestinian state. He’s already instructed the finance ministry to plan for three retaliatory settlements following the coordinated recognition announcement from Spain, Ireland and Norway.

That was hardly the end of it. Smotrich demanded the approval of 10,000 new housing units in the Shiloh settlement and nixed the so-called “Norwegian outline,” under which Israel transfers to Norway tax revenue collected on behalf of Palestinians. Monthly disbursements of that revenue were thrown into limbo by the war.

Norway’s intervention provided for the payouts to resume under a framework that kept the share bound for Gaza frozen. When the interim plan was agreed earlier this year, Norway’s foreign ministry said it was up to the PA to use the funds responsibly instead of — you know — diverting the money to Gaza.

In the letter to Netanyahu, Smotrich declared that, “No funds will be transferred to the PA until further notice.” Yellen disagrees. “I think this would have a very adverse effect also on Israel,” she said Thursday, of the plan to sever the correspondent bank link. The Biden administration, she went on, “will try to do all that we can diplomatically to ensure that this arrangement continues.”

As Bloomberg helpfully noted, the Israeli banks themselves are keen to be “relieved of [the] arrangement” given the embedded legal exposure (i.e., the liability associated with facilitating transfers to banks that may engage in illicit activities, including funneling money to terrorists). And far from being aggrieved by Yellen’s rebuke, Smotrich surely intended to elicit just such a response — so he could turn around and accuse the international community of hypocrisy. Which is precisely what he did Thursday.

“When I decide it’s time to stop…. turning a blind eye [to terrorist financing], the West goes into hysteria and comes to me with complaints,” he jeered. “The West should demand that the PA financial system act according to accepted international standards and the fight against terrorism, then it would have no problem receiving money and conducting business relations with banks in Israel and anywhere the world.”

Smotrich intended that as a “gotcha” moment. Someone forgot to tell him that flagrant hypocrisy is part and parcel of US foreign policy, something 34,000 dead Gazans understand all too well.