Israel has good reason to be upset over the vote last week in the United Nations General Assembly to grant the Palestinians the status of a nonmember observer state. As much as we understand Israel’s reaction, however, that’s no reason for the country to shoot itself in the foot.

In response to the UN resolution, Israeli Prime Minister Benjamin Netanyahu’s government said it would seize Palestinian funds and expand Israeli settlements on Palestinian territory. Those actions will encourage Palestinian extremism. If one especially controversial settlement plan comes to fruition, it will impede a final peace agreement and thereby hurt Israelis as well as Palestinians.

Proposed by Mahmoud Abbas, the moderate leader of the West Bank, the UN resolution changed little, if anything, substantively. Palestine can, with some credence, call itself a state, but the important issues such as its borders, the status of Jerusalem and the rights of Palestinian refugees remain to be negotiated.

On the other hand, politically, the statehood resolution gave Abbas and his Fatah party a badly needed boost against the militant group Hamas, which controls the Gaza Strip and has gained support for its recent rocket attacks on Israel. Now, Israel threatens to undermine Abbas, first by cutting his purse strings. The Palestinian Authority that Abbas leads relies for two-thirds of its domestic revenue on $100 million a month in taxes that Israel collects from Palestinians and is obligated to hand over.

By suspending these transfers, Israel will make it hard for Abbas to pay government salaries. That will rekindle resentments that Abbas has achieved nothing for the Palestinians, whereas Hamas, at least, is fighting for their cause. Israel says it will use the money to pay a $200 million debt to the Israeli Electric Corp., but the timing for such an action was off.

So was the timing of the settlement announcements, which also came less than two months before Israeli parliamentary elections. Most provocatively, Israel said it would begin zoning and planning for housing units in a West Bank zone called E1. The tract connects Jerusalem to the Jewish settlement Maaleh Adumim. If settled by Israelis, E1 would cut off easy access between the northern and southern halves of the West Bank, thereby disrupting its economy and society. The Israelis would be hard-pressed to find Palestinians who would accept a future state based on such a deformed entity.

The Israelis may eventually drop the E1 plan to deflect attention from their intention, announced last week, to build 3,000 additional housing units elsewhere in unspecified parts of the West Bank. Even so, they’ve made Abbas look bad. Weeks before, he offered to resume peace talks with Israel without conditions, dropping an earlier demand for a settlement freeze. The settlement announcements make it politically perilous for him to stick to that statement.

Abbas is more likely now to focus on forming a unity government with Hamas. Such discussions will probably go nowhere, as they have in the past. Still, they will give Hamas credibility.

Abbas may also consider exploiting the one potentially serious consequence of the UN resolution: Palestine can attempt to gain access to the International Criminal Court, where it might challenge Israel’s actions as an occupying force. Before the vote, Abbas had professed little interest in such a course, but Israel is giving him incentives to pursue it.

Netanyahu must figure that Israel, which has learned to endure international condemnation, could tolerate even that. And it could. The question is: Must it?

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