The Palestinian Authority (PA), led by U.S.-backed Abbas, asked foreign powers to stop Israel from blocking the transfers, which make up 70 percent of its revenues.

Israeli Finance Minister Yuval Steinitz said he had suspended a routine handover of 300 million shekels (US$88 million) in customs and other levies that Israel collects on behalf of the Palestinians under interim peace deals.

In an interview on Army Radio, Steinitz said Israel feared the money would go to fund Hamas, an Islamist militant group that runs the Gaza Strip and whose charter calls for the destruction of the Jewish state.

Israel had threatened sanctions last week in response to Abbas's surprise announcement of a unity deal with Hamas that envisages the formation of an interim government and elections later this year.

Palestinian Prime Minister Salam Fayyad said the PA was "in contact with all international influential forces and parties to stop Israel from taking these measures".

"Threats ... will not deter us from concluding our reconciliation process. It is our policy and we must work harder to end our divisions as soon as possible," added Fayyad.

The PA is also heavily dependent on aid from donors including the United States, which has said its future assistance will depend on the shape of a new Palestinian government, expected to be formed under the unity agreement.

Hassan Abu Libdeh, the Palestinian economy minister, told the Maan News Agency the PA would be unable to meet its commitments, including paying the salaries of its employees, if the transfers were blocked. The PA pays salaries to around 150,000 people in the West Bank and Gaza.