Another recent pact would have Israel transfer to the sales tax revenue taken from the 100,000 Palestinian workers employed before the current closure — inside Israel's pre-1967 cease-fire lines.

Oded Eran, who was heavily involved in negotiations with the Palestinians on economic issues, said that there has been no directive to stop these payments, which vary from 30 million to 50 million shekels a month.

Israel also transfers millions of cubic meters of water to the Palestinians each year and supplies it with all of its electricity. Eran said that this has also not been impacted at all by Barak's announcement.

While economic ties have not been affected, security coordination and consultation has for all intents and purposes ended, Lt.-Gen. Shaul Mofaz, the chief of staff, said Monday. The joint Palestinian-Israeli patrols ceased once the violence began.