The United Nations on Thursday called on Israel to unlock millions of dollars in taxes owed to the Palestinian Authority that were withheld after it decided to join the International Criminal Court.
A senior UN official told the Security Council that the freeze of about $127 million imposed on January 3 was in violation of the Oslo agreements between Israel and the Palestinians.
"We call on Israel to immediately resume the transfer of tax revenues," said UN Assistant Secretary-General Jens Anders Toyberg-Frandzen.
The United States and the European Union have criticized Israel's retaliatory move in response to the Palestinian application to join the ICC, which could investigate war crimes complaints against Israel.
The 15-member council was meeting to discuss the Middle East after rejecting in a vote last month a resolution on Palestinian statehood that had been strongly opposed by the United States.
The UN official told the council that recent developments had further reduced prospects for reviving Israeli-Palestinian peace talks.
The Palestinians and Israel are "now engaged in a downward spiral of actions and counter-actions," warned Toyberg-Frandzen.
The council was meeting as Arab foreign ministers gathered in Cairo decided to make another attempt to win approval for a UN resolution on ending Israel's occupation of Palestinian territories.
Several Arab countries were tasked with "the necessary communications and consultations to submit a new Arab proposal to the Security Council," according to a statement from the Arab League.
- A resolution, but not now -
Several council members said they would be ready to support a resolution to revive peace prospects, but New Zealand said it should be discussed after the Israeli election in March.
Spanish Ambassador Roman Oyarzun Marchesi said the text should be "submitted at the politically appropriate time," in a reference to the Israeli polls.
US Ambassador Samantha Power, who voted against the Palestinian resolution last month, announced a meeting later this month of the Mideast quartet -- comprised of the United States, the European Union, the United Nations and Russia -- to chart the way forward.
"I would say that we do not think that another Security Council resolution at this time would be constructive," said US State Department spokeswoman Marie Harf.
The failed Arab-backed resolution set the end of 2017 as the deadline for a full Israeli withdrawal that would pave the way to Palestinian statehood.
Australia also voted against the measure but China, France and Russia were among eight countries that voted "yes," leaving it just one vote short of the nine required for adoption.
The outcome spared the United States from resorting to its veto, a move that could have undermined its standing in the Arab world just as it is leading a campaign against Islamists in Iraq and Syria.
Five countries seen as having a more pro-Palestinian stance began their term at the Security Council this month -- Angola, Malaysia, New Zealand, Spain and Venezuela.