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Israel said on Friday it would take retaliatory steps in response to a Palestinian bid to involve the International Court of Justice in the decades-old conflict.
The measures decided on by Prime Minister Benjamin Netanyahu's right-wing security cabinet include using Palestinian money to compensate victims of Palestinian militant attacks and imposing a moratorium on Palestinian construction in some areas of the West Bank.
This comes as a "response to the Palestinian Authority's decision to wage political and legal war against the State of Israel", said Netanyahu's office.
Last week, following an appeal by the Palestinians, the UN General Assembly asked the Hague-based World Court to give an opinion on the legal consequences of Israel's 55-year-old presence in disputed territories.
Israel captured the West Bank, Gaza and East Jerusalem - areas the Palestinians want for a state - in the 1967 Six-Day War. It withdrew from Gaza in 2005 but, along with neighboring Egypt, controls the enclave's borders after it was taken over by Islamists Hamas. The Palestinian Authority (PA) has had limited self-rule in the West Bank under 1990s interim peace deals.
The World Court is the top UN court dealing with disputes between states. Its rulings are binding, though it has no power to enforce them.
Israel, which collects tax money on behalf of the PA, would use 139 million shekels ($39 million) from PA funds to compensate victims of Palestinian militant attacks and would also offset the stipends the PA pays to Palestinians who carried out attacks and their families, said Netanyahu's office.
The moratorium on Palestinian building, it said, would be for a part of the West Bank called Area C, which is under full Israeli control.
"These decisions are condemned and rejected both in relation to money and other measures they are planning," said Nabil Abu Rudeineh, spokesman for PA President Mahmoud Abbas. ($1 = 3.5421 shekels)