"If the Palestinians continue to dump their waste water, polluting rivers and the aquifer, Israel will stop supplying them," Infrastructure Minister Uzi Landau told army radio.
"Palestinians must meet their duties and connect to sewage treatment plants. Otherwise, we'll give them drinking water but none for industrial or agricultural needs," Landau added. The West Bank aquifer is a crucial source of water for both Israel and the occupied West Bank.
The Western-backed Palestinian Authority, which is aiming to build the institutions and infrastructure of a viable, independent state by mid-2011, has blamed Israel for the lack of treatment plants.
"This is not a new position and we reject it completely. It is the Israelis who are keeping us from building waste water treatment plants," Shaddad al-Attili, the head of the Palestinian Water Authority, told AFP.
"We have been asking to carry out projects since 1997 but the Israelis have not given us permits to build stations in Areas B and C," he added, referring to large areas of the West Bank that are under strict Israeli restrictions.
Israeli Water Authority says 73 percent of waste water from the two million Palestinians in the West Bank -- excluding east Jerusalem -- is not treated, unlike 70 percent of the sewage from 300,000 Israeli settlers in the territory.
"We give them clean water and all we get in exchange is sewage water," said Landau, a member of Foreign Minister Avigdor Lieberman's ultra-nationalist Israel Beitenu party.
Israel largely controls joint water resources and supplies most of the water consumed in the West Bank.
Army radio said the threat was linked to Palestinians' refusal to connect to Israeli water treatment plants.
International organisations say Israel's water supplies fall short of Palestinian needs, but also that the Palestinians have failed to set up the infrastructure and institutions needed in the water sector.
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