JERUSALEM: Israel has carried out its threat to suspend transfer of tax payments totaling some $100 million to the Palestinians Authority to protest this week's admission of Palestine to the United Nations' cultural agency, officials on both sides said Thursday.

The Palestinian bid to join the agency, UNESCO, is part of a broader campaign to win U.N. recognition of an independent state of Palestine, in defiance of U.S. and Israeli opposition. UNESCO's acceptance of Palestine as a member on Monday buoyed the Palestinians but infuriated Israel because it endowed the Palestinians with greater international legitimacy.

Israel later said it would punitively suspend the monthly transfer of roughly $100 million in customs, border and some income taxes that it collects each month on behalf of the Palestinians and relays to their government in the West Bank.

On Thursday, Palestinian officials said Israel has not made this month's transfer. The funds are usually sent in the first three days of the month.

An Israeli official said a "temporary hold" has been put on the money transfer "pending a final decision." The official spoke on condition of anonymity because Israel has yet to make its position public.

The funds are critical for the Palestinian Authority, which employs tens of thousands of people. The cut-off comes just days before a Muslim holiday. The Palestinian prime minister, Salam Fayyad, said he had borrowed from local banks to make sure people get paid ahead of the holiday.

The U.S. cut off contributions - some $60 million - to UNESCO after the Palestinians won membership and Canada swiftly followed suit, together depriving the agency of about 25 percent of its annual funding.

Israel Radio reported on Thursday that Israel, too, would withhold its annual $2 million contribution, but a government spokesman said he couldn't confirm that.

After gaining membership in UNESCO, the Palestinians said they planned to seek membership in other U.N. agencies as part of their campaign for statehood. But in Cannes, France, on Thursday, U.N. Secretary-General Ban Ki-moon warned that "millions" of beneficiaries worldwide could suffer from cuts in U.N. funds if Palestinians join its other agencies beyond UNESCO.

A top Palestinian official suggested the U.N chief should lean on U.S. lawmakers instead.

"I think it would be easier for Mr. Ban Ki-moon to ask the Congress to change their laws," Saeb Erekat said. "I don't think Palestine's admittance to any of these agencies will bring harm."

Palestinian Foreign Minister Riad Malki said there were no immediate plans to apply for membership at other U.N. agencies. Instead, the focus would be on the Palestinian bid for recognition of a state by the U.N. Security Council later this month.

"We want to make sure that we will succeed there, and the moment we will succeed there, our membership in the remaining U.N. organizations becomes an automatic one," Malki said.

Also Thursday, a Palestinian health official in the Gaza Strip said two Palestinian men were killed in clashes with Israeli forces.

Health Ministry spokesman Adham Abu Salmia said he had no information about the men's identities.

The Palestinians said gunbattles began after Israeli soldiers entered Palestinian farmland inside northern Gaza. They said Israeli planes then carried out an airstrike.

The military confirmed the airstrike and said the clashes began after Palestinian militants fired at soldiers on a routine patrol on the Gaza-Israel border. It said its soldiers were on Israeli soil.

The clash marred a brief lull that followed the most serious flare-up in violence in months. At least 10 militants and an Israeli civilian were killed in the exchanges of Palestinian rocket fire and Israeli airstrikes that started late last week.