There is indeed an absurdity in the question of what Israel should do about the money that it has collected in the form of customs duties and taxes for a Palestinian Authority that will soon be administered by Hamas. On the one hand, there is no disputing that this money belongs to the Palestinian Authority by right. On the other hand, how can any country be expected to hand over money to a second country whose government is dedicated to the first country’s destruction?

What, then, is Israel to do?

The first thing is to find some way to put this money in international escrow in order to make it clear that Israel does not regard it as its own, while at the same time delivering the message that the Palestinian Authority cannot expect to see a penny of it as long as it is run by an Israelocidic party. The second thing is to act as quickly as possible to put an end to such situations in the future.

This is something that can easily be done. The only reason that Israel has collected such money on the Palestinians’ behalf until now is that, since its occupation of Gaza and the West Bank in 1967, all foreign goods entering these areas have done so via Israeli ports, and from them, overland through Israel. Had goods ordered by private Palestinian importers and (starting with the establishment of the Palestinian Authority in 1993) Palestinian government agencies not been taxed at the same rate as goods imported for use in Israel, they would have ended up being considerably cheaper, thus leading to a reversal of roles. Instead of Israel being a conduit of goods meant for the Palestinians, Palestinians would have become a conduit of goods meant for Israelis, to whom they would have been resold at far lower prices than those charged by Israeli importers, thus leading to the speedy collapse of Israel’s entire customs and taxation system. The only way to prevent this was for Israel to impose a single tax regime on Palestinians and Israelis alike and to remit the Palestinians’ share of the proceeds to their government.

And yet there is absolutely no need for this system, which has in effect left Israel owing hundreds of millions of dollars to Hamas, to continue. In the case of the Gaza Strip, from which all Israeli settlers and troops were withdrawn last summer, it is already totally anachronistic. In the case of the West Bank, it soon will be.

For years, the Gaza Strip has been surrounded by an impenetrable security fence that – although this was not one of its original goals – also served to prevent the smuggling into Israel of heavily taxed imports like automobiles and electrical appliances by Palestinians who had bought them more cheaply. The only rationale for continuing to tax such products was to keep them from being siphoned off into Israel before they reached the Strip, on their way from Israeli ports like Ashdod and Haifa.

The fact of the matter is, however, that such imports no longer have to reach the Gaza Strip through Israeli ports at all. They could just as well arrive via Egypt, from which, in the wake of the Israeli withdrawal, Gaza now has its own border. And once the security fence now under construction in the West Bank is completed, an event projected for late next year, a similar arrangement would be possible between that area and Jordan.

To be sure, at both the Egyptian and Jordanian crossing points, Israel would still have to exercise its right to inspect shipments of imports for concealed weaponry, a danger that is more menacing than ever with Hamas in power. But although a Hamas government would no doubt find this obnoxious, the problem would be Hamas’s, not Israel’s. If Hamas refused to accept cars or refrigerators that first had to pass through Israeli security, the Palestinians under its control would simply have to make do without new cars or refrigerators.

In general, Hamas’s victory in the Palestinian elections should serve as a prod for Israel to eliminate Palestinian dependence on it in all areas. Apart from ordinary imports, the Palestinian Authority currently gets all its electricity, water, gasoline, and cooking gas from Israel as well. Yet here, too, there is no reason why Egypt (from which Israel itself buys much of its oil and gas) and Jordan cannot take Israel’s place. Although this is not something that can be done overnight, it is certainly technologically feasible to link Palestinians to the Egyptian and Jordanian electric grids. Egypt can easily supply Gaza with the same Nile water that it has ambitious plans to irrigate Sinai with, and waterpoor Jordan could be assisted by Israel, both directly and in the form of help for desalinization projects, in which Israel is a world leader.

For many years after the 1967 war, the many different peace plans proposed for the Israeli-Palestinian conflict all included the element of economic integration and a joint infrastructure between Israel and any Palestinian entity or state. Had peace been attainable, such integration would indeed have been a good idea.

But peace has not been attainable, and the Hamas victory is one more sign that it will not be for a long time to come. And in the absence of integration, there is no sensible choice but total separation. To try to have a bit of one and a bit of the other can only result in situations like the present one, in which Israel ends up with money in its pocket that rightfully belongs to those who would like to see it dead.

Mr. Halkin is a contributing editor of The New York Sun.