RAMALLAH, West Bank — Palestinian President Mahmoud Abbas returned triumphantly to the West Bank on Sunday, receiving a boisterous welcome from thousands of cheering supporters at a rally celebrating his people's new acceptance to the United Nations.
An Israeli decision to cut off a cash transfer to the financially troubled Palestinian Authority, following an earlier decision to build thousands of new homes in Jewish settlements, failed to put a damper on the celebrations.
But Palestinian officials acknowledged they were undecided on what to do with their newfound status, and were waiting for forthcoming Israeli elections and new ideas from President Barack Obama before deciding how to proceed.
"One day, a young Palestinian will raise the Palestinian flag over Jerusalem, the eternal capital of the state of Palestine," Abbas told a jubilant crowd of about 5,000, echoing a phrase the Israeli leaders often use to describe Jerusalem. "Palestine has succeeded in something historic at the United Nations. The recognition of Palestine as a country changes everything. It highlights new realities."
"We now have a state," Abbas said to wild applause outside his headquarters in the West Bank city of Ramallah. "The world has said loudly, 'Yes to the state of Palestine.' "
The U.N. General Assembly last week overwhelmingly endorsed an independent Palestinian state in the West Bank, East Jerusalem and the Gaza Strip, territories Israel captured in the 1967 war.
The move to upgrade the Palestinians to a nonmember observer state does not change much on the ground, but it carries deep potential significance.
The vote amounted to an international endorsement of the Palestinian position on future border arrangements with Israel and a condemnation of Israeli settlements in the areas claimed by the Palestinians.
Israeli Prime Minister Benjamin Netanyahu rejects a return to Israel's 1967 lines. Israel remains in control in parts of the West Bank and considers East Jerusalem, the Palestinians' hoped-for capital, an integral part of its capital city.
Israel also continues to restrict access to Gaza. Israel withdrew seven years ago from the coastal strip, and it is now ruled by Hamas Islamic militants who regularly fire rockets at Israel.
Backed by the United States, Israel campaigned strongly against the statehood measure, accusing the Palestinians of trying to bypass direct peace negotiations, which it said were the only viable path to a Palestinian state.
The Israeli lobbying efforts failed miserably. Just eight other countries voted with Israel, and even its closest allies in Europe, including Germany, Italy, France and Britain, either abstained or voted with the Palestinians.
On Sunday, the Israeli government said it would withhold more than $100 million in funds it transfers to the Palestinians each month. Instead, it said the money — taxes and customs duties that Israel collects on behalf of the Palestinians — would be used to pay off its debts to Israeli companies, including $200 million owed to the state-run Israel Electric Corp., government officials said.
Israel has taken similar measures in the past before eventually releasing the money.
Following the U.N. vote, Palestinian officials said little was expected to change until Israel holds parliamentary elections on Jan. 22. Public opinion polls suggest Netanyahu is likely to win re-election at the head of a hard-line coalition.
Palestinian officials said they were hopeful that Obama would present a comprehensive peace plan after the Israeli vote.
"If there is a meaningful peace process, we will join. If not, then we are taking the Palestinian cause to the international community," said Husam Zomlot, a spokesman for Abbas.
At the weekly meeting of his Cabinet, Netanyahu said the Palestinian statehood campaign was a "gross violation" of past agreements calling for disputes to be resolved through negotiations.
"Accordingly, the government of Israel rejects the U.N. General Assembly decision," he told his Cabinet. He also pledged to continue building settlements in the West Bank and Jerusalem.
"Today we are building, and we will continue to build in Jerusalem and in all areas that appear on Israel's map of strategic interests," he said.
The Palestinians view continued settlement expansion as a show of bad faith and refuse to return to negotiations unless construction is frozen.
U.S. officials voiced disappointment over the measures Israel has taken in response to the U.N. bid. The Obama administration had asked Netanyahu to avoid taking punitive steps that might weaken Abbas, whom it sees as a moderate leader.
Information from the Los Angeles Times was used in this report.