The Dubai Championships was fined a record $300,000 by the governing body of women's tennis (WTA) on Friday after top Israeli player Shahar Peer was barred from taking part in this week's event.
The WTA said in a statement the fine was the largest levied against a WTA Tour member and Peer would be awarded $44,250 -- the average prize money she earned per tournament in 2008.
"The actions taken today are intended to redress the wrongs suffered by Shahar Peer, who was victimised by an unjust policy of discrimination by the UAE," said WTA chief Larry Scott.
"These actions are also intended to send a clear message that our Tour will not tolerate discrimination of any kind and that we will never allow this situation to happen again in the UAE or elsewhere," he added in a statement.
Peer had to forfeit her place in the lucrative $2 million tournament after the United Arab Emirates, which has no diplomatic ties with Israel, denied her entry into the country.
However, after receiving global condemnation for excluding Peer, the UAE was forced on Thursday to change its policy of barring Israeli athletes from competing in the Gulf state.
The UAE, like most Arab countries, has no diplomatic ties with Israel and routinely denies entry to its citizens.
Tensions have been heightened after the three-week Israeli offensive against the Gaza Strip, which killed 1,300 Palestinians and 14 Israelis. Although the conflict ended in January it caused deep anger around the Arab and Muslim worlds.
The WTA was determined to hand out stiff sanctions to the Dubai tournament despite being assured all Israeli athletes would now be given "a special permit" by the UAE government to enter the country if they have qualified for a tournament.
"The fact they fixed their policy going forward doesn't make it okay what happened last week," Scott told Reuters on Thursday.
Peer's doubles partner, Germany's Anna Lena Groenefeld was awarded $7,950 because she could not compete in Dubai as a result of the Israeli's exclusion.
The WTA said the compensation being paid to Peer and Groenefeld would come from the fine levied against the tournament with the balance "donated to a charity or charities, to be determined by the Tour in consultation with Ms Peer".
Peer would be allocated 130 ranking points, which the WTA said was equal to total she earned during the same week in 2008.
For the Dubai Championships to be included in the 2010 calendar, the WTA wants the tournament to post a $2 million financial performance guarantee by July 1 and it also set down further conditions.
The Tour wants written confirmation that all players who qualify for the tournament will be allowed to compete in Dubai and that Israeli players should receive proof of an entry permit at least eight weeks before the event.
The WTA also wants a guarantee Peer will be offered a wildcard to play in the 2010 Dubai tournament even if she fails to qualify by ranking.
Before the UAE changed its policy regarding Israeli athletes, pressure had been mounting for next week's ATP tournament to be cancelled in Dubai if Israeli doubles specialist Andy Ram had also been blocked from competing.
However, Ram was given "special permission" to compete on Thursday, ensuring the men's event will go ahead as planned.