The deterioration in Israel’s international standing has caught headlines in recent weeks, both in Israel and throughout the world. While the current media interest will eventually abate, Israel seems to have entered a new era regarding its foreign affairs. However, it is important not to panic and remember that many interested parties on both the right and left wings are painting the Israeli public a misleading picture of the political and economic reality that Israel is facing internationally.
Primarily, many Israelis think that most of the damage to the country’s international status is being caused by radical groups calling for the dissolution of Israel on university campuses and social networks. The reality is very different, as the following case will illustrate.
On 12 June 2015, Ha’aretz published an article on a decision by the Norwegian insurance company KLP to withdraw its investments from two multinational companies that manufacture building materials. Why? Because these companies are invested in Israeli companies that operate quarries in the West Bank.
The item was drowned out by the plethora of articles on anti-Israel demonstrations, statements by leaders in Israel and abroad, and pundit analysis. However, as KLP provided a detailed explanation of its decision, it is worthwhile to pause over this action. KLP’s decision represents the real damage that Israel’s changing international status is causing to the Israeli economy – much more so than another sensationalist report about a radical Palestinian group in an Ivy League university. Importantly, similar examples abound.
The power of divestment
So what did KLP actually do? Divestment, as opposed to boycott, is not something that activists can do: only large companies or states can exclude companies from their investment portfolios. KLP is the largest life insurance company in Norway; its portfolio spans many companies throughout the world, including shareholdings in HeidelbergCement worth approximately 2.5 million USD and shareholdings in Cemex worth approximately 3 million USD.
The two companies from which KLP chose to divest operate projects in dozens of countries via subsidiaries. Two of these subsidiaries – Hanson and ReadyMix Industries – are located in Israel and operate many projects, most of them within Israel proper. However, they also operate quarries in the West Bank. The quarries were established after 1967 and the state of Israel profits from them directly by way of fees and royalties.
In terms of international law, the matter is fairly straightforward: an occupying power is prohibited from exploiting natural resources in the occupied territory for its own benefit. Israeli human rights organization Yesh Din brought this matter before Israel’s Supreme Court, claiming contravention of the laws of belligerent occupation that prohibit extraction of natural resources from the occupied territory. The Court rejected the case on the grounds that the issues it raised are of a political rather than legal nature.
KLP offered the public a detailed legal explanation of its act. Relying on analysis by the International Law and Policy Institute, the Norwegian insurance giant holds HeidelbergCement and Cemex to be in violation of international law, thereby justifying divestment. The thorough document neither declares nor implies any reservations over Israel’s right to exist, nor does it question Israel’s right to defense. The divestment is the result of financial activity that many international companies view as illegitimate – because of Israel’s control of the Occupied Territories.
So who loses? Directly – no one in Israel. There is not one Israeli company that can be said to directly suffer the consequences of this divestment. The two excluded companies notified KLP that at present, they have no intention of changing their respective subsidiaries’ policies. Indirectly, however, it is the Israeli economy that will pay the price.
For instance, the subsidiary ReadyMix Industries is one of Israel’s largest manufacturers of building material and a leading supplier of the domestic construction industry. It employs more than 1,000 people. Once such a company is tied to illegitimate activity in the business community and in international media, this has an adverse effect on all Israeli companies. The more cases of this kind – not rare in recent years – the more the Israeli market is slowly becoming associated with illegitimate activity. Let us recall that this activity does not stem from the existence of Israel, but from its policies in the Occupied Territories.
This is the economic reality of Israel’s current struggle over international respect: governments or large companies withdrawing investments that are related to the Occupied Territories or imposing sanctions on Israeli produce from the West Bank. The BDS movement has not succeeded in fulfilling any of its boycott efforts against the state of Israel itself. In that sense, the catchphrase “international isolation” is misleading: the Israeli market will not turn into Iran’s isolated, sanction-ridden market; the damage to the Israeli economy is, and will be, much more elusive and less explicit.
Also, Israel’s top ministers have been telling the public for several years that Israel is in a position to choose its economic partners. Norway won’t work? No problem, there’s China. China is playing up too? We’ll open up new markets in India. While this claim may be a good soundbite, in reality it is both absurd and childish.
In the global world, companies are no longer simply affiliated by nation. The network of Israeli and foreign companies operating in Israel is much more complex. As the KLP case illustrates, Israel has no real control over the global market within which it operates: it is enough for a multinational company to purchase an Israeli company, in order to vest the latter of any control over maintaining the considerations that previously guided its decisions.
From Myanmar to the West Bank
One major Israeli hasbara claim is that the international community has a double standard. The argument goes something like this: there is no problem, in principle, with objecting to Israel’s policy in the Occupied Territories; however, daring to voice such criticism when there are so many other injustices in the world shows that the ulterior motive for doing so is anti-Semitism.
The KLP case, and many like it, demonstrates the absurdity of this claim. If you read KLP’s lengthy explanation for its divestment, you will find that it is based on a 2013 decision to divest from the Western Sahara under similar circumstances. This goes to show that the Norwegian insurance giant is not prepared to condone any violation of the laws of belligerent occupation throughout the world – not only by Israel.
In fact, on the very day that KLP announced its divestment from the two companies operating in the West Bank, it took similar action against nine other companies: five coal companies, the Nobel Group that wreaks incredible destruction on rain forests, a tobacco company, a company that sold arms to Myanmar, and a Chinese train company.
That is not what a double standard looks like. Israeli media usually ignores the overall context of divestment and does not inform the public that often, such actions are taken not only against companies related to Israel but also against a wide range of actors that engage in what the Western business world is increasingly coming to view as illegitimate activity. The business world with which Israel is becoming associated – shady arms dealers and corporations with a bad human rights record – should worry every Israeli.
This brings us to the core question: how should we deal with divestments? In the KLP case, it is clear that no amount of hasbara will help: the company clearly did its research and knows much more about quarries in the West Bank than the average pro-Israeli propagandist. KLP even refuted the claim made by the Israeli companies that the quarries benefit the local population by providing Palestinians with jobs, and called it an unconvincing argument given that the profits from these quarries go to Israel.
There is no point in trying to find the next KLP. This case shows that the complex, dynamic global market simply does not enable targeted pressure on every single investor in companies that are somehow related to Israeli policy in the West Bank.
It is important to know that all divestments relating to Israel until now have targeted its policies in the Occupied Territories. Not one of these companies cast any aspersion on Israel’s right to exist. This reflects the current global consensus against Israel’s control of the Occupied Territories.
Many companies that operate in the West Bank have already got the message. That is why Soda Stream, Bagel Bagel and Ahava have all begun the process of transferring their activities into Israel. Yet the KLP case shows that even companies that are not physically located in the West Bank but play a role in building settlements (phone lines, security, paving roads, etc.) are exposed to divestment by foreign investors. Since most building and infrastructure companies do not operate only in the Occupied Territories, the entire Israeli public is likely to suffer the consequences of such divestment.
Truth or dare
On 9 June 2015, Israel’s Institute for National Security Studies (INSS) held a closed conference on the need to face the wave of boycotts threatening the country. Behind closed doors, the participants all admitted that the only solution is to reach an agreement enabling the establishment of a Palestinian state alongside Israel.
However, voicing this opinion in public is uncomfortable: it requires taking a clear political stand. It is much easier to fight radical groups of youngsters calling for the dissolution of Israel. How unfortunate, therefore, that the major damage to Israel in the present and in the future is not coming from those marginal activists, but from our closest allies in the West and from international corporations.
By the way, Yair Lapid bought into this radical furor when he flew to the US as a self-appointed advocate for Israel’s right to exist. The media loved it, but Lapid did nothing to effectively help Israel’s foreign relations or its international status. His impassioned statements may have worked in the past, but today global companies are asking very specific questions about Israel’s policies in the Occupied Territories. At this stage, there is no more point in lecturing them on hypocrisy or extolling the beaches of Tel Aviv.
Other than ending Israel’s control over the Occupied Territories, there is only one issue that could make the government’s position legitimate in the world: its answer to the question whether Israel’s settlement enterprise in the West Bank is justified. Changing the subject or attacking companies that choose to divest will not help. As long as there is no convincing reason to support settlements, we cannot expect the world to do so.