Updated Analysis: Economic Boycotts Against Israel

In recent months, against the backdrop of continued settlement construction, European sanctions against Israel have begun to worsen. Almost all have landed direct blows to Israelis’ wallets (detailed list below). Molad’s Updated analysis for the Davos Conference January 22, 2014 reveals that almost all of Israel’s less than optimal foreign relations are directly related to its control over the territories. When it comes to Israeli control of these territories, there is close to absolute international consensus rejecting Israel’s policies beyond the Green Line. There is no reason to believe that this situation will change any time soon.

Broadly, Israel’s international standing is a nearly unparalleled success story. The international community is interested in close cooperation with Israel in a variety of fields. Therefore, apocalyptic scenarios of Israel’s international isolation are exaggerated. Contrary to popular perception, Israel does not suffer from massive delegitmization. Most actors that come in contact with Israel unequivocally recognize its right to exist. Still, it is likely that a continuation of current Israeli policies will result in more serious damage in the international community. 

Background:

• Europe is the central player in Israel’s economy and cannot be replaced in the foreseeable future: 34% of Israel’s exports and 55% of its imports go to and from EU countries — more than any other region in the world. As Israel seeks to build a “second layer” of economic cooperation with China and India, it must be recognized that this is a long-term project and cannot replace the need for maintaining and strengthening good strategic relations with the West.
• Israel is the only non-European country that was accepted as a member of the European union’s technological research and development project. Thanks to this, Israeli scientists are involved in more than 1,2000 different EU projects. The EU is currently the largest source of public funding of scientific research in Israel. The Association Agreement between Israel and the EU also opens Israel up to many economic options. For example, it allows Israel to take loans from the European Investment Bank, or enjoy the benefits of the European Neighbourhood and Partnership Instrument (ENPI), the financial instrument that supports the European union states and Russia.
• In parallel, Israel joined a variety of other European union programs. For example, the Small and Medium Enterprise (SME) Initiatives; Galileo, the European global navigation satellite system (GNSS); the Cross-Border Cooperation (CBC) program; the European Institute of Innovation and Technology (EIT); the EUREKA network for industrial research and development; Mutual Recognition Agreement (MRA) in the field of good manufacturing practices (GMP) for pharmaceuticals, etc.
• The upgrade in Israel’s status in the EU — which means additional funding of hundreds of millions of shekels per annum to Israeli companies — is frozen due to Israel’s policies in the territories. Over the past decade, relations between the EU and Israel were due for an official upgrade. A shift of this nature would have brought Israel into even closer economic proximity to Europe, and has the power to inject hundreds of millions of shekels into Israeli companies. However, the upgrade has been frozen since 2009 given Israeli policy in the territories, settlement building in particular.
• Since the beginning of his tenure, Economy Minister Naftali Bennett has made statements about strengthening Israel’s economic ties with the East — at the expense of longstanding economic ties with Europe.  For example, at a conference of the Israeli economic newspaper Calcalist last August, Bennett said “I hope that when we look back ten years from now, we will remain with only a slight dependence on the West and America, and will have a great deal more investment in the East. […] In the East there is no tradition of anti-Semitism, in contrast to the West. […] We’re closing ourrepresentatives’ offices in the West and replicating them in the East. Months later, Bennett wrote the following to the members of his Jewish Home Party: “Something bad is happening in Europe. The prohibition on circumcision. Talk of boycott. Demographic changes [have resulted in] a rise in the percentage of Muslims in major cities. The State of Israel must understand that we’re talking about a slow trend, and it is incumbent upon us to prepare for it. In the Economics Ministry we are investing a lot of resources in unlocking the [East’s] enormous resources, China and India […] we need to diversify our economic channels. We are working aggressively to increase our trade in the East.
• Naftali Bennett, the current government’s champion of overseas travels has not once found it necessary to fly to Europe [excepting his trip to Aushwitz on International Holocaust Memorial Day].Data released by the press reveal that, while the Jewish Home Party Chairman has flown abroad extensively during this government — spending some 32 days of his first nine months in office abroad — his primary destinations have been: India, China, Indonesia, Australia, and the United States. Despite the fact that Israel faces diplomatic crisis in the West, the Economy Minister did not see fit to visit Israel’s central trading partner in an attempt to minimize the damage and strengthen Israel’s strategic trade relations.

Updated List of Recent Boycotts (beginning with the most recent):

• Luxembourg's government pension fund, DFC, has divested from Israel's five major banks due to their involvement in "illegal settlements in occupied territory". It also lists companies, including "Elbit" and "Africa Israel", in which it will not invest, citing activities beyond the Green Line. (February, 2014) 
  
• At least two foreign infrastructure companies — the Dutch company Royal Boskalis Westminister and the Italian company Condote de Agua — withdrew from the bidding process to build private ports in Haifa and Ashdod due to concerns for negative political consequences of business activity in Israel. (February 2014)
• Deutsche Bank, Europe's second largest bank and the largest bank in Germany, included Israeli Bank HaPoalim, which is active in the West Bank, on a list of companies that are ethically questionable for investment. (February, 2014) 
• Denmark’s largest bank, Danske Bank, added Bank Hapoalim to its blacklist of companies in which the company cannot invest given its coporate accoutability rules. Bank HaPoalim's involvement in settlement construction was cited as the reason. The bank had already pulled out previously from its investments in Africa Israel Investments Ltd. and Danya Cebus for the same reason. (February, 2014) 
• Norway’s Government Pension Fund Global (GPFG) reinstated its 2010 exclusion of two Israeli companies — Africa Israel Investments and Danya Cebus — due to their involvement in the construction of settlements in East Jerusalem. (January, 2014)
• The German government conditioned transfer of grants to Israeli hi-tech companies and academic institutions on a territorial clause to guarantee that monies will not be invested in companies with activities beyond the Green Line. Included in this are NIS 12 million designated for research projects and a much larger sum for the private sector. (January, 2014)
• The largest pension management company in the Netherlands, PGGM, divested from the five largest Israeli banks (Bank Hapoalim, Bank Leumi, First International Bank of Israel, Israel Discount Bank, Mizrahi Tefahot) because of their involvement in the “financing of settlements in occupied Palestinian territory.” (January, 2014) 
• The world’s largest security company, G4S, announced the completion of all contracts with the Israeli government connected to security in the settlements. The British government opened an investigation into the company’s work on the suspicion that it provides security services and technology to the settlements, contravening OECD guidelines. (G4S announced the end to its contracts in April 21, 2013; the investigation was opened on January, 2014)
• The Netherland’s largest supplier of drinking water, Vitens, severed ties to Israeli water company, Mekorot, due its activities in the West Bank. (December, 2013)
• The Romanian government has approved sending workers to Israel on condition that they do not work over the Green Line. (December, 2013)
• Israel signed the Horizon 2020 agreement with the EU. In accordance with long-standing official European union policy, the agreement prohibits funding for academic research in Israeli universities or high-tech companies associated with activity in the occupied territories. Naftali Bennett’s insistence on including West Bank institutions fueled a crisis and almost led to the end of billions of shekels of funding to Israeli universities and scientific hi-tech companies. (November, 2013)
• Holland’s largest engineering infrastructure company, Royal HaskoningDHV announced that it would pull out of a sewage project it had planned with the Jerusalem Municipality because it would be built over the Green Line. (September, 2013)
• Farmers in the Jordan Valley saw their income plummet over the last year by more than 14%, close to NIS 100 million. Food chains, particularly in the UK and Scandinavia, have stopped buying peppers, grapes, dates, and herbs that originate in the region. According to the chairman of the agricultural committee of the Jordan Valley Regional Council, peppers and grape sales to Europe fell by 50% in just one year.
• Labeling products from settlements has become common in many European countries; many have even begun to avoid stocking them entirely to avoid harming their image. Some examples include: In the UK, Marks & Spencer, Waitrose, Morrison’s, and Group; In the Netherlands grocery Hoogvliet stopped selling products originating in settlements entirely. (announced July, 2012)
• Settlement products do not enjoy duty-free status in EU countries. Unlike products made within Israel’s 1967 borders, Europe’s highest court ruled that products manufactured in the occupied territories will be taxed, as the court does not consider them part of Israel. (February, 2010)