In the first major move by western powers signalling discontent over Israel's conduct in Gaza, the European Commission is seeking to partially suspend Israel's participation in the bloc's flagship research programme.
Though the proposal is not a sanction, it is viewed by Israel as a serious rebuke. It could lead to more consequential measures previously floated in response to Israel's breach of a human rights clause embedded in EU-Israel relations.
Among the options discussed was the suspension of preferential trade relations – an alarming prospect for Israel, given that the EU is its biggest trading partner. The relationship, however, is not reciprocal, as Israel ranks only 31st among the EU's export markets.
Kaja Kallas, the EU's foreign affairs and security chief, has warned more measures could follow, if the humanitarian situation in Gaza continues to deteriorate.
Trade or ban?
The EU Commission on Monday proposed banning certain Israeli companies from participating in an EU-funded programme called the EIC Accelerator.
The move targets firms involved in so-called dual use technology – meaning they can also be used for military purposes – such as cybersecurity, drones and artificial intelligence.
The EIC Accelerator is a funding programme that gives lump sum grants in equity investment. Since the launch of the Horizon research programme in 2021, Israeli entities have received about €900 million ($1.03) in EU funding, including €200 million through the EIC Accelerator, a senior EU official said.
The proposed suspension would not affect existing contracts but would bar Israeli companies from participation in the accelerator.
Based on the EIC's track record in Israel, "one can presume that the effect of this suspension would be very real", the official said, speaking under condition of anonymity.
To be adopted, the proposal requires the backing of 15 of the bloc's 27 member countries representing at least 65 per cent of the bloc's population.
EU ambassadors in Brussels discussed the proposal on Tuesday, but a number of them said they were still analysing the proposal. A decision is expected in the coming weeks.
Four countries – the Czech Republic, Hungary, Bulgaria and Austria – said they would oppose it. But, importantly, Germany and Italy did not express outright rejection.
"There was a clear shift in tone from the Commission, which said that dialogue had not worked," an EU diplomat told The National.
Germany is Israel's closest ally within the EU and its second most important weapons provider. Chancellor Friedrich Merz this week signalled a shift in position, saying he "reserved the right" to support proposals to suspend the EU-Israel Association Agreement. Italy, under Prime Minister Giorgia Meloni, has deepened ties with Israel and the US.
Yet Dutch Prime Minister Dick Schoof has already expressed support for the proposal, triggering a sharp rebuke by Israeli President Isaac Herzog.
The commission believes it is putting forward "appropriate and proportionate measures" in accordance with article 79 of the Euro-Mediterranean agreement. It states that if either party believes the other has failed to fulfil the agreement, "priority shall be given to [measures] that least disturb the functioning of the agreement".
The proposal has been described as "the absolute minimum" by close observer Martin Konecny, director of the European Middle East Project think tank in Brussels. Blocking non-EU countries' participation to Horizon Europe has been done in the past for political reasons, as in the case of the UK and Switzerland.
"Horizon Europe has been used as political leverage in cases of bilateral disputes with close partners," Mr Konecny told The National. "The EU Commission chose to not use it in the case of Israel despite serious violations of international law."
The EU Commission insists comparisons are not appropriate because neither country was fully integrated into Horizon Europe when negotiations began. "There is no precedence of suspending in part or in full an Association Agreement to Horizon Europe," the senior EU official said.
Why now?
The proposal comes after the EU's foreign affairs services conducted an internal review that found Israel had breached a human rights clause, article 2, enshrined in the treaty governing EU-Israel relations called the EU-Israel Association Agreement. The open-sourced review was based on findings by international bodies such as the International Court of Justice and the UN.
At their last meeting in Brussels before a summer break, the EU's 27 foreign ministers had decided to not act on any of the 10 proposals put forward by Ms Kallas.
They instead said they would wait to assess how Ms Kallas's announcement on July 10 of a deal with Israel to allow more aid flow into Gaza would be implemented. Nearly three weeks later, it appears to have had little effect. The EU's humanitarian affairs department, DG Echo, is unable monitor the situation on the ground and bases itself on reports from partner UN organisations.
In its report covering the mid-July period, DG Echo said: "Despite recent agreement with Israel to increase aid delivery to Gaza, there is still no tangible increase, with important stocks of relief items stuck and piling up at the borders."
A big deal?
After 21 months of war, and with no ceasefire in sight amid rising reports of mass starvation in Gaza, Israel appears to be suddenly under significant international pressure. US President Donald Trump said "real famine" was unfolding. Meanwhile, Israeli NGOs have accused their government of genocide for the first time.
Last week, 27 countries, including the UK, France, Italy and Japan called on Israel to immediately end the war in Gaza and condemned what it described as the "drip feeding of aid and the inhumane killing of civilians". On Tuesday, the death toll in Gaza surpassed 60,000.
Israel continues to deny reports of starvation, labelling them a fabrication, and accuses Hamas of stealing aid despite mounting evidence of the contrary.
Suspending trade preferences under the EU-Israel Agreement was one of the 10 options put forward by Ms Kallas. As in Monday's proposal, it must first be tabled by the EU Commission.
However, it needs unanimous backing within the EU council to be adopted. This remains unlikely, considering strong support within the EU for Israel from countries such as Hungary and the Czech Republic, in addition to Germany. A full suspension of the agreement would also require unanimity.
Up to now, the EU's decision to do nothing was largely due to German opposition. Increasingly frustrated smaller nations such as Slovenia have taken symbolic measures, including a visa ban against two extremist Israeli ministers announced on July 17. The Netherlands took a similar measure on Monday.
This has exposed the EU's weakness as a foreign policy player: "We see a coalition of smaller states that are not powerful enough to solve the problem on their own," said Ana Bojinovic Fenko, chairwoman of international relations at the University of Ljubljana.
The EU is stuck in a state of "non-decision", she told The National. Most EU countries preferred to do nothing to avoid acting alone.
What can EU countries do?
One reason it has been so hard to make a decision regarding the EU-Israel Association Agreement is that the path forward is murky, even for diplomats in Brussels. The EU has suspended association agreements with 25 countries but nearly always in the context of an African country after a coup d'etat, starting with Niger in 1996.
The capacity of EU nations to impose sanctions at national level is quite restrained, said Clara Portela Sais, an EU foreign policy expert at the University of Valencia. That is because individual countries cannot make decisions that may affect the harmonised regulations of the EU's common market. They allow for the free circulation of people and goods across the bloc.
For this reason, visa bans announced by EU countries against Israeli ministers do not include frozen assets. The UK, which is no longer part of the EU, issued both a visa ban and an asset freeze against Israeli Security Minister Itamar Ben-Gvir and Finance Minister Bezalel Smotrich on June 10.
"The common market also includes financial flows," Ms Portela Sais told The National. "This is more of a grey area, so this is actually not something that member states do individually. Actually, most of them refrain from doing so."
A simple visa ban is the easiest way to express symbolic discontent because it has no impact on the common market. "Irrespective of legal aspects, the reason why the member states have a preference for acting through the EU is because the political message is much stronger," Ms Portela Sais said.
Implementing an arms embargo on Israel is another largely symbolic measure that has been adopted by a number of countries, including Spain. However, even that is complicated by the fact that dual use items are part of the common market, Ms Portela Sais said. "Only purely exclusively military items are excluded from the common market but nowadays, there are very few arms embargoes that only cover military items," she added.
For EU countries to make decisions at EU level, there needs to be political will – meaning a large enough coalition of countries moving together. In February 2024 – at a time when nearly 30,000 Gazans had been killed – Ireland and Spain wrote to the EU Commission asking to review the human rights clause of the EU-Israel Association Agreement. At the time, no other country followed and the request was dropped.
Now, the number of Gazans killed by Israel has doubled. That is why rights groups accuse the EU of lacking political will. If more countries had joined Spain and Ireland at the time, the EU could have wielded its leverage to influence the course of the war.
Other initiatives have been ignored. In June, nine countries including Belgium, Poland and Sweden, asked the commission asking it to examine the legal implications on the common market of a July 2024 International Court of Justice decision to bar states from trading with the occupied Palestinian territories.
So far, the decision, despite being legally binding, has not been followed by EU countries, except by Ireland. The ICJ has no way to enforce its decisions.
