European states are moving closer to restricting trade with Israeli settlements in the occupied West Bank, amid controversial plans that would effectively bury the prospects of a Palestinian state.
Legal scholars have said that banning trade with settlements is about compliance with international law, but several politicians view it more as a tool to influence Israel's behaviour.
“Having trade with the settlers that are illegal and not legitimate is completely absurd,” Spanish member of the European Parliament Hana Jalloul, a member of the Socialists and Democrats bloc, told The National. “We don't recognise this occupation of the West Bank and Gaza because they are not part of the 1967 borders.”
Israel has occupied East Jerusalem and much of the West Bank since the 1967 war. Hundreds of thousands of Israelis live in settlements in the region, a reality that is widely considered one of the main impediment to the future of a Palestinian state.
'Glass ceiling'
Spain's left-wing government has taken a leading role in efforts to oppose Israeli encroachment in the Palestinian territories. In September last year, it became the first EU state to publish a royal decree banning trade and the advertisement of services with illegal settlements.
Taking measures on trade is relatively straightforward, because products like dates and wine are easily identifiable, but banning services altogether is widely viewed as more complicated.
To justify imposing unilateral restrictions on trade - usually the European Commission's role - the Spanish decree invoked European regulations on common imports. They include an article allowing states to make exceptions based on public policy. Nicole Ochando Szaroletta of Oxfam described the move as an "exceptional measure".
Economically, the stakes are relatively limited, particularly when compared with the EU’s broader trade relationship with Israel, for which the bloc remains the largest export market. Annual trade between the EU and the occupied territories is valued at about €340 million ($397.7 million), less than a tenth of overall EU-Israeli trade.
But taking such measures on trade is also a “glass ceiling that's never been broken”, said Conor O'Neill, spokesman for the campaign to pass the occupied territories bill in Ireland. The EU has previously imposed sanctions on extremist settlers, but has never meaningfully restricted its trade relations.
Now, to achieve a coherent foreign policy, the bloc must show the Israeli government that it can no longer act with impunity, Ms Jalloul said. “We have suspended other agreements in the past but … with this Israeli government, that killed 72,000 Palestinian in Gaza, no? We cannot have this contradiction.”
E1 bid
A renewed sense of urgency is driven by the fact that, starting on June 1, companies will be able to start bidding to build 3,400 new houses as part of Israel's E1 project, which would bisect the West Bank and cut much of the territory off from East Jerusalem.
Israeli cabinet members have embraced the project and reject the idea of a Palestinian state. Israeli settlers are increasing their attacks on Palestinians in an effort to drive them out, with no legal consequences. The recent passage of a death penalty law widely viewed as specifically aimed at Palestinians has also drawn criticism from Europe.
Pressure is building beyond the EU. In Britain, a group of 60 former ambassadors last week published an editorial in the Financial Times asking their government to warn UK companies not to take part in the E1 bid. The EU and the UK say they are committed to a two-state solution.
“Its such a crucial place – on the Jericho road – and it would block the northern West Bank from the southern West Bank,” former British consul general to Jerusalem, Vincent Fean, told The National, referring to the site of the E1 project. “It's intended to be the killer for two states.”
Across Europe, momentum is uneven but growing. Slovenia, the Netherlands, Ireland and Belgium are working on their own legislation.
Last year, four states – Finland, Luxembourg, Portugal and Poland – sought clarification from the European Commission on the legality of settlement trade. More recently, France and Sweden have formally asked the commission to propose restrictions or a ban, a call that Italy has since supported.
Altogether, 12 member states now appear open to some form of trade restriction. With only a few more votes, a qualified majority could be reached at the next meeting of EU foreign ministers on May 11.
Europe's divisions
Potential swing states include Austria, Denmark and Slovakia. In June last year, the four supported a review of the human rights clause of the association agreement. The review concluded that Israel had breached the clause through its conduct in Gaza.
However, the discussion was set aside, with member states saying the timing was not right after the US brokered a ceasefire in the enclave.
Among the proposals put forward by the commission was a partial suspension of the association agreement. This would involve abandoning preferential tariffs granted to Israeli imports to the EU, at an estimated cost to the Israeli economy of €227 million a year.
This option was revisited by EU foreign ministers on April 21, driven by the conflict in Lebanon. Belgian Foreign Minister Maxime Prevot said he understood that a full suspension was impossible as it required unanimous support, but called for “at least a partial suspension” of the association agreement.
But Italy argued that it would be unfair because it would hurt Israeli society as a whole. Germany also vetoed the move, making it impossible to reach a qualified majority, which requires at least 65 per cent of the EU's population.
Whether trade measures would affect Israel's behaviour is a matter of debate. There is little chance that government policy towards Palestinians would significantly change, even if the coming elections lead to a new Israeli government being formed.
“There is a more pragmatic segment of society that could mitigate or postpone the most controversial and uninhibited aspects of Israel's colonisation policy,” Belgian legal scholar Francois Dubuisson told The National.
'Trade-off'
Ms Jalloul believes the EU should take measures against Israel as a foreign policy tool. This week, she was among 57 MEPs who signed a letter asking EU foreign policy chief Kaja Kallas and European Commissioner for Trade Maros Sefcovic to “examine the full range of trade measures available under EU law”.
“Life is about trade-off,” Ms Jalloul said. “I don't believe that you have to be extremely harsh on issues when the other party that you want to sit with and negotiate peace is accepting things.”
There is a need for coherence, the MEPs argued in their letter. They pointed to the divisions among EU states, with Spain moving ahead alone, and a handful of others appearing ready to do the same.
In the past, divergence among EU states has pushed the commission, which oversees matters related to trade, to adapt its position. In 2015, when Britain, Belgium and Denmark started to introduce guidance to distinguish products from Israeli settlements from those made inside Israel's 1967 borders, the commission introduced measures obliging all member states to unify their position in a policy known as differentiation. Today, too, change is more likely to come as a result of a “trickle up” effect, Mr O'Neill said.
States have had no choice but to take matters into their own hands, Erika Guevara Rosas, senior director at Amnesty International, told The National.
"For decades, the EU has failed to use the tools at its disposal to pressure on Israel to stop committing crimes against Palestinians," she said. "This lack of leadership has meant several member states had no choice but to take matters into their own hands."
Legal readings
So far, the commission appears to believe that restricting trade with settlements is a matter of political appreciation, not of respect for international law. Labelling products from the occupied territories is enough, the EU's foreign affairs legal department concluded in its analysis of an advisory opinion published by the International Court of Justice in July 2024, and leaked a few months later by online news website The Intercept.
The advisory called on states to “abstain from entering into economic or trade dealings with Israel concerning the occupied Palestinian territory or parts thereof which may entrench its unlawful presence in the territory”.
In February, the EU's interpretation of the advisory opinion was echoed by French Foreign Ministry officials who spoke to The National.
“Even if you don't take the ICJ advisory opinion, France and other EU states recognise settlements as illegal entities, but they're telling us it's OK to trade with illegal entities as long as there is differentiation,” said Cecile Marquerie, advocacy coordinator at the Platform of French NGOs for Palestine. “That is just them playing on words of international law.”
But few countries besides Spain appear willing to take a firm position. Ireland said that it would move forwards with its own legislation, which has been under discussion since 2018. But these efforts have stalled, with Dublin apparently preferring to wait for an EU-wide decision.
The risk, Mr O'Neill said, is that at next month's foreign ministers' meeting, Ms Kallas will give yet “another readout saying there was discussion but no consensus, and we'll repeat that same groundhog day for the near future”.
