The European Council of Foreign Relations (ECFR) think tank this week released a new policy brief addressing the issue of defining a difference between land owned by the Israeli government and areas that were under Israeli control.
The "EU differentiation and Israeli Settlements" report stated that "Israeli matrix of control inside the OPT [occupied Palestinian territories]" should be included in EU-Israeli bilateral ties.
As a result, all transactions between the EU and Israel that involve business in the Palestinian territories would need to be reassessed, including daily transactions stemming from business deals in the area.
In short, the ECFR pointed out that this could severely hamper the Israeli banking sector, with Israeli media organization Haaretz warning it could ultimately lead to an "economic tsunami" for the country.
Differentiation Is EU Obligation
The ECFR report referenced the European Commission guidelines of 2013, which stated that "differentiation” should be recognized "as a fully-fledged policy." It specified that all transactions between EU states and financial institutions are obliged to follow differentiation policies when dealing with Israeli entities involved in the occupied territories.
At present there is no differentiation between Israeli land and other areas in the occupied territories.
It is thought that if differentiation goes ahead, it may prevent some European banks from providing financing to Israeli counterparts who have operations in the OPT.
Also, as a result of the global financial crisis, the British government currently holds a controlling stake in a number of Israeli institutions, which would therefore mean that they are obliged to follow differentiation rules.
This has led to speculation that some of these British-controlled Israeli institutions may be prevented from conducting dealings with other Israeli businesses and banks involved in the Palestinian land.
Israeli bank stocks dropped on the back of the report’s release, falling by 2.3 points in less than an hour.
The ECFR stated that "European leaders should actively defend differentiation from increasingly forceful efforts by Israel’s political class to misrepresent and conflate EU actions with a boycott of Israel," adding that the policy "does not stem from a desire to isolate Israel, but rather from deepening EU-Israel ties and EU legal obligations."
