How Europe could rethink its economic ties with Israel

If there were hopes that Wednesday’s visit to Jerusalem by Heiko Maas, Germany’s Foreign Minister, would help to dissuade Israel from its plans to formally annex large parts of the occupied West Bank, they were quickly dashed.

Meeting with Israeli officials, Maas expressed Germany’s “serious and honest concern” about the threat of annexation to the two-state solution, warning that some states were pressing to impose sanctions on Israel or recognize Palestine as a state. However, Maas emphasized that Germany would not discuss a “price tag” for Israel’s policy, but was simply seeking dialogue on the matter.

Despite his warning, Maas’ remarks have largely reaffirmed the conventional wisdom that the European Union — a major political and economic player in the Israeli-Palestinian conflict, of which Germany is a powerful member — is unlikely to act in any meaningful way to prevent annexation. In spite of repeated statements opposing such a move, the EU’s foreign policy arm is riven with internal disagreements over how to proceed, immobilized by the need to procure full consensus among its 27 members.

This “wisdom,” however, may be downplaying a significant policy option that the EU could utilize to translate its enormous economic power into political clout, two EU diplomatic sources told +972. The only problem is that the EU is choosing not to.

For the European giant to speak on the world stage, it must do so with a united voice; a single objection from any of its members is enough to prevent foreign policy statements or actions. This requirement has been a key stumbling block in developing an effective EU policy on Israel-Palestine. While one faction of EU members has tried to move the bloc toward a critical position against Israeli government practices, another faction has routinely pushed in the opposite direction.

Allies cultivated by Prime Minister Benjamin Netanyahu in the Visegrad Group — namely Hungary, the Czech Republic, Poland, and Slovakia — have declined to publicly criticize Israel, which they view as a kindred spirit. This does not mean that they are entirely comfortable with the notion that states can annex territory obtained through warfare. After all, just three decades ago, they were all ruled by Moscow as part of the Soviet Union. The EU’s precedent with Crimea, which Russia annexed in 2014 (and to which the EU responded with sanctions on Moscow), also weighs on their minds.

The EU’s main divergence, then, is less about their stance against annexation as it is about how best to ensure its prohibition.

One diplomatic source, who requested anonymity as they were not permitted to speak publicly on the matter, told +972 that the disagreement is more about tactics than substance; in particular, whether Israel would respond better to public condemnations or private urgings.

One camp, explained the diplomat, argues that Israel has made its annexationist intentions clear and should be immediately deterred from pursuing them; the other camp argues that it is still too soon to act.

Both diplomats who spoke to +972 say it is not just the usual critical voices — France, Sweden, Spain, Ireland, and Luxembourg — that are backing the “deterrence camp,” but as many as half of the EU member states. But despite some murmurings in the Israeli press — and Maas’s latest warning — economic sanctions do not appear high on the table, as members are almost certain that a consensus cannot be won for it.

The new Horizon

This does not mean that the EU is without options to dissuade Israel from annexation.

The EU’s “Horizon 2020” is a seven-year, €80 billion fund that provides financial support for research, technological development, and innovation. The program expires this year and is set to be replaced with a new seven-year program, “Horizon Europe,” in 2021.

Although almost any country outside the EU can apply for funding from the Horizon program, Israel is classified as an “associated country,” along with Norway, Turkey, Albania, and other EU-adjacent states. This status, which Israel obtained in 1996 as the first non-European state to do so, means that it is guaranteed access to funding on an equal basis to EU member states.

The question — as far as the conflict is concerned — is whether Israel will enjoy the same privileged status in the upcoming program as it does in the current iteration, if it proceeds with West Bank annexation.

Nili Shalev, director-general of the Israel-EU Research and Development Directorate at the Israel Innovation Authority, explains that while Israel pays for membership in the program — €1.3 billion will be paid to the EU by the end of Horizon 2020, a sum based on Israel and the EU’s respective GDPs — it has tended to gain more financially than it puts in. For example, according to Shalev, from 2014 to 2018 Israel invested €788 million and received €940 million.

Among other advantages, Shalev says that Israel benefits from Horizon through European academic grants that are more substantial than what the government provides domestically; the program also helps reduce the time-to-market (the time from production to sales) for private companies.

The EU, she continues, similarly benefits from the partnership because Israeli projects often address European priorities such as green innovation, healthcare, and cyber and online security — projects that also help to create jobs in Europe, she adds.

Recalling that Israel had to address the question of funding being used outside of Israel’s pre-1967 borders during the previous iteration of Horizon, Shalev hopes that present political differences won’t impede the ongoing collaboration. “Science is innovation for all. It brings knowledge to the whole world’s population; it doesn’t have boundaries,” she says.

Many Palestinians would disagree with this assertion. In a 2018 policy brief, Yara Hawari, a policy fellow at the Palestinian think tank Al-Shabaka, highlighted that many of the technological projects funded by Horizon are also used to maintain Israel’s occupation. For example, a “dual use” clause in Horizon’s funding guidelines effectively allow Israeli companies to “access EU funding for a ‘civilian’ project and later develop it for the military sector,” while some recipients of the funding are located in occupied East Jerusalem, beyond the Green Line.

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