How Europe could rethink its economic ties with Israel

Israel has ignored EU criticisms of West Bank annexation while enjoying funds for science and technology. It will not halt its plans if relations are unchanged.

Prime Minister Benjamin Netanyahu delivers a statement to the press regarding implementing Israeli sovereignty over the Jordan Valley and it's Jewish settlements, in Ramat Gan on September 10, 2019. (Hadas Parush/Flash90)
Prime Minister Benjamin Netanyahu delivers a statement to the press regarding implementing Israeli sovereignty over the Jordan Valley and it's Jewish settlements, in Ramat Gan on September 10, 2019. (Hadas Parush/Flash90)

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.

Israeli Foreign Minister Gabi Ashkenazi meets with German Foreign Minister Heiko Maas at the Ministry of Foreign Affairs in Jerusalem on June 10, 2020. (Olivier Fitoussi/Flash90)
Israeli Foreign Minister Gabi Ashkenazi meets with German Foreign Minister Heiko Maas at the Ministry of Foreign Affairs in Jerusalem on June 10, 2020. (Olivier Fitoussi/Flash90)

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 satellite states 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.

Hearing of Josep Borrell, High Representative/Vice President-designate, at the European Parliament in Brussels. October 7, 2019. (European Parliament)
Hearing of Josep Borrell, High Representative/Vice President-designate, at the European Parliament in Brussels. October 7, 2019. (European Parliament)

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.

Israeli soldiers stand guard during the demolishing of caravans that were donated by the European Union in the West Bank village of Khashim Al-Daraj, near Yatta, August 14, 2017. (Wisam Hashlamoun/Flash90)
Israeli soldiers stand guard during the demolishing of caravans that were donated by the European Union in the West Bank village of Khashim Al-Daraj, near Yatta, August 14, 2017. (Wisam Hashlamoun/Flash90)

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.

A new security drone seen flying near a Palestinian village, May 6, 2018. (Gershon Elinson/Flash90)
A new security drone seen flying near a Palestinian village, May 6, 2018. (Gershon Elinson/Flash90)

The funding Israel receives from Horizon is meant to be limited to academic institutions and private companies operating within the country’s pre-1967 lines — the official borders recognized by the EU. Whether or not Israel continues its “associated” status in the next Horizon program, the EU’s stipulations on where funding can be spent will remain contentious, both EU diplomats noted.

Even if the EU takes no active measures against annexation, many Israeli voters will likely demand an explanation from their politicians as to why the government is cooperating with a program that refuses to acknowledge parts of the West Bank as “sovereign Israeli territory,” said the second diplomatic source. “After annexation, how can they accept that Hebrew University and Tel Aviv University have cooperation with Europe, but that Ariel University [in the West Bank] cannot?” they asked.

Shalev, for her part, hopes and believes that the disagreement on borders will not prevent further scientific collaboration. The EU’s refusal to recognize Israel’s claims to territory in the West Bank — including formal annexation of East Jerusalem and the Syrian Golan Heights in 1980-1 — has not prevented the two sides from cooperating for the last 25 years; why should it in the future?

Technology before human rights

Because Israel has ignored European sentiments on borders while simultaneously channeling the EU’s funding into Israeli companies, it currently has little incentive to alter its course of action in the occupied territories. As such, critics argue, the EU cannot continue to provide Israel with a privileged position if the union is so concerned with its illegal territorial expansion.

Flags in front of the European Commission building in Brussels. May 3, 2010. (Sébastien Bertrand/Wikimedia Commons)
Flags in front of the European Commission building in Brussels. May 3, 2010. (Sébastien Bertrand/Wikimedia Commons)

For starters, the EU commission could discontinue Israel’s inclusion in the new Horizon program next year. This would include ending Israel’s associated status, so that it would have to compete for funding on an equal basis with most countries around the world. As Shalev notes, it is rare for non-associated states to receive grants from the program, and Horizon data shows that less than two percent of its funding goes to “third” countries.

“Going forward, it is not just about what is stopped in terms of the [EU-Israel] relationship, but what future agreements the EU and Israel are unable to enter into because of annexation,” says Hugh Lovatt, a policy fellow in the Middle East and North Africa programme at the European Council on Foreign Relations.

Noting that Israel has not yet signed onto next year’s innovation program and that annexation could be a sticking point, Lovatt says that the lack of unanimity within the EU cuts both ways: it makes suspending an agreement difficult, but also makes ratifying new ones complicated.

Nonetheless, the EU is unlikely to take a hostile position toward Israel, due at least in part to Europe’s desire to access “a highly developed high-tech economy, with lots of research going on,” says the first diplomatic source.

For critics, this calculation does not bode well for the conflict. Palestinians have long charged that Israel’s technological credentials blind the international community to the human rights violations taking place under its military occupation — what many have described as “techwashing.”

Israeli security forces guard as Palestinians protest against Israel's plan to annex parts of the West Bank, near Tulkarem, in the West Bank on June 5, 2020. (Nasser Ishtayeh/Flash90)
Israeli security forces guard as Palestinians protest against Israel’s plan to annex parts of the West Bank, near Tulkarem, in the West Bank on June 5, 2020. (Nasser Ishtayeh/Flash90)

The second diplomatic source rejects this claim, insisting that while the EU is eager to cooperate with Israel, to say that it is dependent on Israeli innovation is an exaggeration. “The argument that Israel is so technologically advanced that it can reap political advantages – this may work with some countries in the third world, but not with Europe.”

And yet, the EU is still likely to welcome Israel into the next Horizon program while continuing to complain about annexation. At best, this contradiction would send mixed signals; at worst, it would reinforce the criticism that Europe is prioritizing technology over Palestinian human rights. The first diplomatic source acknowledges this latter concern, though says that it is too premature to make this assertion.

Although the Israeli cabinet has slated July 1 as the date from which it will advance annexation, it is unclear whether the government will proceed as pledged. Speculation is rife that Netanyahu may back down from the move, giving the EU at least three weeks to make itself heard before the declared date. If the future of scientific and technological collaboration were to be brought into the equation, the concerns of Europeans regarding annexation would likely be taken more seriously.

A spokesperson for the Horizon programs at the European Commission directed Israel-related questions to a representative at the commission’s Foreign Affairs and Security office, who in turn directed questions back to the Horizon office. None provided a comment for this article.

Editor’s note, June 11, 2020: A previous version of this article stated that the Czech Republic, Slovakia, Poland, and Hungary were part of the Soviet Union. They were in fact satellite states of the Soviet Union.