"This is the chronicle of a crisis foretold years in advance," said the Israeli ex-ambassador to Germany, in that petulant tone of a diplomat working very hard not to sound infuriated. Shimon Stein was trying to explain new European Union sanctions against Israeli settlements. Neither journalists nor politicians should sound so shocked by the EU move, he lectured the anchor of state radio's morning news program. He was right, but he was trying to outshout a hurricane of public anger and disbelief. The anchor herself had begun the show with a riff of indignant surprise that the EU considered her Israeli neighborhood in East Jerusalem to be a settlement.
Of course, the EU position has consistently been that the country called Israel is defined by its pre-1967 borders, or Green Line—and that anything built beyond those borders is not part of Israel. The sanctions are designed to give more teeth to that position. Under new budget guidelines, EU bodies must make sure not to fund any Israeli activities in occupied territory. Any future agreements between the European Union and Israel must explicitly state that they apply only within the pre-'67 lines. Let's be clear: This is not an economic boycott of Israel, nor a declaration that Israel is an apartheid state. Rather, the EU is drawing the distinction between legitimate Israel and illegitimate settlements with a thick marker. In the sanctions debate, the Europeans are taking a moderate stance: pro-Israel, anti-occupation.
Such subtleties do not reassure Prime Minister Benjamin Netanyahu, or the rightists who dominate his government, or West Bank settlers. The new guidelines will be issued officially tomorrow, but the daily Ha'aretz got the document and published the news on Tuesday. The hurricane struck immediately. Netanyahu held a panicked meeting with top ministers and officials, and emerged to tell the media, "We will not accept any outside diktat about our borders." Economics Minister Naftali Bennett described the European measures as "an economic terror attack." (Bennett, leader of a pro-settlement party and a proponent of partial annexation of the West Bank, had said on national radio just a week before that in meetings around the globe, he has found that the world is interested only in "prices, economics, industry and growth"—not the Israeli-Palestinian conflict.) The head of a regional council of settlements—the rough equivalent of a county government, but one in which settlers are represented and Palestinians are not—denounced the EU's "blatant and unprecedented intervention in the affairs of an independent and democratic state." Columnist Nadav Haetzni, striking a common theme on the right, said Europe was again expressing the "wholesale hatred" of Jews that it had shown "from the Middle Ages until the Holocaust."
In reality, the new guidelines are significant precisely because of the otherwise warm ties between Israel and the EU—indeed, by some descriptions, uniquely close ties for a non-European country. The European Union has had free-trade agreements with Israel since 1975, and is Israel's largest trading partner. Grants and investments by EU bodies and by member-states have become an essential source of funding for technological development and for research projects ranging from the hard sciences to ancient history. Israel is expecting to be a partner in the EU's next massive seven-year research and development program, Horizon 2020, as it has in previous programs.
But the Horizon 2020 agreement has not yet been signed. Under the new guidelines, the accord will have to specify that it applies only to sovereign Israel, within the pre-1967 lines. It's not yet clear whether the new EU policy will disqualify only Israeli research projects that themselves take place in occupied territory—or any project based in a university that is otherwise involved in research beyond the Green Line. In the later case, for instance, Tel Aviv University would either have to pull out of an archaeological dig at the City of David site in East Jerusalem or forfeit all EU grants. To add to the uncertainty, EU member-states aren't obligated to follow the guidelines, but some are expected to do so. The principle is simple: Intense European cooperation will continue, as long as it's with Israel, not with the realm of the settlements.
The fact that Netanyahu and other top officials were taken by surprise makes even less sense than Bennett's accusation of "economic terror." As declassified documents show, the Foreign Ministry's legal adviser warned that the world would regard settlements as illegal even before the government approved the first one in the West Bank in 1967. The justice minister at the time warned that keeping the West Bank permanently, without giving Israeli citizenship to Palestinian residents, would be seen internationally as colonialism.
In 1986, when Industry Minister Ariel Sharon was building industrial parks in occupied territory, a diplomat at what was then the European Community chancery in Tel Aviv told me that the EC-Israel free-trade pact clearly applied "only to goods made in Israel," not to products from the West Bank. Back then, though, the EC hadn't started checking where imports marked "Made in Israel" were produced. Eventually, slowly, politely, European patience wore thin. In 2005, under EU pressure, Israel signed an agreement requiring it to label exports with the postal (zip) code of where they were produced. European customs officials were given a list of postal codes for occupied territory. Last year, the EU made the list public. In May, the EU postponed an expected decision to require products from settlements to be labeled as such explicitly. The delay reportedly came at Washington's request, to allow Secretary of State John Kerry time to renew Israeli-Palestinian peace talks. The new restrictions on funding fit the same trend of rising European frustration—and the same effort by Israel's friends to aim economic sanctions only at settlements. Europe is still giving Israel a chance to reach a two-state agreement.
Netanyahu, Bennett, and others on the right can proclaim that the Green Line belongs to the past. But if the government refuses to join Horizon 2020, it will starve the research and development that powers the Israeli economy. Netanyahu can tell the public that he won't accept "diktats." The business community, especially the high-tech sector, will be harder to convince. The crisis long foretold has arrived.