EU-Israel relations: Confrontation or co-operation?

For the last decade, relations between the EU and Israel have been strained by tension over the Middle East peace process, but strengthened by intensive scientific and economic co-operation. So far, confrontation has not crowded out collaboration, but with the EU’s decision to get tougher on Israel’s settlements policy, this may change. Both Israel and the EU will need to find a balance between their disagreements over the settlements and the beneficial economic and scientific co-operation. They can take a number of steps in order to achieve this.

The positive aspect of the relationship is not often recognised. Economic and research links between the EU and Israel are strong. In 2013, the value of EU-Israel trade was €29.5 billion (equal to 13.7 per cent of Israel’s GDP), with €12.5 billion imports to the EU and €17 billion exports to Israel. The EU is Israel’s main trading partner, accounting for one-third of its total trade. Large Israeli corporations have sizeable investments in Europe and employ many Europeans, while Israel, despite its small size, is one of Europe’s most important trading partners in the Middle East. It supplies Europe with high-tech products, including software and apps used in most PCs and smartphones, medical devices, chemicals and pharmaceuticals (Israel’s TEVA is one of the most important sources of generic medicines for Europe).

Beyond trade, Israel and the EU have been collaborating in fields such as agriculture, aviation, science and in a wide variety of R&D fields (including nanotechnology, health, environment and communications). Israel participated in the latest EU R&D Framework Programme (FP7) and in June 2014 it joined the EU’s research and innovation programme, Horizon 2020, and will contribute to its budget. Hundreds of leading Israeli institutions have received EU funding for innovative research, in many cases sharing their expertise and knowledge with their European counterparts.

There are also defence ties: Israel conducts joint military exercises with Bulgaria, Greece and Italy, while some EU member states, including Germany, the UK and Italy trade defence goods and services with Israel. In addition, Israel’s intelligence agencies and their European counterparts (among them agencies in the UK and Germany) collaborate closely.

But alongside that co-operation, political tension, rooted in the Israeli-Palestinian conflict, is increasing. Issues such as the political status of Jerusalem, human rights, the humanitarian situation in Gaza and EU funding for left-wing NGOs in Israel have been troublesome.

The EU and Israel also disagree on the timetable for peace. While many European leaders believe that now is the moment to push for an agreement, Israeli politicians often stress the current instability in the Middle East. Moreover, Israelis remember the 2005 withdrawal from Gaza and fear that leaving the West Bank will only lead to a ‘second Gaza’ under Hamas rule or turn it into fertile ground for jihadist movements.

The issue of Israeli settlements in the West Bank undoubtedly casts the longest shadow. European leaders criticise new houses and neighbourhoods built beyond the 1967 borders. They fear that Israel’s actions undermine the territorial integrity of a future Palestinian state, thus making it harder to achieve a two-state solution. Many Israeli politicians, on the other hand, argue that the real obstacle for peace is not the settlements policy but rather the absence of a credible Palestinian partner who is willing to compromise.

Since 2012, the EU’s attitude towards Israeli settlements in the West Bank has become more assertive. This is reflected both in rhetoric and policy. For example, recent statements issued by the European External Action Service (EEAS), say that the settlements “constitute an obstacle to peace” and “question Israel’s commitment to a peaceful negotiated settlement”.

In practical terms, the EU has published strict new guidelines for EU grants, preventing Israeli entities located in the West Bank from receiving EU funding. Additionally, the EU no longer recognises Israeli veterinary services in the West Bank, which in practice prevents the export of dairy and poultry products from settlements to Europe. According to media reports, EU officials are considering applying additional ‘sticks’ in the future if construction continues, among them labelling Israeli products produced in the West Bank and requiring visas from Israeli settlers.

While these European policies are limited in scope, they damage the dialogue between Israel and the EU, especially with a right-wing Israeli government. They may also discourage bilateral co-operation in other areas. Last year’s negotiations on Israel’s participation in the Horizon 2020 programme shows how things can snowball.

During the negotiations, the EU wanted to ensure that European funds would not reach Israeli institutions located in the West Bank, East Jerusalem or the Golan Heights. The Israeli newspaper Haaretz reported that tough meetings took place within the Israeli government; some ministers supported signing the agreement, among them Finance Minister Yair Lapid, while Foreign Minister Avigdor Lieberman and his deputy Ze’ev Elkin argued that Israel should not participate in the programme. They felt that by signing, Israel would de facto acknowledge that the settlements were illegal. For his part, Prime Minister Benjamin Netanyahu raised the possibility of attracting alternative funds from Asia and North America in order to compensate Israeli research institutions.

What started as a discussion about access to Horizon 2020 funds soon became a political argument, creating tensions that had the potential to damage fruitful scientific collaboration. Israel’s academic and research institutions could have lost millions of euros in research grants, as well as access to European knowledge and markets. The EU would have lost one of its most innovative and successful scientific partners.

The Israeli media give more coverage to such disagreements than to co-operation with Europe. Israeli politicians, academics and diplomats have accused the EU of dealing with Israel unfairly, by only pressuring Israel for concessions, and of not understanding the mentality of the Middle East. Furthermore, the increasing number of anti-Semitic incidents across Europe and boycott campaigns in European universities and companies receive significant media attention in Israel. Although these incidents are often condemned by European leaders, they reinforce Israeli mistrust.

The case of Horizon 2020 however, also shows how tensions can be managed. Amid the crisis, prominent Israeli academics, including heads of Israeli universities, members of the Israeli Academy of Sciences and representatives from the Committee of the Council for Higher Education (the state body responsible for distributing higher education funding) repeatedly urged the government to sign the agreement; they were worried about the implications for Israeli research. This pressure eventually paid off. The Israeli government showed some flexibility and a diplomatic agreement was reached: EU regulations will be respected and funding will not flow to settlements, but Israel added an annexe to the agreement stating that it disagrees with the EU’s legal position concerning the settlements.

Other parties can also play a role in calming tensions and preventing future rows about EU policy towards Israeli settlements from damaging collaboration. First, high-tech and medical businesses in Europe and Israel should speak up in times of political friction about the direct benefits they get from a good relationship.

Second, the EU’s representatives have to voice more clearly what they are trying to do. The EU’s guidelines and demands concerning Horizon 2020 were portrayed by some Israeli commentators as part of a ‘European boycott’; but in fact the EU made a legitimate decision not to fund organisations in Israeli settlements in the West Bank, which violate international law. The EU should make clear that, in areas of productive co-operation where there are not the same legal issues, it will do its best to maintain the relationship. It should emphasise the positive contribution that the EU brings to the daily lives of Israelis. For instance, the EU-Israel ‘open sky pact’ reduces the prices of airline tickets for Israelis; its funding for institutions based within the 1967 borders boosts Israeli research and jobs; and the EU-Israel free trade agreement has a positive effect on Israel’s market.

Third, Israeli and European politicians should focus on quieter, pragmatic dialogue, rather than play to the crowd. Member-states, the Commission and the EEAS all have a role to play in managing the relationship and talking frankly about disagreements. Federica Mogherini’s first visit outside Europe as High Representative for Foreign Policy was to Israel and the Palestinian territories. She stated that she intended “to use the Union’s political potential in this region”, which suggests that she plans to continue (or even deepen) the dialogue and the EU’s involvement. Israeli senior politicians should commit to doing the same.

These tools should allow both parties to manage some of the tensions and hostility that have emerged in Israel as a result of the EU’s stance on the settlements. In the long run, however, without meaningful progress in the Middle East peace process, and with more settlements under construction, the EU may be tempted to be tougher. This could translate into more restrictions on Israeli entities located outside the 1967 borders. The longer the status quo remains, the greater the chances of such EU actions. This should be cause for alarm, particularly in Israel. Although the benefits of the relationship are mutual, they are not symmetric; Israel is much more reliant on Europe than vice versa. Turning a deaf ear to Europe’s complaints could be a costly mistake for Israel’s leaders.

Yehuda Ben-Hur Levy is a Clara Marina O'Donnell fellow at the Centre for European Reform.