Israel is worried about Germany's "significant escalation" against settlements

Israeli settlements in the West Bank and East Jerusalem are illegal under international law. Even Israel’s staunchest allies, such as Britain and the US, acknowledge this fact and make occasional critical statements about them. While international ire generally stops at statements, in recent years, the EU has been introducing stricter policies on the distribution of funds to Israeli organisations. In 2012, for example, the EU Foreign Council tightened loopholes that allowed for financial dealings with Israeli businesses based in occupied land.

The latest move has come from Germany, which is seeking to clarify formally a long-standing policy of not funding Israeli institutions and businesses based on the Palestinian side of the 1967 borders. Haaretz newspaper said that Berlin’s decision “represents a significant escalation in European measures against the settlements” in East Jerusalem and the West Bank.

There are two agreements in question. The first is between the Germany Science Ministry and its Israeli counterpart, for research grants. The second concerns Israel’s Economy and Trade Ministry for funding for businesses. The treaty on scientific research and development, agreed in 1986, already states that the Germans would only sponsor projects “within the geographic areas under the jurisdiction of the state of Israel” before the 1967 war.

Germany now wants to apply that clause to the German-Israeli funding programme (DIP), a 1970 agreement renewed annually that gives $3.4m in grants to joint projects by university researchers in the two countries, as well as to an agreement on funding for industrial and applied research and development. The decision to legislate formally the fact that Germany does not fund projects over the 1967 borders was driven by the fact that Israel upgraded an institution in the West Bank settlement of Ariel from a college to a university. The new clause will ban this university (and others that may emerge in the West Bank) from applying for German funding.

The Jerusalem Post said that Germany “wants to place territorial language into two agreements”. A German official put it differently: “This is an expression of the German government’s international-law position and will also be the case in the future.” The same official said that Germany had never co-operated with businesses over the Green Line (the 1949 Armistice Line).

If this is simply a continuation of existing policies, why has it caused such a stir? First of all, Israel is concerned that other EU member states might be encouraged to follow suit. The boycott of settlements is currently centred in EU institutions in Brussels; this demonstrates a movement towards individual EU member states introducing similar legislation. Secondly, Germany’s policy is potentially further reaching than EU measures. The Horizon 2020 scientific cooperation agreement – finally signed by Israel with the EU a few weeks ago – prohibits European Union funding for academic research conducted in settlements. But Berlin’s policy – even though it is just a formalisation of what already happens – extends this ban from public institutions to encompass private companies located in settlements built on occupied land.

What does all this mean for the Germany-Israel relationship? Both sides were keen to downplay any hint of a rift. A spokeswoman for the German foreign ministry told the AFP news agency that Berlin had a “great interest in continuing and expanding scientific cooperation with Israel”; an Israeli diplomatic source said that “the territorial limitations have applied since 1986 and nothing has changed”. Since World War II, Germany has been one of Israel’s strongest allies in Europe, in what AFP terms “atonement for its Nazi past”.

Of course, the clause has been there since 1986 and it has not been disputed by Israel. Both Germany and Israel have an interest in retaining friendly relations but there are signs of discomfort within the Israeli political scene. Left-wing politicians have warned that this is yet another sign of Israel’s growing isolation on the international stage as a result of settlements. According to Nachman Shai, a Labour parliamentarian, “The increasing pressure from Europe shows that the government’s settlement policy carries a high economic price.” He criticised the government for acting “like an ostrich” and ignoring the warnings. Meanwhile, the construction and housing minister, Uri Ariel, told Army Radio that Israel could weather the storm of international sanctions against settlements. Prime Minister Benjamin Netanyahu has continued his bullish tone, warning recently that European sanctions against settlements were hindering the peace process.

The move by Germany solidifies a policy that already existed. The worry for Israel will be that by extending the ban to private institutions, and from EU institutions to individual member states, it could be the first policy of many.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.