Israel, EU proposes sanctions on two ministers and trade tariffs. Now it is up to member states

Brussels – While Israel besieges Gaza City and “Gaza burns”—so exulted Israeli Foreign Minister Israel Katz—the European Commission breaks the deadlock and presents the first political and economic sanctions against Tel Aviv since the start of the conflict. There are three guidelines: Brussels will be able to immediately freeze some 20 million funds planned for Israel, while it will have to go through the capitals to impose trade tariffs on some six billion goods and restrictive measures on two of the most extremist ministers in Benjamin Netanyahu’s government. 

Unlocking a two-year-long impasse was the growing public outrage and mobilisation, which convinced Ursula von der Leyen to announce the belated measures last week in her speech on the State of the Union. “I want to be very clear: the goal is not to punish Israel. The goal is to improve the humanitarian situation in Gaza,” said EU High Representative for Foreign Affairs, Kaja Kallas, presenting the package today. 

With the head of EU diplomacy, there was the head of trade, Maroš Šefčovič, who rattled off figures and volumes of trade between the two partners, as well as the effects of the partial suspension of the EU-Israel Association Agreement, which the EU executive had put on the table. Bearing in mind that the EU accounts for a third of Israel’s total trade with the world, while Israel is only the bloc’s 31st trading partner.

The European Commission has proposed the suspension of trade facilitation under the Association Agreement for trade in goods, participation in public procurement, and intellectual property rules, while the provisions on capital flow and customs would not be affected. By denying preferential access to the EU market, Israeli goods would be subject to the same customs duties that the EU applies to third countries with which it does not have a free trade agreement. 

In 2024, Israel exported goods worth €16 billion to the EU, while goods worth €26.7 billion went to Tel Aviv. In essence, the measures would affect 37 per cent of Israeli exports—mainly agricultural products—because the remaining 63 per cent—mainly machinery, transport equipment, chemicals—would remain subject to zero or very low tariffs, under the terms of the World Trade Organisation’s MFN (Most Favoured Nation) regime. 

The effect, therefore, would be the imposition of additional tariffs on Israeli goods worth €5.8 billion. According to the European Commission’s calculations, this would translate—if trade remains at the same level as in 2024 —into €227 million in tariffs within one year. Conversely, if Israel were to respond by raising similar barriers, duties would affect European goods worth around €8 billion. Brussels has remained deaf to calls—and unilateral decisions by some member states—to impose specific restrictions on trade in arms and dual-use civil-military equipment. On the contrary, according to the MFN regime, they will remain largely duty-free. 

The proposal, whose limited economic impact is inversely proportional to its high political value, will need to be approved by the Member States by a qualified majority. Which means that—net of the opposition of countries with less specific weight, such as Hungary and the Czech Republic—the fate of the proposal will be decided in particular by Italy and Germany, whose governments have never completely resolved their ambiguity towards the conduct of the Israeli army in Gaza. Should they step aside, Brussels will then have to inform the EU-Israel Association Council of the suspension and wait 30 days before the tariffs come into force.

The road to a “yes” vote on restrictive measures against the ministers of national security and finance, religious extremists Itamar Ben-Gvir and Bezalel Smotrich, is even more complicated. Unanimity of the 27 is required to approve the sanctions. A year ago, the EU capitals rejected the same proposal, which had been put on the table by the then High Representative, Josep Borrell. In the meantime, they have been sanctioned by several EU partners, including the UK, Canada, Australia, New Zealand, and Norway. And so did the Netherlands and Slovenia, independently. 

“You know the situation in the Council very well. Although we see that public opinion is really changing, on a political level, the positions are very similar to what they have been until now,” Kallas admitted, with a dark face. In addition to the EU entry ban and the freezing of any funds on EU territory for the two ministers, the proposal includes sanctions for three Israeli settlers and six organisations responsible for violence in the occupied Palestinian territories and 10 members of the Hamas political leadership. 

Of the package presented today, only the stop to bilateral support to Israel, on which the Commission will proceed independently, is likely to survive. We are talking about €6 million annually until 2027 through the Neighbourhood, Development and International Cooperation Instrument (NDICI) and €14 million in institutional cooperation projects, including twinning and twinning projects under the EU-Israel regional cooperation mechanism.