When UK Foreign Secretary Ed Miliband announced a ban on trade with Israeli settlements last week, he took pains to portray the watershed sanctions package as aimed only at those facilitating activity over the Green Line and not Israelis as a whole.

“The sanctions regime will target illegal settlements and settlement expansion, not Israel,” Miliband told Parliament on September 8. “We will continue to support important and valued trade with Green Line Israel precisely because we support the two-state solution, including security and prosperity for Israel.”

However, according to economists and other experts, the planned moves will in reality have the opposite effect, with only muted financial impact for settlements but potentially far-reaching knock-on effects that could chill some of Israel’s most important trade relationships.

“Most of the people abroad don’t necessarily make the differentiation between trade within Israeli settlements and trade with Israel, meaning the action has an effect on the brand of Israel and will be restricting trade with Israel,” said Dan Catarivas, president of the Israeli Federation of Bi-national Chambers of Commerce and Industry.

Industry watchers warned that the threatened sanctions could harm business ties well beyond the UK and the 12 other Western countries that announced plans for similar measures, while a vague promise to impose penalties on anyone aiding settlement expansion could wind up putting the entire Israeli banking system on shaky ground, leading to damage across the country’s economy.

“Diminishing trust in Israel’s economic offering will lead to us not having the income that we need to continue serving our internal and national security interests, and then every Israeli is going to be harmed,” said Joanna Landau, who chairs the board of the Abba Eban Institute for Diplomacy and Foreign Relations at Reichman University.

In a landmark speech, Miliband said the sanctions were coming in reaction to Prime Minister Benjamin Netanyahu’s government turning a “blind eye” to violence by extremist settlers against Palestinians, describing a process of “ethnic cleansing” in the West Bank.

Sharply ratcheting up London’s rejection of what he called Israel’s entirely “unlawful occupation” of the West Bank, Miliband said Britain would impose an import ban on goods from Israeli settlements in the West Bank, sanction companies and individuals that facilitate settlement expansion, and refuse licenses for arms and other exports deemed to materially support Israel’s “occupation,” within six to nine months.

He added that France and Canada would also impose an import ban, with additional countries set to “support further action.”

Shortly afterward, Canada, France, the UK, Denmark, Finland, Iceland, Ireland, Norway, Poland, Portugal, Spain and Sweden released a separate statement promising they would also “introduce national and/or support European restrictions on trade in goods with settlements,” or were at least “actively considering” doing so.

Goods from settlements in the West Bank and around the Jordan Valley make up less than 5 percent of the country’s total exports, according to the Israel Manufacturers’ Association. Settlement products account for only $11.1 million of the annual $8.1 billion trade between Britain and Israel, the group said.

“If we look........

© The Times of Israel