Biden has let the Israel-sanctions genie out of the bottle

Armed Israeli settlers in the occupied West Bank in April 2023

David Rosenberg writes in Haaretz on 23 July 2024:

Many may not know that on Tuesday, Japan imposed sanctions on four Israeli settlers for violence against West Bank Palestinians.

Japan as a country is off the Israeli radar screen, and a fairly large number of settlers and far-right groups are already being sanctioned by Western powers. What difference does it make that Tokyo is joining in?

In fact, Japan’s decision is a worrying one. It is friendly to Israel and traditionally doesn’t entangle itself in the Israeli-Palestinian conflict any more than it needs to. That Tokyo is acting now is because its partners in the Group of Seven countries have been doing the same since the United States announced its first set of sanctions against four violent settlers on February 1.

At the time, it seemed like a symbolic act amid strained relations with the Israeli government. Since then, however, it has become apparent that the U.S. President Joe Biden let the sanctions genie out of the bottle. It will be very hard to put that genie back in or stop it from granting the kind of wishes the BDS movement (boycott, sanctions and divestment) has been dreaming of for the past 20 years.

The U.S. and other Western powers had so far refrained from imposing punishments against the West Bank settlers even as they disapprove of the settlement enterprise and regard it, to one degree or another, as illegal under international law. The U.S. generally avoids imposing sanctions on friendly countries even when they deserve it.

To date, the sanctions that have been ordered are minor – all told, the number of settlers and right-wing activists is probably less than 30; the organizations targeted amount to just a handful of mostly minor ones.

But the trend is unmistakably pointing in the direction of more sanctions imposed by more countries. The U.S. has expanded its sanctions list three times since February. Britain has announced two rounds, France one giant round of 28 individuals, Canada two rounds and the European Union its own sanctions on July 15.

The U.S. is reportedly also weighing sanctions against Finance Minister Bezalel Smotrich and National Security Minister Itamar Ben-Gvir. They may also be imposed on the Amana organization, which plays a major role in building settlements and is already on the Canadian government’s list. The EU is considering sanctioning Regavim, another pro-settler NGO.

The risk of wider and more severe sanctions has grown for two reasons. One is that the International Court of Justice last week for the first time deemed the settlement enterprise in violation of international law. Among other things, it called on the international community and organizations not to legally recognize the Israeli presence in the territories or support its maintenance.

The ICJ’s ruling is non-binding, but it may encourage lawsuits in national courts demanding the ICJ opinion be enforced.

More important is the changes in Israel since the current Netanyahu government came into power. Its (so far abortive) assault on the independence of the judicial system has raised questions about Israel’s willingness or ability to enforce international law. Meanwhile, Smotrich – in his second role as minister in the Defense Ministry – is hard at work erasing the Green Line, effectively turning the occupation into annexation without ever declaring it. Ben-Gvir is contributing to the effort by restraining the police from cracking down on settler vigilantism.

The long American arm

The economic effects of the sanctions that have been imposed so far have been limited, but that should be no cause for comfort because as the number of sanctioned individuals and organizations increases, the impact will grow exponentially.

Here’s why. While the sanctions bar travel to the sanctioning country, they are essentially financial. In the case of most Western countries, the sanctions are restricted to inside their own borders and therefore have limited effect.

Not so with the U.S.: Its sanctions apply to any and all transactions anywhere in the world that use U.S. dollars and/or American technology. The U.S. also enforces secondary sanctions, meaning that foreign individuals and institutions must abide by U.S. rules or risk being barred from doing business in the U.S. and from the SWIFT international-payments network.

In practical terms, it means that people like Bentzi Gopstein and his Lehava organization, both of whom have been targeted by the U.S. and the EU, are barred from accessing their bank accounts or from using Windows on their computers. EU sanctions are not as draconian, but the Bank of Israel has instructed banks to honor them anyhow. Americans and Europeans can no longer donate money to Lehava.

“It is not possible for an Israeli citizen with Israeli money in an Israeli bank to be deprived of rights and assets due to an American order,” Smotrich asserted after the first U.S. sanctions were announced and vowed to do something about it.

Those fighting words may have given heart to his far right base, but they displayed a stunning ignorance of international finance, namely because he was dead wrong: The U.S. can indeed block an Israeli bank account and the finance minister he is powerless to stop it. If Israeli banks were to violate American sanctions that risk not only fines but criminal action and would be cut off from the U.S. banking system. It would effectively put them out of business.

Russia and China, two other countries that have been the targets of U.S. sanctions, have tried to build an alternative system that avoids the use of U.S. dollars and Western-based financial networks. That’s not an option for tiny Israel.

For now, the economic impact of the sanctions is limited mainly to the targets, but the U.S. has left itself a lot of room to expand their scope. The U.S. order has been employed against a small number of people and groups acting violently but it also allows officials to pursue a much larger group that those who are “intimidating civilians to cause them to leave their homes, destroying or seizing property.” It also applies to organizations, including government bodies, that endorse such actions.

In other words, the potential list of sanctioned individuals may grow in number and encompass ministers, large nonprofits and perhaps even businesses involved in financing the construction of settlements or providing them with goods and services. The day may come when Israel’s finance minister can’t use his credit card.

A large and growing number of sanctions people and organizations risks creating havoc for the banks, which would now have to act with extreme caution in any dealings over the Green Line. Foreign financial institutions and investors would face the same problem of constant vetting of clients and assets for fear of running afoul of U.S. rules.

“The impact of U.S. sanctions imposed on individuals within a country can, therefore, significantly harm the economy of that country as a whole,” Prof. Amichai Cohen wrote in an explainer for the Israel Democracy Institute.

Prof. Cohen offers some ideas about how the Israeli government can counter the growing sanctions threat. One of them, which is not to force Israeli financial institutions to ignore the sanctions, it seems to have done. But the most important – “firm action by Israel’s law enforcement institutions against any action in the West Bank directed against law-abiding Palestinian citizens” – runs against the very grain of this government’s policies.

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