The Commission presented on Wednesday a package of targeted trade-related sanctions and other measures against Israel after its army had launched a military offensive in Gaza City against Hamas. Hundreds of thousands of Palestinians have been forced to flee to overcrowded camps south of the city but an estimated half a million people are still left there together with the Israeli hostages.
The measures were first announced by President von der Leyen in her State of Union speech last week. Presenting the details, both the political hierarchy and senior EU officials referred to her speech when explaining the reasons for the sanctions and the expected outcomes. A last-minute attempt by the Israeli foreign minister to change her mind failed.
“The horrific events taking place in Gaza on a daily basis must stop," said President von der Leyen. “There needs to be an immediate ceasefire, unrestrained access for all humanitarian aid, and the release of all hostages held by Hamas.”
“We all agree that the situation in Gaza continues to head in the wrong direction,” explained Kaja Kallas, Commission Vice-President and High Representative for Foreign Affairs and Security Policy, at a press conference. “We must leverage the tools at our disposal to pressure the Israeli government into changing course.”
"Let me be clear: the objective is not to punish Israel, but to improve the humanitarian situation in Gaza.” The sanctions aim at sending a strong message from the EU: “This war must end, the suffering must stop, and the hostages must be released.” Referring to the political divide in the EU, she said that, “The next crucial step is securing support from our Member States to implement this proposal.”
The sanctions consist of three parts: partial suspension of trade-related matters in the EU – Israel Association Agreement such as trade preferences, putting on hold bilateral support to Israel, and restricted measures in the form of travel bans and asset freezes on Hamas politburo members, two Israeli extremist ministers and violent settlers.
The proposal to sanction finance minister Smotrich and national security minister Ben Gvir, who are inciting to violence and pushing for settlement expansion in the West Bank, continuing the war in Gaza, and weaponizing humanitarian aid, was proposed already last year. A proposal on restricted measures requires decision by unanimity.
Suspension of preferential trade
The EU exports more goods and services to Israel than it imports. Total trade in goods in 2024 amounted to €42.6 billion. EU imports from Israel were worth €15.9 billion, its exports €26.7 billion. As regards imports, EU imports €10.5 billion and exports €15.1 billion.
The proposal does not ban trade with Israel but cancels core trade preferences. Currently, 37% of Israeli exports is benefiting of zero tariffs to the EU. This trade will be subject to customs tariffs (ranging between 8% and 40%), under the terms of the World Trade Organization's Most-Favored Nation (MFN) clause, a senior EU official explained. The rest, 63 % of Israeli exports to the EU, benefits of MFN zero tariffs.
Based on 2024 trade figures, the estimated impact would be an additional cost of approximately €227 million per year for Israeli exporters. The costs, however, will be borne by European importers and indirectly consumers in the EU. Trade Commissioner Maroš Šefčovič regretted this “moderate” trade effect. Tariffs are tantamount to taxes which the Commission did not like in the trade talks with the Trump administration.
“We are a proposing the most meaningful and impactful suspension of trade preferences,” a senior EU official summarized. “We are suspending all preferences in the trade agreement with Israel - which affects ca 37 % of our trade in goods will Israel – and will fall back on WTO’s MFN clause.”
A Commission spokesperson confirmed later the figure concerning the cost of tariffs on Israeli exports to EU. He added that EU exports of goods to Israel will also be subject to tariffs amounting to over €400 million because of the mutual suspension of trade preferences.
The officials were vague about the most controversial but needed Israeli export product - arms and defence equipment. According to SIPRI statistics, Israel is one of the major arms suppliers to European NATO countries while it also imports weapons from EU countries.
But as the MFN tariff on them is probably zero, arms and defence equipment will not be affected by the suspension, as there is no alternative regime. Furthermore, provisions concerning capital movements and certain customs cooperation are not suspended to ensure the continuity of financial flows and customs operations necessary for trade.
Products from Israeli settlements in the occupied territories – which makes up a few percents of the total export from Israel - are not affected by the proposal as they are not included in the Agreement and do not benefit from trade preferences. EU Member States are required to label those products as originating from the occupied territories.
Core issues in trade are an exclusive EU competency and the Council needs to adopt the proposal with a qualified majority. The Commission will also have to notify the Association Council, which gives time for further dialogue with Israel. The decision takes effect 30 days after the notification. If the war would end and the humanitarian situation in Gaza would improve, the proposal might be withdrawn.
The proposal on a partial suspension of trade-related matters follows a review of Israel's compliance with Article 2 of the Association Agreement, which found that actions taken by the Israeli government represent a breach of essential elements relating to respect for human rights and democratic principles.
The breach refers to the rapidly deteriorating humanitarian situation in Gaza, the insufficient implementation of the EU - Israel understanding on increasing humanitarian aid, the intensifying of military operations and the decision by Israel to advance a settlement plan in the so-called E1 area of the West Bank, which would split the area and undermine the two-state solution.
EU's bilateral support to Israel put on hold
This support consists of two types of institutional cooperation projects: twinning programmes (transfer of EU legislation and best practice to partner countries) and projects promoting regional integration and cooperation in the context of the Abraham Peace Accords. The amount to be put on hold is approximately €14 million of already allocated funds for the period 2020 – 2024.
Out of this amount, over €4 million has already been contracted. Grant decisions not adopted yet for 2025, amounting to €6 million, will also be put on hold.
The Commission emphasized that €20 million allocated to the International Holocaust Remembrance Center in Jerusalem (Yad Vashem) for measures to fight antisemitism will not be put on hold. Likewise, €10 million for civil society in Israel will remain untouched. Support amounting to € 5 million per year for peacebuilding initiatives via Israeli and Palestinian civil society will also continue.
The suspension of bilateral support aims at targeting the Israeli government and public authorities. “This is an important signal and a continuation of our policy of advocating for peace,” commented Dubravka Šuica, Commissioner for the Mediterranean.
She added that the Commission continues to advocate for a two-state solution - one based on a secure Israel and a viable Palestinian Authority. “To help make this possible, we are supporting the Palestinian reform process with substantial funding, amounting to €1.6 billion over the next two years.”
Is there a contradiction in the sanction package - not banning arms trade with Israel while putting on hold bilateral aid to twinning projects and grants to projects supporting Israel's regional integration in the region?
“I would not call it a contradiction, but rather a reflection of the different instruments at our disposal and the specific objectives they serve,” Commissioner Dubravka Šuica told The Brussels Times. “When it comes to arms exports, decisions are taken by Member States. On the other hand, the bilateral support with Israel can be put on hold by the European Commission.”
Israel's war policy fuels antisemitism in Europe but so might also EU sanctions against Israel do. How can such a negative side-effect be prevented?
“I want to be very clear: we are putting bilateral support to the Israeli government on hold, while maintaining support for civil society and support to Yad Vashem,” she replied. “We will not block Israeli civil society and Israeli people have our full support in these trying times. Other instruments are intended to fight antisemitism within Europe and they are not affected by this decision and continue as usual.”
A Commission spokesperson said on Thursday that the EU condemns antisemitism in all its forms: “We need to separate this, as far as such a separation is possible, from the work we are doing in respect of the two-state solution.”
The Commission’s sanctions package faced some critical voices in the College. According to a document seen by The Brussels Times, Magnus Brunner, Commissioner for Internal Affairs and Migration, drew attention to the high level of antisemitism and antisemitic acts in Europe - the highest one since WWII. “Like never before, Jewish Europeans are being held responsible for the actions of the government of Israel.”
“Antisemitism goes against our values and against everything Europe stands for,” he underlined. "Therefore, we need to be very clear – clearer than before - that today’s decision is about the policies of the current Israeli government, and not about the people of Israel.”
While accepting the position of the College, he warned against a backlash if the EU is not clearer about its commitment to fight antisemitism and support Jewish life in the EU. “If we don’t make this crystal clear, I fear that our decision today will be instrumentalised for the wrong purposes.”
Commission President von der Leyen will travel to New York where she will take part in the high-level commemorative meeting of the UN General Assembly, marking the 80th anniversary of the United Nations. On Monday afternoon, the President will also address the high-level international conference on the two-state solution, hosted by France. Most agree that the two-state solution must be kept alive.
Has the commission assessed whether this is the right timing for EU Member States to recognize Palestine, considering that the current far-right Israeli government vehemently opposes the two-state solution and might response with extreme measures?
“President von der Leyen was very clear in her State of the Union address, which set the scene for the package of measures,” a Commission spokesperson replied. “The two-state solution has been, is, and will remain the priority for the EU in this complex geopolitical question. “We believe that now is the most important time of all to reinforce that commitment and push for the two-state solution.”
Israel’s Foreign minister Gideon Sa’ar sent von der Leyen a letter on Tuesday, copied to High Representative Kaja Kallas and EU Member States foreign ministers, complaining that the proposed measures were decided without any consultation with Israel and that they were unprecedented as similar measures never have been implemented against any other country (besides Syria during the Assad regime).
Israel continues to claim that it still is fighting an existential war against Hamas and that the war would have ended long time ago had Hamas agreed to disarm and release the hostages. Sanctions will jeopardize on-going efforts to end the war as they “harden its stance, and undermine progress toward potential agreements”.
In fact, Hamas has already been defeated and no active mediation between the two sides is taking place after Israel’s failed strike last week against Hamas’ leadership in Qatar. Despite mass protests in Israel, and against the advice of the military, the Netanyahu government has until now rejected all proposals for a ceasefire-hostage deal, whether phased or comprehensive, which would end the war.
Update: The article has been updated to include a summary of Commissioner Brunner's remarks at the College meeting and a clarification on the suspension of preferences.
