In recent years, sanctions have become an extremely common tool of Washington’s foreign policy, which has more or less left Israel untouched, as it remains the main Middle Eastern ally of the United States. Since the beginning of this year, there has been a change in both this trend and the nature of American restrictions, whose ultimate goals have been revealed in a new way.
Historians argue that states have taken measures against one another which have had a financial and economic impact since ancient times, and modern international relations have added sanctions to this list, including those of the United States against a number of states, including Cuba, Iran and Russia. The Israeli authorities, in response to recognised hostile actions on the Palestinian side, have resorted to similar practices over the years, for example, by reducing the fishing zone off the coast of the Gaza Strip, limiting or completely blocking the entry of Palestinian workers, freezing the transfer of tax revenues to the Palestinian National Authority, as well as introducing a ban on certain NGO activities. However, the Israeli government prefers to shy away from the concept of sanctions, replacing it with such words as “measures”, “steps” or “response”. The desire for this kind of lexical diversity is most likely due to the reluctance to actualise the topic of sanctions in the Palestinian-Israeli conflict, especially since the PNA is already openly calling for them, refusing synonyms.
Continuing a brief excursion into the theory of financial and economic restrictions, one cannot help but note that their derivatives are widely used in the form of secondary sanctions and so-called self-sanctions. The essence of these, albeit in different forms, boils down to the forced or preventive voluntary refusal of residents of one country to interact with representatives of another. However, here too, against the backdrop of the international situation in recent years, Israel has managed, in a sense, to withdraw into the shadows. On the one hand, the state clearly did not take part in the Western economic pressure against Russia. On the other hand, neither the remaining connections nor the losses from those that were broken are advertised. Two questions occupied a central place in assessing the nature of anti-Russian restrictions. The first of them is options for circumventing restrictions, since similar techniques can be used by Israel’s main geopolitical adversary, Iran. The second is the accompanying transformation of global trade, including the share of transactions in Chinese yuan, in which the UAE and Saudi Arabia have shown interest. This is of particular importance for Israel in the context of normalising relations with its regional neighbours.
It seems that Israel has finally managed to complete the task of more than half a century ago: it is minimising its own losses in the context of a global confrontation. However, recent events in the Middle Eastern country itself illustrate the true nature of the new reality. It is characterised by both US approval of some targeted restrictions on Israel, and by the fact that measures of influence imposed from outside have been adapted by national players for dealing with their own citizens.
In February of 2024, the US Treasury Department imposed sanctions against four Israeli settlers suspected of involvement in violence against Palestinians in the West Bank; in mid-March, three more names were added to this list. In addition to the fact that even personal sanctions were not previously characteristic of the “special” nature of American-Israeli relations, the further actions of the banks of the Middle Eastern country gave added specificity to the situation, which also followed the path of restrictions, for fear of the restrictive measures of the United States, but in their own way.
The first Israeli financial institution to respond to the US policy against settlers was Bank Leumi, followed by Bank Hapoalim and the state-owned Postal Bank. The country’s Finance Minister, Bezalel Smotrich, tried to influence them through the Office of Banking Supervision in his own department, calling the implementation of American decisions “unthinkable” and warning against becoming a “banana republic.” In parallel, the Bank of Israel, took the opposite approach, supporting the measure, emphasising in a corresponding statement that the refusal to take into account Washington’s instructions threatens serious consequences, including suspicions of money laundering and supporting terrorism, as well as reputational damage.
Of course, there is a rational explanation for the behaviour of Israeli banks. in the mid-2010s the US Securities and Exchange Commission identified and prosecuted Bank Leumi and Bank Hapoalim for assisting American citizens in tax evasion. Due to the length of the proceedings and the severity of the charges, which included “active assistance” in the violation of tax laws, which is quite atypical for such cases, it is very likely that financial institutions do not want to go down this path again. However, it is noteworthy that at the stage of opposition to the judicial reform of Benjamin Netanyahu’s coalition, properly the banks, including the Central Bank, expressed the most alarmist sentiments, emphasising that the reforms would aggravate economic difficulties in the medium term.
It was also possible to resolve the issue of providing financial services to settlers who fell under restrictions only at the instigation of the United States. In late March, the US Treasury Department sent an explanatory letter to the Bank of Israel containing “gratitude for participation” in the implementation of these measures and permission to service the accounts of persons in the sanctions list if the transactions relate to covering only basic needs or ensure the survival of animals kept on their farms. At the same time, Smotrich’s attempt to present the situation as the result of negotiations with the White House, which ended with consideration of Israeli interests, seems to have failed, since Washington justified its response by citing the “humanitarian” concessions that always exist in such cases.
This story is interesting and even instructive, as it testifies to a change in the nature of American sanctions, which, contrary to theoretical foundations, are clearly becoming aimed not at changing foreign policy abroad, but at transforming the internal affairs of the country. At first glance, the target of the measures may be considered to be representatives of the extreme right wing of the Israeli government – Minister of Finance Bezalel Smotrich and Minister of National Security Itamar Ben-Gvir. The already-sanctioned persons and possible candidates to be included in the next package of restrictions constitute the electoral base of these politicians’ parties, and Washington has lobbied for their removal from the Cabinet or at least from bilateral contacts with the United States in the context of containing Israeli judicial reform.
At the same time, the tense nature of relations between the government of Netanyahu and the administration of Joe Biden, aggravated by the IDF Iron Swords operation in the Gaza Strip and the presidential race in the United States, makes it possible to introduce sanctions against a number of settlers into a broader context. In this case, the minimum task of these restrictions comes down to an attempt to force the Israeli authorities to act on the Palestinian track in a way that has a positive bearing on the re-election campaign of the current US president. In this case, the formal reason is the situation on the West Bank of the Jordan river, which does not pose an existential threat to Israel and fits into the framework of the traditional views of the Democratic Party on Israeli settlers’ activity as one of the obstacles to a Middle East peace settlement. The maximum task is to achieve Netanyahu’s departure from the political arena.
Thus, a situation emerges in which American sanctions are expanding both the range of problems that the United States wants to solve with their help and the geographic scope of their application, extending sanctions not only against adversaries, but also against established partners.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
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