EU Commission proposes trade restrictions on Israeli settlements, options include ban or tariffs

Ursula von der Leyen, the European Commission president, has sent legal options to EU governments for tightening restrictions or preventing trade with Israeli settlements.

The Commission document, seen by Euractiv and marked "restricted," outlines three options:

• An import licensing system for settlement goods
• Punitive tariffs designed to price them out of the EU market
• An outright ban on imports originating in Israeli settlements, which are illegal under international law

While the paper lays out the technical options for imposing trade measures on Israel, it strongly suggests the Commission believes such a move would constitute a political step rather than a simple economic measure — partly because of the tiny amount of trade the EU does with settlements.

The paper therefore suggests the EU should frame the move as foreign policy sanctions, which require the unanimous approval of 27 governments to agree them — a steeper threshold than trade measures require.

Rather than being drafted by the European External Action Service, headed by Kaja Kallas, it was the cabinet of the Commission president and the executive's secretariat-general that wrote the paper, a source told Euractiv.

However, it will fall to Kallas, the EU foreign policy chief, to present the options and determine whether there is consensus at a meeting of foreign affairs ministers on Monday — a major test of her political authority.

Background and Context

The paper is the fruit of a long tussle inside the EU institutions and reflects mounting pressure from national governments and growing scrutiny of EU-Israel ties over its conduct in Gaza, the expansion of settlements, and violence by extremist settlers in the West Bank.

Several countries, from Ireland to the Netherlands, have advanced national legislation to ban trade with settlements.

Practical Hurdles

The paper also flags practical hurdles to restricting trade with the settlements. It warns that all three options hinge on national European customs authorities' ability to identify settlement products. Israeli traders could re-label or mix goods with products from Israel, undermining enforcement.

The Three Options in Detail

Option 1: Import Licensing Regime

The least confrontational option would introduce a dedicated import licensing regime for goods originating in Israeli settlements. Companies seeking to import such products into the EU would first need approval from national authorities, with customs officials verifying that the goods comply with the bloc's rules of origin and broader trade legislation. The Commission, however, warned that this system would remain vulnerable to circumvention.

Option 2: Dedicated Tariff Regime

The second option involves creating a dedicated tariff regime applying only to goods produced in the settlements, with duties set high enough to effectively price those products out of the EU market. The paper states that this option would in practice achieve many of the same objectives as an import ban while stopping short of formally prohibiting trade. Yet, the Commission also noted that Israel already reimburses settlement exporters, potentially blunting the impact of higher tariffs.

Option 3: Full Import Ban

The most far-reaching option would go considerably further by prohibiting the import, transit, marketing, and distribution within the EU of any goods originating in Israeli settlements. The restrictions could be targeted at specific sectors, such as agricultural products, or extended to all settlement goods.

According to the Commission's assessment, a partial or full ban could be justified under the EU's foreign policy powers, as the objective would be to influence Israeli government policy rather than regulate trade, while noting that settlement exports account for only a very small share of overall EU-Israel trade.

Basing the proposal on foreign policy grounds would require unanimous backing from EU national governments.

Previous Attempts

In 2025, the Commission proposed suspending trade preferences under the EU-Israel Association Agreement, but failed to get the approval of national governments.

(bw, mm)