The European Union, and its predecessor the European Community, has for the past four decades been involved in trying to resolve the Israeli-Palestinian conflict through a negotiated two-state solution. EU diplomacy has been instrumental in creating consensus around the need for a Palestinian state, but far less successful in establishing "Palestine" on the ground. Though the internationally-supported Palestinian state-building process in many ways was a spectacular technical achievement, as demonstrated by the 2011 reports from the EU, the UN, the IMF and the World Bank that all unanimously stated that the Palestinian Authority was ready for statehood, it turned out to be an even bigger political fiasco. The technical achievements on the ground and in the PA were never translated into political progress in the peace process.
This development, together with several rounds of failed negotiations between the parties, has led observers on all sides in the conflict to argue that the Israeli-Palestinian conflict is beginning to move out of the two-state solution paradigm and into an uncertain future. While the peace process certainly has died and resurrected several times before in the past, it seems harder and harder to visualize a viable Palestinian state alongside Israel. The EU's new "differentiation strategy" against Israel should therefore be seen both as a very late measure against reversing more than four decades of Israeli settlement construction, but also as a possible strategy for dealing with the conflict in a post-two-state solution reality. By "disengaging from the settlements", differentiation actually makes it possible for the EU to have normal relations with Israel, even if the occupation will not end. It is therefore a strategy where one of the objectives is to avoid placing real, effective sanctions against Israel.
The EU's new differentiation strategy is about separating the democratic and internationally recognized Israel within the 1967 borders from what is increasingly referred to by Peter Beinart and others as the non-democratic and non-recognized Israel, which is the occupation, primarily of the West Bank (including East Jerusalem), but also of the Golan Heights. Differentiation takes the form of prohibiting grants, prizes and funding from the EU to the settlements in the occupied territories (2013 EU settlement guidelines), clauses in EU-Israel agreements (See for example, the Horizon 2020 research project that began in 2014) that stipulate that the occupied territories are not part of the state of Israel, non-recognition of Israeli veterinary supervision beyond the Green Line (2014 EU decision), which has effectively banned these products from entering the EU. The latest measure in the EU's differentiation strategy is the newly published labeling of settlement products.
Since the differentiation strategy targets only around 1 percent of Israel's economy, it is obviously not an instrument for boycotting Israel and it will likely not lead to immediate Israeli counter-reactions or concessions, but it may have long-term consequences, just as the EU's normative diplomacy has had in the conflict in the past. Had the EU really wanted to boycott Israel, it would of course target the other 99 percent - the internationally recognized and democratic Israel, which the EU, as it continues to state over and over again, instead wants closer relations with.
In late 2013, around the same time as the settlement guidelines went into effect, the EU offered Israel an unprecedented assistance package in the form of a "Special Privileged Partnership" (SPP) if it would sign a peace agreement with the Palestinians. The SPP, which was a bit vague when it was published, was estimated to be worth billions of euros, not to mention what it would do for Israel's decreasing international legitimacy. Above all, the fact that the EU offers Israel closer integration into the Union ridicules certain extreme Israeli allegations by settler leaders and others that the EU's differentiation strategy is motivated by anti-Semitism.
At the same time, it is certainly true, as Israeli critics argue, that differentiation is a political as much as a technical or economic strategy. These measures against Israel would not have happened if Israel and the Palestinians would be six months away from signing a peace treaty. But Israeli critics are wrong in arguing that Israel somehow is being unfairly singled out for sanctions while others are not. Right now, about three dozen countries are listed on the EU's list of countries subjected to "restrictive measures (sanctions) in force" - and Israel is not among them. Israeli critics of the EU often conveniently fail to mention that the EU has a similar differentiation strategy in place for Armenia's occupation of Nagorno-Karabakh, though not for other occupations like Turkey's of Northern Cyprus or Morocco's of Western Sahara, which EU officials say are completely different situations from the Israeli-Palestinian conflict.
Also important to note is that the EU in its security strategy from 2003 defined resolution of the Israeli-Palestinian conflict, unlike other conflicts, as "a strategic priority for Europe". This completely legitimate self-interest might warrant different measures in the Israeli-Palestinian conflict as compared to other conflicts. In a world still dominated by interests and realpolitik, one can never expect a political actor to be completely consistent in its international affairs. Just look at the disrespect with which Israeli leaders regularly treat the EU, or even the American administration (its real friends) and compare that to the respect it pays the leaders of Russia (the main weapons supplier for Israel's enemies) and China (a lucrative trading partner for Israel, but hardly a diplomatic ally, as it almost always votes against Israel's positions in international forums).
The academic EU literature has long sought ways for the EU to translate its economic power into political clout in the Israeli-Palestinian conflict. The differentiation strategy offers the EU just that - a completely new box of diplomatic tools it can use against Israel, where the EU can use its power as the world's largest economy and Israel's number one trading partner as diplomatic leverage. Differentiation between the democratic and nondemocratic Israel will be even more important in a possible future scenario where the two-state solution is gone and the occupation becomes permanent. In the meantime, the EU's differentiation strategy offers one of the most concrete examples yet of the price Israel is paying for its continued occupation.
Anders Persson is a political scientist at Linnaeus University, Sweden. He is also expert commentator on the Middle East on Swedish TV and radio. His latest book The EU and the Israeli-Palestinian Conflict 1971-2013: In Pursuit of a Just Peace was recently published by Lexington Books in the United States.