THE BLOG
02/20/2014 05:01 pm ET | Updated Apr 22, 2014

The BDS (Boycott, Divestment, Sanctions) Threat to Israel: A Realistic Appraisal

As Secretary of State Kerry prepares an American set of principles that will be the basis for pressing the Israelis and Palestinians to negotiate on a final status agreement, the threat of BDS (boycott, divestment and sanctions) applied in some form against Israeli interests has entered the conversation. Secretary Kerry has argued that allowing the peace talks to fail would incite Israel's critics who are looking to pressure the country through a campaign for boycotts against Israeli products and institutions. "You see," he stated, "for Israel there's an increasing de-legitimization campaign that has been building up. People are very sensitive to it. There is talk of boycotts and other kinds of things. Are we all going to be better with all of that?"

That statement generated angry criticism from a number of Israeli officials with Israel Intelligence Minister Yuval Steinitz calling Kerry's language "offensive, unreasonable and unacceptable." While Prime Minister Netanyahu did not mention Kerry, he did remark that efforts to boycott Israel are neither moral nor justified and will not achieve their goals. "First, they cause the Palestinians to become further entrenched behind their intransigent positions and push peace further away and secondly, no pressure will cause me to give up vital Israeli interests, first and foremost the security of Israel's citizens."

We already have seen actions that reflect the BDS movement. Some of them relate to religious, cultural and academic arenas and some to business and investment activities. The Presbyterian Church (USA), which in 2012 narrowly voted down a proposal to divest from companies that do business with the nation of Israel will again consider the recommendation this summer. The Methodist Church also rejected a divestment proposal in 2012. In the academic world, the American Studies Association voted in December 2013 not to collaborate with Israeli academic institutions. This is a small body of less than 5,000 members. But other more important groups are being pressured to follow suit. Similarly, the actress Scarlett Johansson continued her endorsement of Sodastream in the West Bank, despite pressure on her by the anti-poverty charity Oxfam to break ties with the company.

In the business category are the decisions by PGGM, the Netherland's largest pension fund management company to withdraw all its investments from Israel's five largest banks because they have branches in the West Bank and/or are involved in financing construction in the settlements. A few other Dutch firms have also ceased business activities with Israeli companies. By contrast, ABP, another one of the Netherlands's largest pension funds, announced that it does not intend to divest from its investments in Israeli banks because it had concluded that they had not done anything contrary to international law or regulations.

The fact is that none of these actions to date has had any serious impact on Israel's economy that has been growing at an enviable rate; a growth that was not significantly dimmed by the bursting housing bubble and great recession that struck other parts of the world. The growth of Israel's economy is tied to its enormous technological innovation. Thus, despite its small size and population of only 8.13 million people, Israel, called the "start up nation" has a disproportionate number of start-ups for its population and more companies listed on the NASDAQ than any foreign country other than China. It has seen a significant number of home grown companies purchased by American companies and large-scale investment by US companies in Israel. It is this growth in GDP, jobs and internal and external investment that has enabled Israel to handle the serious burden on the economy from an increasing number of ultra-orthodox Israelis who do not work, who have large families and who are increasingly dependent on the society for support.

Nevertheless, the concern expressed by Secretary Kerry is real. If the present effort to find a resolution to the Israel-Palestinian conflict fails there is little doubt that the Palestinians and their supporters will make a massive attempt to push the BDS program against Israel. They will argue that Israel's intention to take control over and possibly annex the West Bank is demonstrated by the failure to reach even the agreement on principles sought by Kerry. They may press for a bi-national state. There are 6.1 million Jews in Israel. The Arab population of Israel is 1.68 million and the number of Palestinians in the West Bank and Gaza is about 4.1 million a total that almost brings the two populations in parity. In view of the higher Palestinian birth rate, joining in a single state could soon result in a majority of its citizens not being Jewish. Israel would never accept a bi-national state as that would end Israel as a Jewish state. Alternatively, the Palestinians will claim that Israel's control of their lives without their political representation is anti-democratic and a form of apartheid. And they will press the UN and call on the nations and businesses of the world to apply sanctions against Israel of the kind applied to South Africa, boycott products manufactured in Israel, and divest from investments there or from entities investing there. Undoubtedly, there will be a massive push back against this effort - particularly by the United States and by American Jews. And I believe that most American companies and even a substantial number of European and companies of other nationality will not publicly support these sanctions against Israel. Indeed, some may actually rail against them.

But what they say or do publicly is not important for Israel's business and economy. It's what they do in their business activities. And here is where I think the threat to Israel's export based economy truly lies. Israel's start-up, technologically driven businesses are most vulnerable. Companies and their executives and employees will generally seek the easier more comfortable path -- the one with the fewest risks. Risk managers will concern themselves with reputational risk with customers or suppliers. Executives, as always, will seek to avoid controversy. For the company to purchase a competing product from a non-Israeli firm without tying it to a political position is the easiest, least risky path. Having spent many years investing in Israel and engaged in selling Israeli made products in the U.S. and elsewhere, I can testify first hand that companies can choose a competitive product or make a decision not to invest in Israeli technology and there is no way to prove that the decision was anything other than a business decision.

A recent Israeli Finance Ministry study showed that the phenomenon of boycotts is the largest threat to Israel's economy with a possibility of a 20 percent drop in exports; inflation and thousands of job layoffs should Europe seriously commit to boycott Israeli companies. As noted by Finance Minister Yair Lapid "Israel's economy is more vulnerable than its national security" Does this suggest that Prime Minister Netanyahu should compromise Israel's security or flood it with returning Palestinians or harm its ability to function successfully as a Jewish state in order to avoid the possibility of sanctions? Of course not! But it does suggest that the results of a failure to reach an accord should be taken into account when weighing the many factors that are relevant for negotiating a two-state deal with the Palestinians.

Of course, it is thoroughly wrong and shameful that with all the reprehensible conduct carried out by other nations in the world, Israel, the only true democracy in the Middle East, is the one targeted for BDS. For those of my generation who grew up in a world of overt anti-Semitism, culminating in the Holocaust, it is a reminder that anti-Semitism still lives on. It is also a reminder of one of the key reasons underlying the Zionist movement -- that we Jews could finally have a homeland of our own where our people could find security and a chance to make a successful and safe life for future generations. And as I look at the situation, that presents the clear choices the Israeli people and its government now have to make. On one side are the positions represented by some members of the governing political coalition, which includes religious nationalists who believe as Coalition Chairman MK Yariv Levin said of West Bank settlements "we are here because this is our land, because of our legal historical, religious and national right, and no one will uproot us..." or as Housing Minister Uri Ariel stated at a march on the West Bank: "We are here to stay. There will be only one state between the Mediterranean Sea and the Jordan River."

On the other side are the many reasons for seeking a two-state solution, and ensuring the success of the Zionist enterprise, including the reasons referred to by Secretary Kerry. These were the reasons that prompted soldier-statesmen Yitzhak Rabin, Ehud Barak and Ariel Sharon to move towards separating Israel from the West Bank and Gaza.It is important that in making their choices the Israeli people fully understand the implications of their decision. Secretary Kerry's warning helps accomplish that.

Mr. Lifton is a Board Member of The Israel Policy Forum. His memoirs, "An Entrepreneur's Journey: Stories From a Life in Business and Personal Diplomacy," was published by AuthorHouse in 2012.

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