The Sanctions Against Israelis
The US, the UK, France and other states have announced the imposition of economic sanctions on Israeli residents who are believed to be complicit in 'settler violence.' This document aims to outline the framework of international economic sanctions and contextualize the sanctions imposed on Israelis.
Yinon Levi, an Israeli recently sanctioned by the US. Photo by Yonatan Sindel/Flash90
On Thursday, February 1st, 2024, the President of the United States signed Executive Order No. 14115 stipulating that violence by a number of Israeli residents in the area referred to as Judea and Samaria or the West Bank has reached a level where it endangers peace, security and stability in this region, Israel, and the Middle East as a whole. The order also states that these actions also, undermine American foreign policy. Given these threats, President Joe Biden declared a national emergency, stating that the US Secretary of State and Secretary of the Treasury have the authority to impose economic restrictions and various travel restrictions on those they believe to be complicit in ‘settler violence.’ Indeed, the US State Department has already announced the imposition of sanctions on four Israeli residents of the territories.
The imposition of sanctions was not limited to the United States. On February 12th, 2024, the British Foreign Minister announced the imposition of economic sanctions on four Israelis allegedly associated with actions against Palestinians in the territories (only one of whom is included in the US sanctions). On February 13th, 2024, France imposed sanctions on 28 settlers whose names have not yet been published. Canada's Minister of Foreign Affairs also announced that Canada would impose sanctions on settlers accused of settler violence and, as reported in the media, European Union (EU) institutions are also trying to impose sanctions on some settlers. Such efforts are being currently blocked by the Czech Republic and Hungary, Israel's allies in the EU.
This document aims to outline the framework of international economic sanctions and where the sanctions imposed on Israelis fall within this framework.
Economic sanctions have been imposed by international institutions, particularly by the UN Security Council, for decades by virtue of the Council's general authority anchored in the UN Charter. These sanctions include freezing assets (e.g. of terrorists), prohibitions on conducting trade relations in goods, such as oil or weapons, with countries like Iran or North Korea, or general restrictions on the transfer of certain chemical substances between countries.
In the last decade, the sanctions regime has developed towards the imposition of economic sanctions by certain Western countries. Economic sanctions became an essential enforcement tool against countries, as well as individuals and corporations within countries, perceived as being responsible for significant violations of the world order - threatening stability and peace in the world or violating human rights, or threatening essential interests of the country imposing the sanctions. Moreover, international sanctions against the citizens of a country express misgivings as to the ability or desire of the government whose citizens or residents they are, to enforce the law on those individuals or corporations.
In each sanction-imposing country, the source of authority to do so is different. In the US, several laws authorize the President to impose sanctions at his discretion, through an Executive Order. Usually, any imposition of sanctions in the EU requires a separate legislative procedure by the Parliament and Council. In the UK, laws such as the Global Human Rights Sanctions Regulations (2020), allow the Minister of Foreign Affairs to impose economic sanctions in certain cases.
In every country, there are authorities whose job is to enforce the sanctions.
For example: In the US, there is a specific agency within the US Treasury called the Office of Foreign Assets Control (OFAC), whose role is to enforce sanctions. OFAC keeps lists of sanctioned individuals and corporations, and an online searchable database is available.
Sanctions imposed by the United States are considered, by most standards, particularly aggressive. Unlike other countries around the world, the US obliges its citizens all over the world to adhere to these sanctions, regardless of the country where the frozen property is located. Furthermore, the sanctions apply to any transaction made in U.S. Dollars, as well as any transaction where American technology is used (such as the Microsoft Office software package). Finally, the US also imposes secondary sanctions - on companies and individuals who have no ties to the US, but have conducted business with people on whom sanctions have been imposed.
The extensive American sanctions regime, and especially its application to hundreds of Russian citizens, has had a significant impact on the business world. Many companies, especially financial companies, check every customer and every transaction against the American sanctions lists. Banks in all Western countries are especially cautious when dealing with countries with a relatively large number of people on whom American sanctions were imposed (such as Russia, Venezuela or China). Investors are prudent about investments in countries where many individuals are subject to sanctions. The impact of US sanctions imposed on individuals within a country can, therefore, significantly harm the economy of that country as a whole.
The sanctions regime of the EU, or of other Western countries, is quite constrained by comparison. It mainly applies to activities carried out within the sanctioning country's borders and to assets located in that country. These countries tend to avoid imposing "secondary" sanctions – i.e., on companies from foreign countries who maintain relations with sanctioned entities.
Several Israeli laws prohibit trade with certain countries and authorize the government to impose sanctions on individuals.
- The Trade with Enemy Countries Ordinance
- The Law to Prevent the Proliferation of Financing of Weapons of Mass Destruction
- The Law to Combat Iran's Nuclear Program
- The Import and Export Ordinance
- The Defense Export Control Law
Nevertheless, Israel has no general authorization to impose sanctions on countries based on government discretion.
The Israeli banking sector is particularly cautious regarding the imposition of sanctions. Israeli banks have faced serious repercussions in the past when they assisted US citizens in evading Federal Income Tax payments and had to pay hundreds of millions of dollars in fines. Due to their caution, Israeli banks avoid contact with individuals subject to American sanctions and, in many cases, with those subject to EU sanctions.
The procedure of imposing sanctions is an administrative one, where the discretion of the administrative authority imposing the sanctions is relatively broad, and a wide range of considerations can be examined. The procedure is only transparent to a limited extent, and since the sanctions are prescribed to foreign citizens, they often deny these individuals Due Process before being imposed. Sometimes, decisions pertaining to sanctions are based on confidential material, of which the person being sanctioned can only view a portion or "the essence."
Like any administrative procedure in a democratic state, there are mechanisms for reconsidering such decisions. For instance: OFAC in the US allows exceptions to the ban on transactions, in the form of licenses. OFAC decisions can be appealed to the Federal Courts, but they generally refrain from interfering with these decisions.
As mentioned, the executive order has so far only been prescribed to four Israeli residents of the territories, but its potential scope of applicability is vast. In his order, President Biden authorizes the Secretaries of State and Treasury to impose sanctions on anyone who endangers stability in the West Bank, and anyone who acts violently to harm people or their property, or to deprive them of their property. The order also applies to organizations, including government organizations, that endorse such actions.
The many reports by human rights organizations in recent months alleging an increase in ‘settler violence’ against the Palestinian residents and of Palestinian property takeovers by local Israelis, some supported by the government authorities according to these NGOs, or by the IDF's turning a blind eye or actively assisting them, served as the backdrop for the aforementioned executive order.
So far, no information has been provided about an intention to significantly broaden the scope of sanctions imposed by the US, beyond those already prescribed. But FinCEN (the US Treasury unit that provides information to the financial system regarding economic crimes, money laundering, etc.) has already issued a warning concerning the imposition of sanctions.
As published in the media, Israeli banks have frozen the accounts of those sanctioned. It can be assumed that other Israeli and foreign companies will avoid doing business with them. Traveling to certain countries abroad will become problematic for them.
But the potential of the sanctions is more comprehensive. As mentioned, the executive order allows sanctions to be imposed on anyone directly or indirectly involved in acts of private property takeover and on any organization, including government organizations, whose members engage in such acts and their managers. For example, In the Regulation Law Case, argued before the Israeli Supreme Court in 2021, it was claimed that many structures in the settlements are built on private Palestinian land. It was also alleged that quite a few official institutions, such as local councils, were involved in inhabiting these private lands. Allegedly, the potential for sanctions encompasses all those individuals and institutions involved. As the number of people and companies to which the sanctions will actually be applied may increase, so too will the lateral damage to the Israeli economy increase.
The executive order could also, potentially, apply to senior Israeli politicians involved in the activities listed in the order - including ministers and senior officials in government agencies.
Entities who violate the sanctions should expect fines of tens or even hundreds of thousands of dollars for each violation. Entities who systematically and maliciously violate the sanctions should expect even higher fines and, sometimes, even criminal prosecution.
The sanctions reflect the Western countries' distrust toward the State of Israel's ability to enforce the law in the West Bank on its own. That distrust may signal to the international community that the internal law enforcement system in Israel is unreliable. That distrust may quickly translate into a greater willingness of international institutions, such as the International Criminal Court, to intervene in what is happening in Israel, especially in the West Bank.
That distrust is especially problematic in the midst of the current war, when international support is critical for Israel. If the Israeli government does not reconcile the rifts with the American administration soon, the damage to Israel's economy and public image could be harmed significantly, precisely at the worst moment.
First, Israeli politicians should tread cautiously when attempting to act against the business entities subject to sanctions, such as the Israeli banks. In this situation, banks primarily seek to protect themselves from the severe ramifications that violating the sanctions will have on them. Political activity aimed at encouraging or forcing the Israeli banks to disobey the sanctions could have negative repercussions on the Israeli banking system.
Second, it is possible to act vis-a-vis the American authorities via diplomatic channels to prevent the expansion of the sanctions. To the extent that there are claims against the factual basis of the sanctions, acceptable means must be implemented within the US to lift the sanctions.
Eventually, Israel's best response would be a firm action by Israel's law enforcement institutions against any action in the West Bank directed against law abiding Palestinian citizens, allowing for the restoration of international confidence in Israel's ability to act on its own against such activities.