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The UN’s resolution on Israel doesn’t include any sanctions. It could hurt Israel’s economy all the same.

It gives the green light to activist groups to accelerate campaigns aimed at striking Israel’s economic interests.

BDS protesters marching in Beverly Hills in August 2016.
Getty Images

The high-profile United Nations resolution condemning Israeli settlements that passed last week does not impose any kind of financial sanctions or other punitive measures on Israel. What it does do, though, is essentially give the green light to activist groups and countries to accelerate campaigns aimed at striking Israel’s economic interests and weakening its international reputation. And that could potentially prove to be just as damaging.

In the past few years, movements like “boycott, divestment, and sanctions” (BDS), a campaign modeled off the economic activism that helped end apartheid in South Africa, have begun to gain traction in the West. And in November 2015, the European Union issued new guidelines on the labeling of imported goods that distinguish between goods from Israel proper and those from its settlements in occupied Palestinian territories, a policy that’s expected to hurt Israeli exports. Last month, France became the first country to enforce the new guidelines.

So far, the impact of these efforts have been modest, but if they continue to gain momentum with boosts like the UN resolution, real money is at stake: Experts estimate they could lop anywhere from $15 billion to $47 billion off the Israeli economy over the next decade.

That’s a substantial sum of money. But perhaps even more important is the psychological toll such economic pressure would exact on Israel’s government, forcing it to consider how its already beleaguered international reputation could slide even further. That in turn could change the calculations the Israeli government makes about the price it’s willing to pay for its defense of settlements.

BDS is a banner for a lot of different campaigns

BDS is an umbrella campaign launched by Palestinians and run by pro-Palestinian activists around the world that aims to apply economic pressure on Israel in order to push its government to concede to three main demands. In its own words, these are:

1. Ending its occupation and colonization of all Arab lands and dismantling the Wall. International law recognizes the West Bank, including East Jerusalem, Gaza and the Syrian Golan Heights as occupied by Israel.

2. Granting Arab-Palestinian citizens of Israel their right to full equality

3. Respecting, protecting and promoting the rights of Palestinian refugees to return to their homes and properties as stipulated in UN resolution 194

To do this, the BDS movement advocates for and organizes boycotts of Israeli goods and companies, calls for institutions like banks and universities to exclude Israeli companies from their investments, and lobbies for the imposition of international sanctions.

But although BDS has a formal mission statement, in reality it serves as a banner for a number of different groups and individuals with a wide variety of views and motives. BDS has attracted members who want to do more than just stop Israel's occupation of the West Bank and its policies toward Gaza.

As Vox’s Zack Beauchamp has written, “While the movement takes no official position on how to end the Israel-Palestine conflict, one of its co-founders, Omar Barghouti, has called for unifying them into a single state, which would mean dissolving Israel as a Jewish state.” That’s fed concerns among some Israeli observers that the thrust of BDS is ultimately at odds with a two-state solution.

And although its leaders reject discrimination and racism against Jews, Beauchamp explains that “proponents of anti-Semitism, which is rising globally, have also at times gravitated toward BDS. This spring in South Africa, for example, protesters rallying in support of BDS shouted, ‘You Jews do not belong here in South Africa.’”

There is also variation when it comes to tactics: Some campaigns consider all Israeli businesses fair game, while others argue for only targeting businesses in and products from Israeli settlements.

BDS is on the upswing — and could continue to accelerate

Attempts by Palestinian groups to use boycotts, divestment, and sanctions to pressure Israel predate BDS — they go back at least as far as the 1990s, according to Yousef Munayyer, executive director of the US Campaign for Palestinian Rights. But Munayyer says they took on a particularly organized and sustained form known as BDS after a large group of Palestinian civil society institutions ranging from NGOs to labor unions made a call in 2005 for people around the world to band together for boycotts against Israel.

BDS itself has been around for more than a decade, and it enjoys high levels of support among Palestinians, in part because it seems to have better prospects of effecting change than the divided and anemic Palestinian political leadership. But it’s really in the past few years that it’s begun to gain international prominence, evolving from a fringe movement to an adversary of Israel worthy of harsh criticism from the prime minister himself.

The BDS movement’s accomplishments mainly fit under the “B” and “D” categories — it has been successful in promoting sustained boycotts and divestment — but it hasn’t persuaded state governments, which don’t want to interfere with the Washington-mediated peace process, to impose sanctions on Israel.

In the past few years, scores of universities, pension funds, churches, and unions in the US, Europe, and elsewhere have supported BDS by boycotting Israeli goods and investments. The United Methodist Church’s $20 billion pension board, the biggest pension fund asset manager in the US, blacklisted the five largest Israeli banks. Norway’s $810 billion Government Pension Fund Global, the world’s largest sovereign wealth fund, blacklisted two Israeli companies over their involvement in settlement building in East Jerusalem.

The student councils of most of the University of California campuses have voted in favor of requests that the university system administrator divest from American companies making money from the settlements. The National Women’s Studies Association and other academic groups in the US have voted to boycott Israeli universities. Legendary physicist Stephen Hawking refused to attend a conference in Israel in solidarity with BDS.

A handful of large and prominent Western companies have pulled out of Israel in recent years as well, although it’s difficult to ascertain their exact motives for doing so. For example, when the French telecom group Orange ended its brand licensing deal with an Israeli mobile operator in 2015, some remarks about the end of the deal by its CEO were perceived as sympathetic to BDS.

While BDS claimed it as a victory, the company said the campaign had no role in its decision, and the CEO ultimately traveled to Israel to apologize and smooth things over. That seems to fit a pattern. French infrastructure company Veolia framed its withdrawal from the Israeli market as part of a debt reduction strategy, but BDS claimed that its multiyear pressure campaign on the company was the real reason.

When the Israeli company SodaStream shut down its factory in the West Bank in 2015, the company’s CEO, Daniel Birnbaum, said that it was for restructuring purposes, and asserted that the boycott movement that had targeted it due to the factory’s location had a “marginal” effect on its business.

But according to testimony Birnbaum submitted to Congress, the BDS movement had more than a minor role in SodaSteam’s business outlook and cost the company sponsorship events abroad. “There is absolutely no doubt that our reputation as individuals and as a company was compromised because of our association with the lies and allegations directed at us from the BDS,” Birnbaum said.

Sodastream’s experience gets to the heart of the matter here. While BDS’s actual financial impact on foreign and Israeli businesses in Israel so far is extremely small, its campaigns can frequently deal a significant blow to a brand’s reputation over time. And that’s enough to change the behavior of institutions that want to maximize their bottom line.

So while BDS campaigns aren’t yet close to capable of bringing Israeli businesses to their knees, in the aggregate they could easily become a substantial factor in the calculations that investors worldwide make about Israel’s business climate.

The symbolic victory of UN resolution is likely to invigorate BDS activists and drive them to them to pursue bigger campaigns and target more Israeli companies. If they really pick up steam, that could come at a real cost to Israel’s private sector. Analysts estimate that a chill in foreign investment resulting from BDS campaigns could cost Israel billions a year.

The EU’s disapproval of settlements is a major point of concern for Israel

In addition to grassroots BDS efforts, the EU is the other major source of economic pressure on Israel, although such activities are targeted specifically at settlement activity, not Israel more broadly.

In 2013, the EU created guidelines that say any Israeli entity that wants to receive funding or apply for grants from EU foundations or institutions has to declare that it has no links to the West Bank, East Jerusalem, or the Golan Heights, a strategically important plateau Israel seized from Syria in 1967 and annexed in 1981.

And last year it established guidelines for its member states to clearly label all goods imported from Israeli-occupied Palestinian territories as such, in an attempt to discourage Israel’s settlement activity. Many European nations also warn their businesses of the legal and reputational risks of doing business in the settlements.

Some of the guidelines aren’t mandatory, and member states can choose to enforce them differently. France was the first country to actually begin enforcing the labeling guidelines in November — a year after they were established. But it’s possible the strong language from the UN resolution could empower advocates within the EU who want more member states to observe the guidelines and put more pressure on Israel over its settlement activity.

As with BDS, the power of the EU’s disapproval of Israel’s settlements lies more in the aura of Israeli misbehavior than it does in its specific economic measures. Even if Europe ceased to import all goods coming from the settlements, that would affect a mere 1 percent of the goods that Israel exports to the EU. But increased scrutiny over the origin of Israeli exports could dampen overall demand in Europe.

The biggest cost of economic punishment is reputation

Israel has a strong economy, a large part of which is driven by a booming tech sector that houses a number of premier Western tech firms. It’s difficult to see how even a massive surge in BDS campaigns could destroy that dynamic. And so far, BDS’s successes haven’t prevented Israel from seeing a steep increase in foreign investment in recent years.

But the country’s biggest concern is similar to that of Israeli businesses being targeted by BDS — the cost to its reputation.

“It’s not just an impact of dollars and cents, but it’s an impact that is psychological as well,” Munayyer says. “It’s about the effect of knowing that there are costs in the form of international isolation to continuing down the road Israel is on.”

Israeli leaders are deeply concerned that an uptick in successful BDS campaigns and increased enforcement of EU guidelines would isolate it in the global arena. That’s why politicians from across the political spectrum in Israel have begun to describe BDS as an existential threat in recent years, and argue that its chief goal is “delegitimization.”

The fear for Israel is not that boycotts and sanctions will lead to its economic ruin. It’s that the movement could leave it entirely friendless in the international community, and lead to the loss of its leverage in negotiations over the question of Palestine.

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