The European Union has proposed to suspend parts of its free trade agreement with Israel, affecting about 5.8 billion euros of Israeli exports, the commission announced on Wednesday.
The EU also announced that it would be placing sanctions on "extremist Israeli ministers," West Bank settlers, and Hamas.
The EU is Israel's largest trading partner, and accounts for 32% of Israel's total international trade, an EU press release said.
If the free-trade arrangement is suspended, Israel would face duties at the same level as other countries without a trade accord with the bloc.
In Israel's case, that would affect exports worth approximately 5.8 billion euros, resulting in an estimated 227 million euros a year in duties, a senior Commission official told reporters.
European Commission President Ursula von der Leyen said that the EU believed Israel is in breach of compliance with Article Two of the Euro-Mediterranean Agreement. The Agreement "establishes respect for human rights and democratic principles as an essential element."
“The horrific events taking place in Gaza on a daily basis must stop. There needs to be an immediate ceasefire, unrestrained access for all humanitarian aid, and the release of all hostages held by Hamas," Von Der Leyen said.
"The European Union remains the biggest donor of humanitarian aid and an unwavering champion of the two-state solution. Reflecting these principled commitments, and taking into account serious recent developments in the West Bank, we propose to suspend trade concessions with Israel, sanction extremist ministers and violent settlers, and put bilateral support to Israel on hold, without affecting our work with Israeli civil society or Yad Vashem.”
EU suspends funds to Israel
Additionally, the EU announced that it would be stopping bilateral support to the Israeli government.
EU Commissioner for the Mediterranean Dubravka Šuica stated that €14 million of previously allocated funds were designated for the period from 2020 to 2024. Out of this amount, €4.3 million was contracted, while €9.4 million remains uncontracted.
"Until further notice, we will not proceed with the joint identification of new actions or the signature of contracts," Šuica said.
Šuica stated that the EU would continue its support for Yad VaShem at €20 million, alongside over €10 million for Israeli civil society.
The EU said that it would give the Palestinian Authority €1.6 billion over the next two years. Šuica also confirmed that the commission would establish a Palestine Donor Group to "engage on the future of Gaza" and attempt to help implement reforms with the PA.
Foreign Minister Gideon Saar said on X that the European proposals are "morally and politically distorted, and it is to be hoped that they will not be adopted".
EU diplomats told Reuters that it is unlikely that the proposal would get the necessary support, with much depending on Germany, which has so far been reluctant to impose EU penalties on Israel.