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UK restricts trade in goods from Israeli settlements in the West Bank
The UK has imposed trade restrictions on goods from Israeli settlements built on Palestinian land in the occupied West Bank. The package includes sanctions against actors supporting settlement expansion, the rejection of certain export licences and a ban on advertising settlement properties in the UK.
The UK has restricted trade in goods from Israeli settlements in the occupied West Bank and placed individuals, businesses and organisations that contribute to settlement expansion under sanctions.
The decision by the UK government is based on the assessment that actions such as Israel issuing a tender for an illegal settlement in the E1 area of the West Bank weaken the prospect of a two-state solution and further worsen conditions in the region.
Package targeting settlements in Palestinian territories
The sanctions package provides for trade restrictions on goods from settlements located in the occupied Palestinian territories. Individuals and organisations providing construction, infrastructure, financing or real estate services for settlement expansion may also face sanctions.
Under the measures, advertising in the UK for the sale of properties in illegal settlements is prohibited. The package also includes sanctions against Israelis who support or encourage violence against Palestinians, as well as the rejection of licences for weapons and other exports that contribute to the occupation.
Trade between the UK and Israel is estimated to have reached $8.1 billion in 2025, with approximately $51.4 million of that amount consisting of imports from illegal settlements in the West Bank.
Countermeasures from Tel Aviv
The UK decision has heightened tensions between the two countries. The Israeli government in Tel Aviv adopted a series of counter-sanctions, including the closure of the British consulate general in occupied East Jerusalem.
A statement by UK Foreign Secretary Ed Miliband did not provide details on which financial institutions could be targeted, how the scope would be determined or the conditions for implementation. This has raised questions about how the trade restriction will be applied and what steps will be taken to prevent sanctions evasion.
Possible effects on banks and construction companies
Metal, plastic and electronics assembly plants operate in industrial zones linked to Israeli settlements in the West Bank. However, the settlements are estimated to account for approximately 5 percent of Israel’s total exports.
An analysis published in Israel assessed that the sanctions were not expected to have a major impact on industry and agriculture in the West Bank. It also noted that banks financing settlement expansion and construction companies operating in the area could face more serious consequences.
Israeli banks provide loans to companies building in the settlements, as well as financing and housing loans. The sanctions could therefore limit the sources of financing used in the construction of illegal settlements.
Nadav Tamir, executive director of J Street Israel, said the sanctions could have political and economic effects. Tamir said imposing sanctions on companies or banks involved in projects in the E1 area would force organisations planning to participate in similar projects to act more cautiously.
Tamir said banks’ refusal to provide housing loans to people buying property in settlements would be an important tool that could deter people from becoming involved with settlements. He said the UK decision conveyed the message that practices and annexation efforts in the West Bank are unacceptable.
Israeli economist Omer Moav offered a more cautious assessment of the sanctions’ impact. Moav argued that if the UK and other Western countries genuinely wanted to punish Israel, sanctions would have to be imposed directly on Israel as a whole.
Debate over product origins and sanctions evasion
Avraham Novogrotzky, president of the Manufacturers Association of Israel, said some products are used in factories located in areas under Israel’s own sovereignty, referred to as the “1948 borders of Israel.” Novogrotzky said this could make it difficult to determine the products’ origin.
Novogrotzky also claimed that 18,000 Palestinian workers employed under special permits in Israeli settlements in the West Bank could be adversely affected by the sanctions. He said extending the sanctions to other parts of Israel could create a dangerous situation.
During similar decisions previously adopted by European countries, attempts were made to circumvent the bans by presenting goods produced in West Bank settlements as products from within Israel’s 1948 borders. Preventing this practice is also emerging as a significant implementation challenge in the UK decision.
The UK is expected to tighten customs inspections and seize and destroy goods belonging to importers found to have made false declarations.
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