As the EU becomes increasingly critical of Israel’s military conduct and is considering economic sanctions more seriously, it might need to take into account US countermeasures.

Following the 7 October attack by Hamas, the EU initially showed strong solidarity with Israel. However, after more than 45 000 Palestinians got killed during the Israeli invasion of the Gaza strip, the EU and its member states started to change their stance. Recently, thirteen member states voted in favour of a UN resolution demanding Israel to end its presence in Palestine and a handful of them showed support for the International Criminal Court’s arrest warrant for the Israeli prime minister.

Some member states have started actively calling for economic sanctions. Belgian prime minister Alexander De Croo lobbied his European colleagues for an import ban on dates, olive oil and wine that originate from areas illegally occupied by Israel. Spain and Ireland went even further by arguing for the suspension of the EU-Israel trade agreement. The EU already imposes sanctions against some Israeli individuals and entities for human rights violations, but EU top diplomat Josep Borrell called for more meaningful measures. Despite opposition of member states such as Germany, the Czech Republic and Hungary, the EU is seriously considering the use of economic statecraft.

If the EU would enact stricter sanctions, it would have to deal with the United States. Besides the EU’s most significant economic and security partner, the US is a staunch ally of Israel and determined to throw its economic weight around in defence of the country, regardless of the accusations of war crimes and crimes against humanity.

One of the US’ main weapons in defending Israel are the so-called anti-BDS laws. BDS stands for Boycott, Divest, and Sanctions and anti-BDS laws refer to the amalgam of regulations that aim to counter actions by people, organizations or states that want to exert economic pressure on a US ally. American citizens and firms are prohibited from participating in an unsupported foreign sanction regime and are obliged to report any requests to do so. Individuals that don’t comply face up to 20 years of imprisonment.

In name, the anti-BDS laws are targeted at any “boycott maintained by a foreign country against a country friendly to the United States”. In practice, however, the list of examples of illegal boycott requests maintained by the Office of Antiboycott Compliance reveals that the rules are mainly destined for US firms that are asked to participate in sanctions against Israel. 61 of the 63 examples refer explicitly to the boycott of Israel, with the remaining two being too general to decide who they were for.

The US government also uses the toolset to dissuade its own citizens of participating in a boycott. Testimony to such government pressure is the 2021 documentary Boycott that tells the story of three American citizens who find their lives turned upside down because they refused to sign an anti-boycott pledge. Going even further, the government is trying to make it practically impossible to boycott products from illegal Israeli settlements. Recently, the Anti-BDS Labelling Act codified the Trump-era rule that goods imported from the Gaza Strip or the West Bank should be labelled as being from Israel, making it impossible for the consumer to know if they are purchasing goods originating from illegal settlements or Israel itself.

If the EU proceeds with sanctioning Israel against the will of the US, it might become subject to similar economic statecraft. The US threatened with fines of up to $2.3 million dollar per voyage when Spain denied port entry to a ship carrying arms to Israel, proving that the US is willing to risk good relations with its other allies in supporting Israel.

Since anti-BDS measures target US persons, the most likely target would be US multinationals in the EU. If these multinationals would comply with hypothetical European sanctions on Israel, they might face indictment in the US. American controlled firms make up 20% of foreign owned entities in the Union and they account for half of the value added within this group. In addition, they have within their ranks strategic players in the high-tech, digital, and pharmaceutical industries. Hence, the subsidiaries’ compliance with US pressure could severely affect the European economy.

The recent expansion of the EU’s economic statecraft arsenal would allow the EU to react in the short term. First, there is the Blocking Statute that protects EU firms from extra-territorial measures (i.e., actions of one country trying to enforce its laws in another country). The Blocking Statute could prohibit EU subsidiaries of American multinationals from complying with US anti-BDS laws, the effects of the anti-BDS laws could get nullified and the subsidiaries could recover their damages. However, it is not clear whether the blocking statute would apply to US subsidiaries in this case. Second, there is the Anti-Coercion Instrument, a mechanism to respond to general economic coercion. The instrument allows a broad spectrum of countermeasures such as tariffs and other trade and investment restrictions. Nevertheless, issuing such measures under the Anti-Coercion Instrument might be a considerable step on the escalation ladder.

The US’ extra-territorial defence of Israel touches the core of the EU’s strife for strategic autonomy and highlights the need for better European capacities to act more autonomously. To that end, the EU should decrease its dependence on foreign countries that use extra-territorial measures as economic statecraft. In doing so, the Union should bear in mind that those countries are not limited to China, Russia, and the Gulf states. In addition, it should work on its unity as a form of resilience since potential US measures might hit member states differently.

Israel’s military actions in Gaza, the West Bank, and its neighbouring countries have been condemned by international organizations, the EU, and several of its member states. The EU is faced with a dilemma. If it wants to credibly defend its values and the international order, it should react forcefully. The use of economic statecraft could be an initial step, but it would also render the EU susceptible to economic coercion by the US.