The European Union’s consuls general in East Jerusalem and Ramallah are recommending economic sanctions against settlements in the West Bank and East Jerusalem.

Among the recommendations made in the nonbinding Heads of Mission report for 2012, which has been obtained by Haaretz, is to “prevent, discourage and raise awareness about problematic implications of financial transactions including foreign direct investments, from within the EU in support of settlement activities, infrastructure and services.”

Seven of the report’s 10 recommendations deal with imposing direct or indirect sanctions by the European Union on bodies and organizations involved in construction in the settlements. The recommendation to actively encourage European divestment from the settlements is particularly severe, compared with previous internal EU reports.

The consuls recommend that the EU ensure strict application of the free trade agreement between the EU and Israel so that products manufactured in settlements do not benefit from preferential treatment. Another clause recommends encouraging efforts to enforce existing legislation requiring products made in the settlements to be labeled as such at sales points.

Efforts must be made to “ensure that imports of settlement products do not benefit from preferential tariffs and guarantee the consumers’ right to an informed choice” with regard to the origin and labeling of products, the report states. The annual mission report, which is written by all the heads of diplomatic missions of EU member states in the Palestinian Authority, does not compel practical steps, but serves as a basis for internal discussions of the Israel-Palestinian situation.

The 2012 report, which was handed in early January to the EU institutions in Brussels and to the foreign ministries of the 27 member states, also advocates closer supervision of cooperative programs between the EU and Israel with regard to technological research and development to ensure that no research grants, scholarships or other technological investments assist settlements, either directly or indirectly.

The diplomats gave the example of Israel’s participation in a cooperative program called Horizon 2020, through which the EU invests hundreds of millions of euros in Israeli high-tech firms. They noted that some of this funding goes to firms like the research laboratories of the cosmetics company Ahava, which are located in the Jordan Valley kibbutz Mitzpeh Shalem, near the Dead Sea. If the EU consuls’ recommendations are accepted, such investments will stop, since the kibbutz is seen as a settlement.

The report takes Israel to task over the decision to move ahead on construction plans in Area E-1, the corridor meant to link Jerusalem to the nearby West Bank settlement of Ma’aleh Adumim. The decision was made in late November, after the Palestinians’ statehood bid in the United Nations. The implementation of the E-1 project “threatens 2,300 Bedouin with forcible transfer” and “would effectively divide the West Bank into separate northern and southern parts,” the report states, adding that it would also “prevent Palestinians in East Jerusalem from further urban development and cut off East Jerusalem from the rest of the West Bank.”

The consuls recommend to the EU member states to “coordinate EU monitoring and a strong EU response in order to prevent settlement construction in E1, including opposing forced transfer of the Bedouin communities in E1.”

The consuls state that the continuation of Israel’s policy in East Jerusalem could thwart the possibility of the city serving as the Israeli and Palestinian capital and therefore put the entire two-state solution at risk.

According to the report, Israel is “systematically undermining the Palestinian presence” in Jerusalem, through policies including “restrictive zoning and planning, demolitions and evacuations, discriminatory access to religious sites, an inequitable education policy, difficult access to health care, the inadequate provision of resources.”

A large portion of the report deals with Israeli restrictions on Muslim and Christian religious practice in Jerusalem and accuses Israel of attempting to change the character of Jerusalem as a city sacred to the three faiths. The Israeli government “selectively enforces legal and policy restrictions on religious freedoms and on access in particular for Christian and Muslim worshippers to their holy sites in Jerusalem/Old City,” the report states.

The consuls direct special attention to the cooperation between the right-wing group Elad and the Israel Antiquities Authority, determining that the purpose of this collaboration is to promote “a partisan historical narrative, placing emphasis on the biblical and Jewish connotations of the area while neglecting the Christian/Muslim claims of historic-archaeological ties to the same place.”

The authors said it seems that an attempt is being made to use archaeology to erase Muslim and Christian connections to the city, and that the “overreaching purpose of such a pre-programmed approach to the presence of archaeological evidence in the area seems to be a concerted effort by pro-settler groups to use archaeology to enhance an exclusively Jewish narrative on Jerusalem.”

The consuls say 2012 saw a rise in the number of violent incidents on the Temple Mount and a sharp increase in “the frequency and visibility of visits by Jewish radical political and religious groups, often in a provocative manner.” According to the report, the Palestinians fear that Israel is trying to change the status quo on the Temple Mount and create “Hebronization” there by arrangements similar to those in force at the Tomb of the Patriarchs in Hebron.

In the report the consuls say that construction of Jewish neighborhoods in East Jerusalem is “systematic, deliberate and provocative” and presents as an example Israel’s announcement that 3,000 new housing units were approved by the government, a statement that came shortly after the Palestinians had their UN status upgraded to non-member observer state.

The consuls noted in particular three construction plans they view as problematic: the eastward expansion of the Jerusalem neighborhood of Har Homa, the southward and westward expansion of Gilo and housing construction in the Givat Hamatos neighborhood in between.

“The construction of these three settlements is part of a political strategy aiming at making it impossible for Jerusalem to become the capital of two states,” the report states.