The EU and Israel reached an agreement Tuesday enabling the Jewish state to participate in a European-funded scientific research program after a compromise on settlement funding.

The agreement on Israel's participation in the Horizon 2020 Programme "fully respects the EU's legal and financial requirements while at the same time respecting Israel's political sensitivities and preserving its principled positions," according to a joint statement released by Israel's justice ministry.

Israel had objected to European Union guidelines, published in July, which will ban funding for and financial dealing with settlements in the occupied West Bank and annexed east Jerusalem starting from January 2014.

The guidelines angered Israel because it would have to recognise in writing that the settlements—which are illegal under international law—are not part of the Jewish state in any future EU agreements.

According to military radio, the sides agreed the EU will add a clause to the Horizon 2020 agreement determining that research money won't serve research institutions in the West Bank, while Israel will include a clause in the agreement saying it does not recognise the new EU guidelines.

The issued text does not cite the concessions made in this area.

The joint statement said the breakthrough between the sides came "following discussions between Israeli Minister of Justice Tzipi Livni and (EU) High Representative" Catherine Ashton.

"The agreement will allow Israel's scientific community to benefit from one of the most important EU programmes and facilitate its further integration into the European space of research and innovation," read the statement.

"This agreement will pave the way for Israel's participation in other EU programmes to be launched from 1st January 2014."

Israel will have to contribute 600 million euros to the Horizon 2020 project in return for access to the wider funding pot.

The deal makes Israel the only non-European nation allowed to participate in the scientific cooperation programme. It will allow hi-tech companies and research institutes to access European funding.

Palestinian and pro-Palestinian groups had called on the European Union to go further, towards a boycott of all Israeli settlement products, or even all Israeli products.

© 2013 AFP