EU bars funding for Israeli settlements Israeli government fails in last-minute bid to prevent publication of ban on groups in Israeli settlements from using EU money.

European Union today published rules that will, from next year, bar Israeli organisations, groups and companies from receiving EU funding if they are based on Palestinian territory occupied by Israel.

The requirement, which appears in European Commission guidelines published today (19 July) in the EU’s Official Journal, has caused a storm of protest in Israel, with the Israeli government lobbying the EU hard to postpone publication. The ambassadors of France, Germany and the UK were also summoned today to explain their governments’ agreement with the rules.

The ban would not apply to Israeli individuals and refer only to funding, grants and prizes awarded by the EU’s institutions. The EU’s 28 member states are affected only when they are co-financing projects.

The guidelines reiterate “the long-held [EU] position that bilateral agreements with Israel do not cover the territory that came under Israel's administration in June 1967”, Catherine Ashton, the EU’s foreign policy chief, said in a statement issued today.

Ashton linked the publication of the guidelines to the start of the EU’s next seven-year budget in 2014. Agreements with Israel would have to include a reference to the exclusion of entities based in the occupied territories.

The guidelines are, in practice, a codification of an agreement reached by the EU’s member states last December, which stipulated that “all agreements between the state of Israel and the EU must unequivocally and explicitly indicate their inapplicability to the territories occupied by Israel in 1967”.

The European Parliament has previously complained about several instances of EU funding going to Israeli companies based in the occupied territories.

The response from Israel has been angry and frenetic. Israel’s Prime Minister Binyamin Netanyahu responded sharply on Tuesday (16 July), saying: “We will not accept any external edicts on our borders.”

In the days since, Netanyahu has contacted José Manuel Barroso, the European Commission’s president, to call for publication of the guidelines to be postponed. Similar calls have been made by the justice minister, Tzipi Livni, and President Shimon Peres.

The Israeli press report that John Kerry, the US secretary of state, has also contacted Barroso.

Kerry is currently engaged in efforts to bring the Israelis and the Palestinians to the negotiating table.

EU member states last month decided not to issue a new statement on the continued construction of Israeli settlements in the occupied territories, after a request from the US to give Kerry space to pursue his initiative. The Middle East peace process is due to be discussed by EU foreign ministers on Monday (22 July), but again they are not expected to issue a statement.

Israel’s finance minister, Yair Lapid, has claimed that the timing of the publication of the guidelines “sabotages the efforts that US secretary of state John Kerry is putting into bringing both sides back to the negotiating table”.

In a tweeted comment, Carl Bildt, Sweden’s foreign minister, asked: “Did Israel really expect that EU should fund illegal settlement expansion? Was never – mildly speaking – in the cards.”

EU foreign ministers issued strongly worded statements twice last year warning that the extension of Israeli settlements into Palestinian territory was threatening to make a two-state solution impossible.

Such concerns have also been aired within Israel. Yuval Diskin, a former head of Shin Bet, Israel’s internal security agency, wrote in the Jerusalem Post on Sunday (13 July), that Israel and Palestine may have already crossed “a point of no return” when a two-state solution ceases to be feasible.

After that, he wrote, “we will be left with one state from the river to the sea for two peoples. The consequences of such a state for our national identity, our security, our ability to maintain a worthy, democratic state, our moral fibre as a society, and our place in the family of nations would be far-reaching.”