Impact of the Boycott, Divestment, and Sanctions Movement

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Mr. Chairman, America and its allies must prepare for an increasingly dangerous era. It will be marked by political, economic, and financial warfare. It will not only target the United States. Our allies also will be in the crosshairs. As always, Israel is the canary in the coalmine. With the so-called “Boycott, Divest and Sanctions” (BDS) movement, we are getting a glimpse of an economic and financial weapon that could soon be turned against us and other vital allies, with serious consequences for the national and economic security of the United States and our allies.

Many of our allies are involved in territorial disputes in the Middle East, Europe, Asia and elsewhere. We may agree or disagree with their positions in these disputes. But our support for defensive structures to protect them from conventional military, missile, cyber, WMD, and terrorist threats, among others, must never be dependent on our policies with respect to these territorial disputes. Neither should our defenses against economic and financial threats.

The U.S. must create a defense economic and financial shield to protect the United States and our allies against economic and financial warfare, and Congress is well placed to lead that effort.

BDS and Economic and Financial Warfare

The BDS movement is a tool of political, economic, and financial warfare against Israel. Those waging this war seek to first isolate and delegitimize Israel and to turn it into an international pariah. From there, doing economic damage to Israel becomes an easier task.

This is not the first time economic war has been waged upon Israel. The Arab Boycott, first enacted in 1945 before the creation of the state of Israel, was an instrument of raw economic power. The Arab states wielded oil and market access to put companies to a fundamental choice between doing business with Israel and doing business with the Arab world. Israel’s chamber of commerce estimates that the Arab boycott has cost the Israeli economy $45 billion. And the boycott was not only costly to Israel. On a global scale, the Arab oil embargo following the 1973 Yom Kippur War is estimated to have caused a 4.7 percent decline in America’s GDP and a 7 percent and 2.5 percent decline in Japan’s and Europe’s GDP, respectively.

The BDS movement is only the most recent iteration of the Arab boycott, with many naturalized American citizens now leading the charge. The movement, purportedly supported by a grass roots constituency, is a highly organized campaign of political de-legitimization designed to lay the predicate for a broader economic and financial warfare campaign. Not only is the goal to pressure Israel to make political and territorial concessions, but it also seeks to convey to countries and companies that there is increased market risk and reputational consequences for Western companies that do business with Israel. Never mind that investment in Israel is among the safest in the Middle East.3 The boycotters understand that if Israel is delegitimized, it becomes easier to pass Western sanctions against companies doing business with Israel or, at the very least, pressuring them into cutting their business ties with the Jewish state.

While many in this country are focused on the threatening atmosphere that the BDS movement has created for pro-Israel students on campus, FDD’s research has determined that the economic and financial warfare campaign currently targeting Israel’s economic and financial relationships with Europe is far more dangerous. Europe is Israel’s largest trading partner. In 2014, EU-Israel trade was valued at $30 billion.

In 2012, the EU’s consuls general in east Jerusalem and Ramallah issued a Heads of Mission report recommending sanctions on Israeli settlements, and in January 2014, PGGM, a large Dutch pension fund, withdrew its investments from Israel’s five largest banks because they have branches in the West Bank. In November 2014, an internal EU document was leaked to the press. The document included an assessment of what economic sanctions against Israel could possibly include.

In March 2015, reports suggested that the EU was considering sanctions against Israel in an effort to force Israel to “comply with EU law” and to compel a peaceful settlement between the Israelis and Palestinians. These sanctions would target Israeli products produced by Israelis and Palestinians in the settlements, with a focus on raising awareness among European businesses about the risks of doing business in Israeli settlements located in the disputed territories of the West Bank or east Jerusalem. Reports also indicate that the EU document came on the heels of a request from Palestinian Negotiator Saeb Erekat to Federica Mogherini, the current High Representative of the European Union for Foreign Affairs and Security Policy, asking that the EU hold Israel accountable for “[v]iolations of International law.” Additionally, reports indicate that France was mulling ways to single out Israel at the United Nations and to blame it for stalled peace talks with the Palestinians.

International organizations, religious institutions, private businesses, sovereign wealth funds, and universities have joined in supporting BDS in recent years. Most of them are European. Some are not. Some have reportedly re-entered the Israeli market. Some have not. They should all be identified publicly as having joined the economic and financial war against Israel.