Biden’s sanctions set ominous precedent for the settlement enterprise

Not only will it likely cause economic disruption to additional West Bank residents and organizations, but it could also pave the way for other countries to take similar measures.

The executive order issued by President Joe Biden on the first day of February imposed sanctions on four West Bank settlers. The unprecedented decree bodes ill for the settlement enterprise as a whole. A close reading shows that it is far more sweeping than the financial punishment meted out to the four individuals named by Washington might suggest.

Not only will it likely cause economic disruption to additional West Bank residents and organizations, but it could also pave the way for other countries to take similar measures.

The Israeli government must work with the Biden administration to rescind the order, not least by persuading Washington that Israel is willing and able to enforce the law in the West Bank itself.

Onerous economic sanctions, whether imposed by executive order or an act of Congress, are a powerful policy tool to wield against the “bad guys” of the world. They have been imposed throughout American history – most recently on a series of individuals and companies, including those associated with terrorism: Tehran and its Revolutionary Guard Corps, Vladimir Putin, and other senior Russian officials, as well as Cuba, North Korea, Syria, and other rivals and enemies of the United States. But the imposition of sanctions against settlers is, at its core, a scathing political statement against the government of Israel that makes it clear that the American administration views the West Bank settlements in an extremely negative light.

The preamble to Biden’s executive order leaves little room for interpretation: The president disapproves of what he sees as “a high level of settler violence and forced evacuation of villages” by settlers. The order expresses concern that these actions disrupt regional stability in the Middle East and impair the ability of the United States to implement its policy there and to lead the geopolitical process toward a “two-state solution.”

The order states, among other things, that anyone involved in activity that may “harm stability” in any way or who, as a governmental entity, refrains from acting to stop such activity can be subject to sanctions. In addition (and as expected), any involvement, even peripherally, in violence, property damage, the forced removal of people from their homes, or terrorism is subject to the sanctions laid out in the order.

There is a draconian ring to the vague and overly broad language of Biden’s decree. Theoretically, if the administration decides that any settlement activity threatens “regional stability,” even if it is in complete compliance with Israeli law, the US can activate crippling sanctions on government entities, construction companies, and private individuals.

The net cast by the order is so wide that even those with a tangential connection to such activity – for example, a bank that provides financing – could fall into the snare of punishing sanctions. A broad interpretation of the order could render many of the day-to-day activities in the West Bank illegitimate in American eyes.

IT IS TRUE that for now, sanctions have been imposed only on four West Bank residents, but due to the way the international financial system operates, the order could have much more far-reaching implications. With the signing of the order, the US Financial Enforcement Authority (FinCEN) issued an admonition to the American financial system, reminding it of its obligation to implement it. The warning includes a series of “red flags” that will make it easier for financial institutions to identify “prohibited activity” per the order. These red flags are also worded in an overly broad way.

Biden and Netanyahu. Photo by U.S. Embassy

The order is American, but its reach is international and immediate. The way the international financial system operates, and specifically the primacy of the US dollar, creates a situation where, in effect, the US has enforcement authority over almost every financial institution in the world. This is not a theoretical matter. Due to economic and political interests, American enforcement authorities routinely exercise this power and impose exorbitant fines on financial institutions they believe have contravened US sanctions. They hold the ultimate stick: the ability to cut off a financial institution from clearing US dollar transactions, effectively paralyzing it.

In addition, US sanctions will likely have a “chilling effect” on the willingness of financial institutions to operate in the West Bank out of fear that they will be cast in a negative light by Washington under this executive order.

Therefore, any financial institution – in America, Israel, or anywhere else in the world – is sure to take strict measures to avoid the risk of any action that might violate the US sanctions. Freezing the bank accounts of the individuals singled out by Biden’s pen is just the initial step; it is bound to be followed by each institution’s implementation of a policy to scrutinize every transaction that has any connection to Judea and Samaria or to economic activity originating there. Not every such activity will be stopped, but they will all be placed under a profoundly limiting cloud of suspicion. It is likely that risk-averse banks worldwide will steer clear.

For these reasons, Biden’s executive order sets an ominous precedent for the settlement enterprise. Canada has already announced that it will follow suit (making an outrageous comparison between the settlers and Hamas), and the fear that European countries will do so is not unfounded.

It is reasonable to think that Biden’s order stems, in part, from domestic political calculations – his desire to give a wink and nod to progressive voters who take a critical view of his unwavering support for Israel in its war against Hamas. But there can be no doubt that it is also a burning poker in the eye of the Israeli government and an expression of great displeasure with its composition, its policies, the public statements of its ministers, and its enforcement policy in the West Bank.

The settlers should complain to the extremists among them and to their leadership, whose defiant, provocative, and violent conduct contributed greatly to this situation. It deserves unequivocal Israeli condemnation. But the executive order has been signed, and therefore, Israel must act with determination and in every way possible to counter the weight of the decree and mitigate its damage.

Published by Jerusalem Post