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Israel decided to mark produce grown in the settlements after the British chain Marks & Spencer returned millions of dollars in products, Dov Weissglas, former advisor and bureau chief to prime minister Ariel Sharon, revealed yesterday.

Weissglas, who was giving a speech at a cultural event in Ramat Hasharon, said Israel had been ignoring the European Union and European Economic Area (EEA) demand that it mark such products out of "national pride, and based on the position that all our producers are citizens of Israel, and we must not yield to the political discrimination Europe was demanding."

"This pride evaporated when Sharon learned that millions of dollars worth of goods had been returned by Marks & Spencer.

He called up Ehud Olmert, who was then minister of industry and trade, and ordered him to begin marking the products in keeping with European demands," Weissglas said.

Euro-exports

The Europeans said Israel's export agreements with the EEA do not include the occupied territories, and therefore all goods produced there must be taxed at 15 percent, unlike other Israeli products.

If Israel maintained its refusal to mark settlement produce, all Israeli exports to Europe would be taxed, they said.

This would mean that Israeli products would not be able to compete in Europe, which buys two-thirds of Israeli exports, worth $18 billion a year.

Weissglas said Sharon decided to begin evacuating the occupied territories as early as 2002, out of the recognition that no other country, including Israel's top allies, supports the settlement project.

"Only one state out of 188 supports the settlement project, and that's Israel. The world doesn't care about historic rights, it cares about reality. The reality is that there are 2 million Palestinians living in the territories, but only 300,000 Israelis."

Weissglas said Israel is dependent economically on Europe, and militarily on the United States. "$4 billion, a quarter of all American military aid, goes to Israel.

Without Europe and the States we'd be like the Palestinians, surviving on $200 a month," he said.

"Now that we've left the Gaza Strip, we will give back the rest of the territories sooner or later, and every single settler will have to leave," he said.