Israel and EU Compromise on Terms of Joint Initiative, Following Rift Over Settlement Funding Ban

Livni and Ashton draft agreement to enable signing of Horizon 2020 pact, following day-long marathon telephone negotiations.

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Israel and the European Union reached agreement Tuesday evening on a compromise formula that would allow Israel to sign the Horizon 2020 scientific cooperation agreement despite the new EU guidelines that bar funding to entities over the Green Line, a senior Israeli official said.

The formula was reached during marathon telephone negotiations between Justice Minister Tzipi Livni and EU Foreign Minister Catherine Ashton, the official said. After weeks of talks during which the EU had rejected various proposals, Livni had presented Ashton with wording the latter could accept, the official added.

According to the senior official, agreements were reached on two clauses in the Horizon agreement that had disturbed Israel and blocked it from signing. One clause related to the EU demand that an appendix be attached to the pact stating that the conditions of the agreement would not prevent the EU from implementing the guidelines approved regarding allocating funding to entities in the West Bank, East Jerusalem and the Golan Heights. The guidelines, approved in July, are set to go into effect on January 1.

With regard to this clause, the parties decided to formally agree to disagree. The EU would add the above-mentioned appendix, while Israel would attach an appendix in which it declares that it objects to the guidelines regarding the settlements from both a legal and political perspective.

The second clause Israel wanted softened related to indirect funding and loans to Israeli entities based in Israel that also operate in the settlements or have extensions or branches in the settlements. The EU’s concern was that it would not be able to verify that European money would not, in the end, make its way to the settlements.

On this clause, the two sides agreed that any Israeli entity that operates within the Green Line can apply for European loans, and both sides would examine ways to make sure that the money would be restricted and not reach the settlements in any form. What this seems to mean is that Israeli companies or organizations that do business in the territories and want loans from the EU would have to set up a system to make sure that any money it gets from the EU would be invested solely within the Green Line.

The official said that these agreements addressed both the European and the Israeli demands, but that the wording still needed the approval of the diplomatic echelons on both sides.

After it emerged Monday that the EU had rejected most of the Israelis' conditions for compromise, Prime Minister Benjamin Netanyahu convened an urgent meeting on the issue, which Foreign Minister Avigdor Lieberman and his deputy minister, Ze’ev Elkin, took a tough stance, with Lieberman declaring: “Signing the agreement would constitute capitulation.”

Livni and Science and Technology Minister Jacob Perry took the opposing view from Lieberman and Elkin at a government meeting on the matter, saying that Israel could not afford to give up the European investment.

Following two emergency meetings to discuss the rift with the European Union, Netanyahu decided late Monday to continue seeking a compromise that would enable Israel to sign the pact.

“In light of the difficulties in the talks with the European Union, Netanyahu ordered us to work to change the agreement so that it can be signed," a high-ranking diplomatic source in Jerusalem said.

Netanyahu had seriously weighed sending a delegation headed by Livni, Economics Minister Naftali Bennett and Elkin to Brussels to hold personal meetings with Ashton and other EU officials to try to hammer out an agreement. In the end, that idea was dropped, and the negotiations were conducted by phone.

The European Commission's guidelines regarding EU funding of entities in the West Bank settlements prohibit funds and agencies from giving grants, scholarships, or prizes to Israeli entities in the settlements or to activities in the settlements. In some cases, the guidelines forbid giving loans to Israeli entities that operate directly or indirectly beyond the 1967 lines.

The guidelines also stress that every agreement between Israel and EU has to include a territorial clause that stipulates the agreement does not include the settlements in the West Bank, Jerusalem, and Golan Heights. Due to the new guidelines, the agreement on the scientific cooperation initiative Horizon 2020 has become a point of contention between Israel and the EU.

The Horizon 2020 agreement would provide Israeli research institutes and high-tech companies with hundreds of millions of euros in funding over the next several years. If Israel does not sign, the country’s R&D stands to lose about 500 million euros (roughly NIS 2.5 billion) over the period. The Committee of University Heads and the Council for Higher Education’s Budgeting and Planning Committee have expressed great concern over the damage to Israeli academia if the agreement is not signed.

The head of the Council for Higher Education’s Planning and Budgeting Committee, Prof. Manuel Trajtenberg, told the meeting Tuesday last night that along with the sums of money that would be lost, “even more important is that we’d lose access to the most advanced research and development in the world. There is no alternative to an agreement with the EU.”

Senior Israeli academics on Tuesday urged the government to mend the rift to enable the signing of the pact. The president of the National Israeli Academy of Science met with Lieberman and Livni and pressed them "to do the utmost" for the pact to be signed.

Prof. Ruth Arnon, president of the Israel Academy of Sciences, urged Foreign Minister Avigdor Lieberman and Justice Minister Tzipi Livni to “do everything” they could to get the pact approved.

The talks were aimed at finding a formula that would enable Israel to participate in the EU’s flagship research program, given the EU guidelines published in the summer that bar any EU funding to entities over the Green Line, including East Jerusalem and the Golan Heights.

Arnon, in a public statement, called Horizon 2020 “Absolutely essential for the future of science in Israel, and failure to sign it, God forbid, will be an irreversible and disastrous loss to Israeli science in particular and the country in general.”

According to Arnon, what’s at stake is “not just the financial issue, but Israel’s participation or non-participation in the most prestigious competition in the scientific world, knowing that we have an excellent chance of coming in first place.”

Dr. Eli Even, who heads the Research Authority at Bar Ilan University and is the Israeli member on the EU’s Advisory Committee on Research and Development, also warned of the consequences of rejecting the agreement.

“If the negotiations do not produce an agreement, the practical significance will be damage to about 50 percent of the State of Israel’s research budgets. It would be a fatal blow to research in Israel,” he said.

Over the past five years 336 Israeli researchers received EU grants that enabled them to return to Israel, thanks to grants from the organization."

EU rejects Israeli demands

On Friday, Pierre Vimont, Ashton's deputy, sent a letter to the Foreign Ministry rejecting most of the proposed Israeli compromise on the language of Horizon 2020 agreement. The Europeans turned down Israel’s demand to remove the new guidelines on the settlements. The EU wants the agreement to include an “attachment” stating that the agreement’s conditions do not prevent the European Commission from implementing the guidelines on the settlements.

The Foreign Ministry officials said this clause breaches oral understandings between the sides and backtracks on positions that the EU stated during the talks.

The EU also rejected Israel’s demand to remove the clause prohibiting the indirect funding of agencies that operate in the settlements. Regarding loans, EU officials said they feared that no way would be found to ensure that EU funds did not eventually reach the settlements. They said the EU was unwilling to back down on the issue.

Foreign Ministry officials, including Elkin, who is responsible for this issue, see this clause as untenable under any circumstances. They say it harms Israeli firms even if they only have branches in the West Bank, such as fuel companies, energy companies and banks.

The EU also demands that Israel’s recognition of its policy on the settlements not just focus on EU funding. The EU now demands Israel’s consent to the following clause:

“In accordance with EU policy this agreement shall not apply to the geographic areas that came under the administration of the state of Israel after 5th of June 1967. This position should not be construed as prejudging Israel’s principled position on this matter. Accordingly the parties agree that the application of this agreement is without prejudice to the status of those areas.”

Meeting of Prime Minister Benjamin Netanyahu with EU Foreign Commissioner Catherine Ashton in Jerusalem. Credit: GPO

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