Israel-Ireland diplomatic rupture could hit trade hard

Yesterday, the Israeli Ministry of Foreign Affairs announced that it was taking one of the toughest steps in the diplomatic procedures book and closing its embassy in Ireland. This is the first time that Israel has closed the embassy of an EU member state – Israel’s largest trading partner. The reason for taking this step was “extremist anti-Israel policy” and “crossing red lines” in its support for the Palestinians in international institutions, including joining the Palestinian side against Israel in legal proceedings in The Hague. Israel and Ireland view the technology industries as a major driver of economic growth, and are clearly on a diplomatic collision course. “The Globe” studies the latest developments.

What is the background to Israel closing its embassy?

Ireland is considered the most pro-Palestinian country in the European Union, where public opinion strongly sympathizes with the Palestinians as an occupied people. After October 7, 2023, the public and politicians were united in expressing their support for the Palestinians, not the Israelis. Prime Minister Leo Varadkar said at the time: “We see our history through (the Palestinians’) eyes.” 79% believe that Israel is committing genocide in Gaza, according to recent opinion polls, and 71% believe that the Palestinians live under an apartheid regime.

In recent months, Ireland began an attempt to suspend trade relations between Israel and the European Union, claiming that Israel is violating international law. It independently announced a law to boycott settlement products, which contradicts European Union policy. Ireland’s sovereign wealth fund has divested from all Israeli companies in its portfolio. Ireland also recognized Palestinian statehood in May, in a move coordinated with Spain and Norway. The Irish president accused the Israeli embassy of leaking a congratulatory letter he wrote to the new Iranian president, and Prime Minister Simon Harris announced last week that Ireland would join South Africa’s petition alleging genocide in the Gaza Strip. Ireland, which was the last EU country to open an embassy to Israel in 1996, could become the first country to close an embassy.

What kind of trade relations exist between Israel and Ireland?

Annual trade between Israel and Ireland combined will reach $5.9 billion in 2023, according to the Israel Export Institute. Half of this amount is in goods and half in services. In the goods sector, Israel exported goods worth $2.5 billion (mostly electronics and industrial equipment), while it imported goods worth $500 million from Ireland (electronic equipment and medicines). In the services sector, Ireland, with the help of a favorable tax policy, has become a destination for Israeli technology companies seeking easy access to the European market, so it is mainly intellectual property.

According to Ofir Angel, president of the Israel-Irish Chamber of Commerce, and head of international consulting firm Oren in Israel, “hundreds of Israelis have moved to Ireland” in recent years, as part of the opening of a European office or the relocation of Israeli technology companies to Ireland. One of the most notable of these companies is Wix, which has opened an office in Dublin.

Angell says: “Before the war on Gaza, there were several Irish companies that visited Israel to discuss participation in infrastructure projects in transport, communications and railways, and there were joint projects by Intel (which operates in both countries).” But since the start of the war, he says, “inquiries from Ireland have dropped by 80%. It is as if Irish companies are not interested in having any relationship with Israel, or being labeled as one.”

On the Israeli side, he says, interest in recent years has been mainly from technology companies. “The Irish still have a lenient tax policy on technology companies, and it is an English-speaking European country that uses the euro, so it is a successful destination for companies trying to enter the European market. But since the beginning of the war it has been very difficult to be Israeli in Ireland, the weather is against us, Everyone who lives there hides the fact that they are Israeli.

What are the economic repercussions of closing the embassy?

“From a business point of view, it’s a shame, because there are people at the embassy in Dublin who have been very helpful to Israeli companies entering the Irish market in recent years. There is an experienced team who are informally helping to open up the Irish market,” Angel says. The right doors will disappear.”

He adds that this is a miserable development from a strategic perspective, “because over these years Israel has not invested much in diplomacy or in changing public opinion in Ireland. We can actually be a country close to the Irish, not a rival country.” We have similar characteristics as we compete for American technology investors, we have to strategically decide how to move forward, and currently both sides have been drawn into the competition for investors as well as global public opinion.

What are the diplomatic ramifications of closing the embassy?

“There is a very sharp message here of abandoning a country from a diplomatic perspective,” says Dr. Maya Sion Zedkiyahu, director of the Israel-European Relations Program at the Mitvim Institute. “It is true that Ireland is a small country, but it is not marginal. Economically, it is important because it is a hub for many global technology companies. Our message from closing the embassy is that we do not see any benefit in establishing relations with them. No matter what we do, they will not see the Israeli side, which is “Irreversible.”

The Irish case is exceptional and attitudes against Israel are particularly strong, says Dr Sion Zedkiahu, “so it is difficult to see the picture changing. Sometimes, when you specifically break the rules, you get the message right. When the Irish themselves are calling for the embassy in Israel to be closed and the Diplomatic relations, when pictures of the Israeli ambassador with blood graffiti are published and they demand that they be removed, perhaps it is a good idea to think about how far you can go by banging your head against the wall.”

How will the Israeli move be viewed in Ireland?

Irish newspapers published the Israeli move on their front pages on Monday morning. Prime Minister Simon Harris said Ireland was not expected to close its embassy in Israel in the near future in response, “because it is doing important work.” Irish Foreign Minister Michael Martin said Ireland was “not hostile” to Israel, but the situation in Gaza “beyond any humanitarian measure.” He also reaffirmed Ireland’s intention to present the EU-Israel Association Agreement, which is the basis of trade relations, at the EU summit.

The head of the Irish Jewish Representative Council, Maurice Cohen, said he was “deeply concerned.” He criticized the Irish government’s policy of joining South Africa in the Hague case, and said that closing the embassy was not only a “symbolic blow” to Israelis and Jews, but was also a disgrace due to the loss of embassy services. On social media, many Israelis living in Ireland expressed concern about continuing to receive consular services at the embassy in Dublin.

Published by Globes, Israel Business News – en.globes.co.il – on December 16, 2024

© Copyright Globes Publisher Itonut (1983) Ltd., 2024