Published by Global Banking & Finance Review®
Posted on September 17, 2025
3 min readLast updated: January 21, 2026
Add as preferred source on GoogleThe EU proposes suspending trade benefits for Israeli goods amid the Gaza conflict, impacting €5.8 billion in exports. Germany's position is pivotal.
BRUSSELS (Reuters) - The European Commission on Wednesday proposed suspending a trade arrangement affecting about 5.8 billion euros ($6.87 billion) of Israeli exports due to the Gaza war, although the measure does not currently have enough support among EU nations to pass.
EU foreign policy chief Kaja Kallas also proposed a package of sanctions on two Israeli ministers, as well as "violent" Israeli settlers and 10 senior members of Palestinian militant group Hamas.
The two ministers are far-right National Security Minister Itamar Ben-Gvir and Finance Minister Bezalel Smotrich, an EU official said.
Israel’s nearly two-year offensive in Gaza and the worsening humanitarian situation has increased political pressure on European leaders to take action.
ISRAELI EXPORTS TO FACE DUTIES IF SUSPENSION PASSES
The European Union is Israel's biggest trading partner, with trade in goods between the two amounting to 42.6 billion euros last year, according to the EU.
If the free-trade arrangement is suspended, Israel would face duties at the same level as other countries without a trade accord with the bloc.
In Israel's case, that would affect exports worth approximately 5.8 billion euros, resulting in an estimated 227 million euros a year in duties, a senior Commission official told reporters.
Israeli Foreign Minister Gideon Saar said on X that the European proposals are "morally and politically distorted, and it is to be hoped that they will not be adopted".
The suspension of free-trade arrangements, first floated by European Commission President Ursula von der Leyen last week, would require the support of a qualified majority of EU governments - 15 out of 27 EU members representing 65% of the EU population.
EU diplomats told Reuters that it is unlikely that the proposal would get the necessary support, with much depending on Germany, which has so far been reluctant to impose EU penalties on Israel.
GERMANY NOT REACHED A FINAL VIEW ON PROPOSALS
A German government spokesperson said on Wednesday it has not yet formed a final view on the EU proposals and Germany wants to keep the channels of communication with Israel open.
Diplomats say the proposed measures against the Israeli ministers are also unlikely to pass as they require unanimous support from EU members.
Kallas said that although public opinion has been shifting due to suffering in Gaza, she believes "the political lines are very much in the place where they have been so far".
But the proposals mark a political shift in the EU’s relationship with Israel.
The Commission is also putting its bilateral support for Israel on hold, without affecting work with Israeli civil society and Yad Vashem, Israel's main Holocaust memorial centre.
Hamas militants attacked Israel in October 2023, killing about 1,200 people and taking 251 hostages, Israeli tallies show. Israel's military assault against Hamas has killed over 64,000 Palestinians, Gaza's health ministry says.
($1 = 0.8447 euros)
(Reporting by Lili Bayer in Brussels; Additional reporting by Andrew Gray in Brussels, Alexander Cornwell in Jerusalem and Madeline Chambers in Berlin, editing by Bart Meijer and Sharon Singleton)
Trade benefits refer to advantages or incentives provided to countries in trade agreements, such as reduced tariffs or preferential access to markets.
The European Commission is the executive branch of the European Union, responsible for proposing legislation, implementing decisions, and managing the EU's day-to-day operations.
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