Australia breaks from international pack on Israeli sanctions

Australia has broken from the pack in not adopting the trade sanctions against West Bank businesses. (ABC News: Callum Flinn)

It's almost 12 months since Prime Minister Anthony Albanese joined 10 other countries in recognising the state of Palestine at the United Nations General Assembly.

The move was dismissed by some critics as too late, or only symbolic, at the time.

And at that time, the prospects of a Palestinian state ever emerging were already pretty grim, with Gaza largely reduced to rubble and Israel in the process of expanding settlements in the West Bank at a record pace.

In the intervening year, with the world's attention distracted by the conflict with Iran, and by Israel's invasion of a vast swathe of Lebanon, the Israeli cabinet has defied growing criticism from the international community by only escalating its efforts to make a Palestinian state a physical impossibility.

The overnight move by the international community, spearheaded by the United Kingdom but including Canada, France and other European nations, is a significant escalation of attempts to stop Israel from doing that.

The move is not just significant because it escalates penalising actions into trade sanctions.

It is important because of what goes with that, as well as the changing context of Israel's actions.

In the past, Israel has justified many of its moves to clear Palestinians from their homes — in Gaza, in Jerusalem or the West Bank — on specific security grounds: that houses and the people who lived in them were responsible for, or represented, a security threat.

Even many Israelis who are not fans of the settlement movement will say that, while they don't like them, their presence makes them feel more secure.

But settlers themselves tend to justify their takeover of Palestinian land in the West Bank on the grounds of an assertion of sovereignty, based in the Bible, rather than any immediate security threats emanating from any particular village.

Those past security concerns, and UK Labour's fraught history of allegations of antisemitism, have been part of the reason why Westminster has hesitated to adopt findings against Israel in the international criminal system.

As British Prime Minister Andy Burnham said on Tuesday, "For too long, we have been hesitant to act, fearful of being accused of being anti-Israel."

On Tuesday, local time, UK Foreign Secretary Ed Miliband told the House of Commons that the British government "agrees that there is ethnic cleansing of Palestinians in areas of the West Bank — perpetrated by settler terrorists".

"And all too often the Israeli government has turned a blind eye to this and worse, members of it have made statements and taken actions to support the forced displacement of Palestinians," he added.

"Now for a long time, the British government has rightly said settlements are illegal.

"But we have remained silent on the question of the legality of the occupation as a whole, which in 2024 the International Court of Justice concluded was unlawful.

"Today I announce that the official view of the British government is that the occupation is unlawful."

The significance of this is that the UK — along with countries like Australia — previously legally separated the status of the settlements from the status of the military occupation of the West Bank as a whole.

The occupation was viewed as a temporary, unresolved political dispute — even though it has been in place since 1967 — to be settled via bilateral negotiations.

Miliband also foreshadowed the likelihood of the International Court of Justice making a finding of genocide against Israel, and that the UK would accept such a finding, and the possibility of further actions at the UN General Assembly in New York later this month.

Israeli Prime Minister Benjamin Netanyahu repeated his pledge at the time of the UN move last September, saying his government was "going to fulfil our promise that there will be no Palestinian state".

Benjamin Netanyahu addressed the 80th United Nations General Assembly in New York City last September. (Reuters: Jeenah Moon)

In March this year, Israel announced another 34 settlements in the West Bank, as well as allocating billions of shekels to fast-track infrastructure, roads, and security connectivity for these sites.

In August, it provocatively pushed ahead with a development that Miliband described to the House of Commons on Tuesday as "crossing a long-standing red line": the issuing of tenders for more than 1,200 homes in a 12-square-kilometre tract of land immediately east of Jerusalem known as E1.

The proposed housing development would start to cut the West Bank — Palestinian territory — in half, and also cut it off from Jerusalem, destroying the prospect of a viable Palestinian state.

While settlements — and the increasing violence shown by settlers towards Palestinian landowners (tolerated or even sometimes perpetrated by the Israeli military) — are the most visible signs of Israeli actions in the West Bank, it is also in a state of virtual war on the West Bank economy.

While settlers physically attack Palestinians, they also uproot their trees and divert the water supplies of villages, which make them viable.

But on a larger scale, Israel has increasingly made economic life impossible.

Israel has withheld tariffs and revenue it collects on behalf of the Palestinian Authority — which is supposed to fund its provision of day-to-day services. It leaves the Palestinian banking system in a perpetual state of uncertainty by refusing to guarantee it will offer exchange services with the Israeli banking system.

It puts strict limits on how much paper money — even though it is Israeli shekels — can be exchanged between the Palestinian and Israeli economies.

The settlements themselves are often economically unviable. They are not just the odd caravan on a hill but often mini cities.

Though the Israeli government does consider informal settlements, known as outposts, illegal, they often later authorise them as formal settlements.

The Israeli government doesn't just tolerate the violence; it provides massive subsidies to encourage people to move to the settlements, including reduced income tax rates, security gear for unauthorised or "young" outposts as well as funds to purchase vehicles, drones, security cameras, generators, electric gates, and perimeter fences.

That's what makes the various economic trade sanctions announced overnight by the UK, France, Canada and 12 European countries both so significant and also so potentially difficult to implement.

They are also one of the reasons Australia has, on this occasion, broken from the pack of other nations in not adopting the trade sanctions against West Bank businesses.

The argument goes that it will be almost impossible for international companies to distinguish between Palestinian businesses in the West Bank and settler businesses, or between sanctions that only hurt settlers and those that might also hurt the Palestinian economy.

The Albanese government knows it remains exposed by its position, which one Labor source described as "rhetorically less impressive", but there are signs it may act further in the coming weeks and months.

Foreign Minister Penny Wong told the Senate on Tuesday that the "Netanyahu government's actions in the West Bank, the rapid expansion of settlements, the proposed E1 settlement development and flagrant settler violence are extinguishing the possibility of a two-state solution".

Australia is "not, at this time, pursuing a blanket style import ban", she said, because "we have concerns about the implementation of a blanket ban and unintended consequences for Australian businesses, for Palestinians and for Israelis".

The real effectiveness of any blanket bans is likely to be in the realm of finance, rather than sanctions on, say, date farms in the West Bank.

A particular issue for the UK in recent months has been investor "expos" inviting people in Britain to come along and find out how they could invest in the West Bank, in illegally occupied land.

The UK signalled action "against specific companies and individuals who provide services such as construction, infrastructure, financing, or real estate for settlement expansion", Mr Miliband said.

It will also ban the advertising in the UK of illegal settlements.

Just what specific actions France and Canada will take in support of the UK position are unclear, although they have said they will also ban the import of goods from illegal settlements.

The Netherlands, Ireland, Belgium, Spain and Norway have already either banned goods or are in the process of doing so, while Denmark, Finland, Iceland, Poland, Portugal, and Sweden also pledged to take further action overnight.

To date, the US has been notably quiet about the UK actions, with Secretary of State Marco Rubio not condemning the UK action but saying the US would "obviously" not be going along with it either.

"Obviously, we're not going to do what the UK did. We saw their announcement today, but I don't have any comment on it right now," Rubio told reporters in Miami.

The US does not want to see "anything destabilising going on right now in the West Bank with so much going on in the region", he added.

"We were made aware that they were going to make this decision," he said.

"We heard their arguments as to why. But we share the goal of stability. We don't want to see some uptick in violence or an uptick in conflict or tensions in the West Bank at a very tenuous time in the region."

But there already has been more than an "uptick" in conflict on the West Bank, and little sign that the US-led peace initiative for Gaza is making any progress.

Some analysts have expressed concern that the Israeli government would be quite happy to see a full-scale uprising on the West Bank ahead of next month's Israeli elections.

And that raises another aspect of this story: that international actions against Israel often galvanise public opinion in favour of the government.

The UK-led actions this week come just as Netanyahu's standing with voters came under huge new pressures this week with revelations that he had been warned by the United Arab Emirates of the likelihood of a major Hamas attack in the days leading up to October 7, 2023, but failed to pass this intelligence on.

The man who has emerged as the greatest challenge to Netanyahu at next month's elections is Gadi Eisenkot.

While he supports maintaining established settlement blocs in the West Bank and opposes Palestinian statehood, he has also opposed unilateral annexation, criticised provocative outposts, settler violence and controversial construction plans like the E1 development, in part because of the diplomatic toll such moves impose on Israel's international standing.

In the Israeli landscape of 2026, that is quite a different position from that of the current government. But it's unclear whether it would be enough of a change to satisfy an increasingly frustrated international community.