Israel Asks EU to Delay Funding Restriction on ‘67 Border

July 17 (Bloomberg) -- Israel is asking the European Union to freeze new guidelines that would restrict EU funding to entities operating over 1967 borders, saying they would complicate efforts to reach a peace deal with the Palestinians.

The EU decision is especially untimely coming just as U.S. Secretary of State John Kerry arrived in the region in an effort to revive Israeli-Palestinian negotiations, said an Israeli government official who was not authorized to give his name.

Israeli Prime Minister Benjamin Netanyahu spoke today and yesterday with Kerry and various European leaders, including European Commission President Jose Manuel Barroso and French President Francois Hollande, according to the official. Netanyahu and Barroso agreed to continue discussions on the issue, the official said.

The guidelines, published today in the Haaretz newspaper, would restrict the award of EU-funded “grants, prizes and financial instruments” to Israeli entities operating in “the Golan Heights, Gaza Strip and the West Bank, including East Jerusalem.”

Israel captured those areas during the 1967 Middle East War with its Arab neighbors. It has since withdrawn troops and evacuated settlements in Gaza and annexed the Golan in a move that has not been recognized internationally. Israel says the fate of settlements in the West Bank must be resolved in peace negotiations.

Cultural Exchanges

The guidelines, which are not binding, will cover central EU funding and won’t affect contracts between individual European governments and Israel, EU spokeswoman Maja Kocijancic said yesterday in Brussels. She said the result could be funding restrictions in “a very small number of cases.”

While the restrictions wouldn’t directly affect trade between Israel and its largest export market, Israeli officials say it may affect educational and cultural exchanges and set a dangerous political precedent for their country’s relationship with Europe.

“Legally this decision is open to endless interpretation, and therefore one can only presume those who drafted it intended it to be implemented to the greatest possible extent,” Israeli Foreign Ministry spokesman Yigal Palmor said by phone. He added that it would also reduce Palestinian incentives to negotiate with Israel by predetermining the future border lines.

“We will not accept any outside diktat about our borders,” Netanyahu said yesterday. “This issue will be decided only in direct negotiations between the sides.”

‘Qualitative Shift’

Hanan Ashrawi, a member of the Palestine Liberation Organization’s Executive Committee, welcomed what she called a “significant move,” saying it would aid the peace process.

“The EU has moved from the level of statements, declarations and denunciations to effective policy decisions and concrete steps which constitute a qualitative shift that will have a positive impact on the chances of peace,” she said.

Israeli and Palestinian peace talks were suspended in 2010, primarily over the issue of Israeli construction in West Bank settlements on land claimed by the Palestinians for a future state.

Kerry, who arrived in Jordan yesterday on his sixth trip to the region in as many months, is trying to broker a formula to bring both sides back to the negotiating table.

To contact the reporter on this story: Calev Ben-David in Jerusalem at cbendavid@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net