Israeli government and business leaders are alarmed by a growing international boycott movement and the likely effect of EU measures against exports from Jewish settlements in the occupied West Bank.
Cabinet ministers are to meet next week to hammer out a strategy against a growing international campaign to boycott trade linked to settlements, Haaretz newspaper reported Friday.
And a group of top Israeli businesspeople has launched a publicity campaign urging Prime Minister Benjamin Netanyahu to make peace with the Palestinians for the sake of the economy.
In the latest developments, Norway's sovereign wealth fund blacklisted Thursday two Israeli companies involved in building settlements in Israeli-occupied east Jerusalem and US actress Scarlett Johansson stepped down as Oxfam ambassador amid a storm over her ad campaign for a firm operating in a settlement in the occupied West Bank.
These incidents highlight the creeping success of a campaign to boycott trade linked to settlements built on Palestinian land seized during the Six Day War of 1967, and viewed by the international community as illegal.
Meanwhile, the European Union recently moved to block all grants and funding to any Israeli entity operating beyond the 1967 lines, sparking growing alarm in Israel.
Lars Faaborg-Andersen, the EU's ambassador to Israel, told AFP last week that, in addition to coordinated action by the body, Israel's constant settlement construction was fuelling private moves to boycott products and services linked to the settlements.
He said initiatives in Europe to require separate labelling for goods manufactured in the settlements were gathering pace every time Israel announced a new round of construction.
Israeli Finance Minister Yair Lapid warned Wednesday that the breakdown of current peace talks with the Palestinians could strengthen the boycott, divestment and sanctions (BDS) movement and deal a body blow to the economy.
Israel is a country dependent on exports, with 33 percent of its foreign trade conducted with the European Union, he told a security conference.
"Europe is our primary market," he said. "Even a 20 percent fall in our trade with Europe would mean 9,800 workers being fired immediately," he said.
"Even a partial European boycott would be felt by every Israeli, and the cost of living would go up," he added.
"Exports will drop by some 20 billion shekels ($5.7 billion/ 4.2 billion euros) annually; GDP will drop some 11 billion shekels," he said.
Last May, the Palestine Liberation Organisation published an estimate of EU imports of goods produced on settlements, which it put at 229 million euros a year.
While some Israeli companies set up in occupied territory to take advance of tax breaks, low rents and soft loans, others do so for ideological reasons, believing in the Jewish religious imperative to settle the biblical land.
SodaStream, the home soft-drink machine maker that hired Johansson this month, says it hadn't chosen to set up in Maale Adumim settlement, east of Jerusalem, but simply inherited the facility when it acquired the business in 2007.
In fact, CEO Daniel Birnbaum told New York Jewish weekly The Forward the plant's location was "a pain in the ass."
But he added: "We will not throw our employees under the bus to promote anyone's political agenda," saying he "just can't see how it would help the cause of the Palestinians if we fired them."
Senior executive Yonah Lloyd told the Jerusalem Post that would mean making 800 Palestinians and 500 Israelis jobless.
Commenting in Haaretz, Egyptian-Belgian journalist Khaled Diab said that while boycotts could change the behaviour of commercial enterprises they were unlikely to change state policy.
The film "'Lost in Translation' brought Scarlett Johansson global fame. Will the actress's latest role -- lost in the occupation -- earn her widespread infamy," he asked.
"Even at the height of anti-apartheid sanctions, South Africa managed to find 'sanctions-busting' alternatives, and began a process of recalibrating its economy and finding alternative trading partners."
"In addition, sanctions had some unintended consequences," he added. "For instance, it forced the country to innovate more, such as developing alternative energy technologies."
"Like with South Africa, the United States should end its military aid to Israel until it ends the occupation, which might possibly be the single most effective economic action any party can take to end the occupation."