EU foreign policy chief Kaja Kallas has also put forward a proposal for targeted sanctions against two Israeli government ministers, certain Israeli settlers accused of violence, and ten senior members of the Palestinian group Hamas.

The two ministers identified are National Security Minister Itamar Ben-Gvir and Finance Minister Bezalel Smotrich.

Trade Impact and Legal Basis

The European Union is Israel’s largest trading partner, with bilateral goods trade totalling €42.6 billion in the previous year. If the proposal to suspend the preferential trade arrangement is adopted, Israeli exports would become subject to the same tariffs as countries without a free trade agreement with the EU.

A senior official from the Commission estimated that this change could result in approximately €227 million annually in added tariffs for Israeli goods.

Israeli Foreign Minister Gideon Saar criticised the proposal, describing it as “morally and politically distorted” and expressed hope that it would not be adopted.

EU Member States Divided

For the suspension to take effect, it would require approval from a qualified majority of EU countries—at least 15 out of 27 member states, representing at least 65% of the EU’s population. Diplomats say the proposal currently lacks sufficient backing, with the position of Germany, a key member state, being especially influential. The German government stated that it has not yet taken a final position and emphasised the need to keep communication open with Israel.

The proposed sanctions on Israeli ministers and individuals associated with Hamas would require unanimous support from all EU member states, a threshold that appears difficult to reach at this stage.

While public opinion in some EU countries has shifted due to the scale of the conflict, Kallas noted that political positions among member governments have remained largely unchanged. Nonetheless, the proposals reflect a shift in the EU’s approach to its relationship with Israel.

Background on the Conflict

The latest escalation began in October 2023 when Hamas launched an attack that killed around 1,200 people and led to the capture of 251 hostages, according to Israeli figures. In response, Israel launched a military campaign in Gaza. Palestinian health authorities in Gaza report that more than 64,000 people have been killed during the ongoing operation.

The European Commission is also reviewing aspects of its cooperation with Israel. While certain forms of bilateral support are being paused, this does not apply to projects involving Israeli civil society or Yad Vashem, Israel’s national Holocaust memorial institution.

The announcement, made during a speech to the European Parliament in Strasbourg, comes amid increasing criticism within the EU regarding Israel’s handling of the conflict in Gaza. The proposals reflect mounting pressure on the European Commission to take a stronger stance.

The measures, however, would require significant support among EU member states—either broad or unanimous—depending on the specific action. Given the divisions within the bloc on Middle East policy, securing agreement is expected to be difficult. Still, the Commission President emphasised that the move is also intended as a political signal.

“What is happening in Gaza has shaken the conscience of the world,” she said in her State of the Union speech, an annual address where she outlines her priorities.

She acknowledged the internal disagreements in the EU over Gaza but stressed the Commission would take action within its remit.

“We will propose sanctions on the extremist ministers and on violent settlers. And we will also propose a partial suspension of the Association Agreement on trade-related matters,” she said.

She did not specify which ministers would be targeted or which trade measures would be affected.

Israel’s Foreign Minister responded by criticising the remarks.

“The President of the Commission errs in yielding to the pressures of elements that seek to undermine Israel–Europe relations,”

he posted on social media platform X. He added that the comments were “regrettable”, and claimed the Commission President is aware of Israel’s efforts to support humanitarian aid and that the suffering in Gaza is caused by Hamas.

The European Union remains Israel’s largest trading partner, with goods trade between the two reaching €42.6 billion (around $49.9 billion) last year. According to a policy paper from July, suspending the trade portion of the EU-Israel Association Agreement would remove preferential access for Israeli goods entering the EU. This move would need support from at least 15 of the 27 EU countries, representing 65% of the population.

Divisions Within the EU

Some EU members—such as Ireland, Spain, Sweden, Denmark, and the Netherlands—have supported suspending the free trade agreement with Israel. Others, including Germany, Hungary, and the Czech Republic, have opposed such actions.

Sanctions on individuals require unanimous approval, and Hungary has previously blocked proposals to sanction violent Israeli settlers.

“I am aware it will be difficult to find majorities. And I know that any action will be too much for one, and too little for others. But we must all take our own responsibility,” the Commission President said.

Spain welcomed the proposals.

“We Europeans cannot have normal relations with Israel when there is a flagrant, systematic, daily violation of human rights in Gaza,” said Spanish Foreign Minister Jose Manuel Albares.

The Commission President also announced a pause in bilateral support for Israel, while continuing work with Israeli civil society and institutions such as Yad Vashem, the Holocaust memorial center. She did not detail the funding that would be affected.

An earlier proposal to limit Israeli access to a major EU research funding program did not gain enough support from member states. Diplomats noted that Germany’s position will likely be decisive, and Berlin has so far remained unconvinced.

Lastly, she announced that the Commission will establish a Palestine Donor Group next month, which will include a mechanism for reconstruction efforts in Gaza.