How the UK Sanctions on Israel Will Endanger the Palestinian Economy

The announcement by British Foreign Minister Ed Miliband that the UK government intends to impose sanctions on products manufactured by Israeli businesses in Judea and Samaria, as well as on organizations and entities supporting the settlement movement, marks a watershed moment, and for all the wrong reasons.

Beyond exposing the British government’s glaring hypocrisy, the proposed measures reflect a fundamental misunderstanding of the Israeli-Palestinian peace process and the obstacles to a negotiated settlement. The stated justification for the sanctions is the claim that Israeli towns and communities in Judea and Samaria, commonly referred to as “settlements,” constitute a major obstacle to achieving a “two-state solution.”

While the UK Foreign Minister misguidedly declares the “two-state solution” to be “the North Star of his government’s policy,”¹ he and his government appear to be totally ignorant of the fact that neither the Oslo Accords between Israel and the Palestinian leadership, nor any other international determination, contain any commitment to a ‘two-state solution.’ Instead, the parties committed to negotiating an agreement on the ‘permanent status’ of the territory. Such negotiation could ostensibly lead to one, two or three states, a federation, confederation, condominium, or any other agreed solution. But neither the United Kingdom nor any other authority has the right to prejudge those negotiations or to impose any solution on the parties.

In light of the UK’s misguided fixation with the ‘two-state solution ‘, one may justifiably ask why the UK has never imposed sanctions on Palestinians who have repeatedly rejected the “Two State Solution” and openly engaged in advocating, financing and supporting terror? Why did the UK not impose sanctions on Yasser Arafat for rejecting the peace deal brokered by US President Clinton, in the summer of 2000, or on Mahmoud Abbas for rejecting the 2008 peace deal offered by Israeli Prime Minister Ehud Olmert?²

If undermining the “Two-state solution” was the real justification, surely the UK would also have imposed sanctions on the Palestinian Authority and its leadership for formally educating the generations of Palestinians to hate Israel and seek its destruction. Surely the UK would have imposed sanctions on the PA, the PLO, and their respective leaders for the multi-billion dollar/pound terror rewarding “Pay-for-Slay” policy.³

On the issue of Israeli citizens constructing homes, the UK Foreign Secretary appears to be no less ignorant as to the terms of the Oslo Accords, which deferred any negotiation on the issue of settlements to the permanent status negotiations. In the meantime, the Accords allow Israel to build in the part of the territory it administers (Area C), just as the Palestinian Authority builds in areas A and B under its jurisdiction.

One may ask whether the UK is seriously trying to argue that Jews legitimately building homes in their 3,500-year-old ancestral homeland⁴ is more of an obstacle to the “Two-State Solution” than an institutionalized and entrenched Palestinian social system which promotes and incentivizes terror and in which the PA, the PLO and their leaders literally pay cash rewards to terrorists, simply for murdering Jews?    

No less surprising, and even shocking, is the revelation by Mr. Miliband on Sky News that the UK government, before deciding to impose sanctions, considered it necessary to consult with the Prime Minister of the Palestinian Authority, Mohammad Mustafa, and the PA’s representative in the UK, Husam Zomlot, both of whom encouraged the UK government to impose the sanctions.⁵

Such a situation, in which the UK government seeks the advice and endorsement of the Palestinian leadership before announcing its sanctions against Israel, is untenable. By the same token, the Palestinian leadership cannot, on the one hand, actively promote, incite and reward terror, in violation of its commitments in the Oslo Accords, and simultaneously urge foreign governments to impose sanctions on Israel, without assuming, on the other hand, that Israel is not entitled to take appropriate action in response to such violations.

While clearly Israel’s response may take the form of reciprocal diplomatic action against those countries imposing sanctions, Israel’s response should also include a very clear financial-economic response directed toward the very Palestinian leadership that encouraged and endorsed the sanctions. Such a response could potentially be damaging for Palestinian workers and businessmen, and eventually the entire Palestinian economy.

The following are some of the measures Israel should consider:

The Palestinian Workforce Will Be the First to Suffer

According to a report⁶ published by the PA’s Central Bureau of Statistics, in the second quarter of 2026, 53,000 Palestinian residents of Judea and Samaria were employed by Israelis companies or individuals. Over 35,000 were employed in Israel (as delineated by the 1949 Armistice Lines, a.k.a. “The Green Line”) and another 17,600 were employed in the Israeli cities and communities in Judea and Samaria. According to the PA report, the Palestinians working in the Israeli businesses earned, on average per day, 263.4 NIS, almost double the sum – 134.3 NIS – earned by Palestinians working in Palestinian businesses.

Shockingly, in the second quarter of 2026, when the Palestinian leadership was urging the UK government to impose sanctions on Israel, the number of Palestinians working in Israel rose by 16.7%, from 30,000 to 35,000.

If the UK government imposes sanctions, Israeli businesses could be affected. In that case, they would be well within their rights to fire their Palestinian employees.

Since the sanctions, supported by the PA Prime Minister, would potentially have a wider effect, Israel could also have the right to revoke all the entry and employment permits of Palestinians working within the “green line.”

Thus, as a direct result of the UK sanctions, endorsed by the Palestinian leadership, over 53,000 Palestinians, earning relatively substantial wages and supporting wider Palestinian social circles, could find themselves immediately unemployed.

Palestinian unemployment in Judea and Samaria already stands at 27%-29% of the workforce. Adding another 53,000 people would push unemployment rates toward 32%-34%.

The Knock-On Effect to Palestinian Businesses

By the same token, as the UK intends to impose sanctions on the products of the Israeli businesses in Judea and Samaria, the Israeli government would be perfectly entitled to impose similar sanctions on products of Palestinian businesses in Judea and Samaria. Such a move would have an overwhelming, potentially devastating, effect on the PA economy.

According to PA reports,⁷ for extensive periods of time, the vast majority – between 80%-90% – of Palestinian “exports” were sold to Israel. Since the beginning of 2026, these percentages have consistently risen, reaching as much as 96% of total Palestinian “exports.”⁸

In parallel, according to the same PA reports, the majority – often over 60% – of Palestinian “imports” also came from Israel.

Since the sanctions were requested, driven and endorsed by the Palestinian leadership, the Israeli government would be well within its rights to both impose sanctions and potentially even ban all Palestinian “exports” to Israel.

Such a decision would cost the already fragile Palestinian economy $2.45 billion annually.

One may then ask who would buy the Palestinian products? Would Mr. Miliband and his colleagues step in to support the Palestinian businesses? Will they buy their products, which would have to be shipped, of course, via Jordan, since no Palestinian goods would be allowed into Israel, no matter their final destination?

Furthermore, as a reciprocal measure, the Israeli government would also be well within its rights to impose sanctions, and potentially even ban, all trade with persons and businesses in the areas controlled by the PA.

That would mean that the PA and the Palestinians would have to find an alternative, and undoubtedly more expensive, source from which to buy and import products. As part of the same measure, all products destined for the PA and the PA-controlled areas would be banned from coming through the Israeli ports. Thus, to buy a product from abroad, a Palestinian would have to pay to transport it through Jordan and deliver it via the Allenby crossing.

Frustration of the Oslo Accords

In declaring its intention to impose sanctions, UK Foreign Secretary Miliband appears ill-advised about the nature and content of the 1993-5 Oslo Accords, which the UK enthusiastically supported and which the US, the Russian Federation, the EU, Norway, Egypt and Jordan witnessed.

The parties agreed that the permanent status of the territories remained to be determined, along with issues such as “Jerusalem, refugees, settlements, security arrangements, borders, relations and cooperation with other neighbors, and other issues of common interest.”⁹ Hence, as stated above, clearly, there was no reference in the Accords to a ‘two-state solution’ that would have prejudged the outcome of the permanent status negotiations.

Furthermore, the Oslo Accords contain no provision preventing planning, zoning, and construction by the parties in areas under their respective jurisdiction.

While Israel still implements the Oslo Accords, the Palestinian leadership, through its Palestinian Authority, has consistently and fundamentally breached almost every obligation the PLO took upon itself.

Examples of such fundamental breaches include, inter alia, incitement to terror, educating generations of Palestinians to hate Israel and to seek its destruction, paying financial rewards to terrorists, attempting to alter the status of the territory by applying to the United Nations to recognize the “State of Palestine,” initiating actions against Israel’s leaders in the International Criminal Court, failing to combat terror, allowing terrorist organizations, such as Hamas, the Popular Front for the Liberation of Palestine (PFLP) and other internationally designated terrorist organizations to participate in Palestinian elections, and developing a huge terror army.¹⁰

In fact, PA Chairman Mahmoud Abbas has even publicly declared that the PA-PLO is no longer bound by the Accords:¹¹

The Palestine Liberation Organization and the State of Palestine are absolved, as of today, of all the agreements and understandings with the American and Israeli governments and of all the obligations based on these understandings and agreements, including the security ones.

While Israel has overlooked the Palestinian violations of the accords, the cumulative actions of the Palestinian leadership could, by any objective standard, certainly be seen as having frustrated them.

This conclusion could be compounded by the fact that countries and entities that signed the accords as witnesses, such as Norway and the European Union, and supported them, such as the UK, are now adopting policies, at the behest of the Palestinian leadership, that fundamentally undermine the accords. In doing so, they violate international obligations incumbent on witnesses to international agreements, not to undermine them.

All of the above, whether this be sanctions by the UK and other governments against Israeli businesses in the territories or Palestinian fundamental breaches of the Accords, point to a situation in which the Oslo Accords are being frustrated and their implementation placed in doubt.

Clearly, frustrating the Accords would be tantamount to invalidating their provisions, including the functioning of the Palestinian Authority itself, as well as its powers and responsibilities in the territory.

The implications of frustrating the Accords could be far-reaching, including dismantling the PA, suspending the 1994 Paris Agreement, which defined the financial and economic relationship between Israel and the PA, and other measures.¹²

U.K. Sanctions and U.S. State Laws

Since 2015, dozens of states in America have adopted legislation to combat moves to impose boycotts, divestment, and sanctions on Israel. While each state’s legislation differs, a common theme is that it restricts state contracts with businesses that boycott Israel, requires public investment funds to divest from certain companies, or both.

Because the full nature of the sanctions the UK government and others intend to adopt remains unclear, it is difficult to assess the potential ramifications of state legislation.

Companies implementing the sanctions may face limitations and restrictions. They may have to decide whether to comply at the risk of sanctions or divestment by different states.