The EU’s role and limits in the achievement of a Two-State Solution and the Differentiation Strategy

In an attempt to maintain their legitimacy through International Law compliance, the European Union has continued to support the parameters of the Oslo Agreement and a Two-State Solution. However, by doing so, it has failed to adjust to the changing realities on the ground and half-measures designed to ensure the geopolitical readiness of the East Side of the Green Line have ultimately failed to move the Middle East Peace Process any closer to a final agreement. The reasons behind this cautious EU approach to the conflict are complex and, at its crux, revolves around a lack of unity among EU member states; a reluctance to instigate any major confrontation with Israel and their limited power if acting unilaterally without US backing. With the purpose of understanding the role and limits of the European Union in the Israel-Palestine conflict resolution, this paper places emphasis on the EU Differentiation Strategy and its symbiotic relationship with the Two State for Two Peoples paradigm. On the basis that the EU’s Strategy aims to build the foundations of a future Palestinian State, it will be argued that the Differentiation Strategy is insufficient to achieve a Two-State Solution as it fails to understand the roots of the settlement policies and the lack of sovereignty in the Occupied Territories as the main obstacle to peace.

The European Union has played an important role in the Middle East Peace Process (MEPP) being both a supporter of a Two-State solution and a legitimising agent of the Palestinian State –meaning Gaza, the West Bank and East Jerusalem[1].  Its role in legitimising a more pro-Arab framework of negotiations has been key to normalising issues such as the Palestinian rights back in the seventies when only Arab states had hitherto mentioned the word Palestinians or a Palestinian Homeland. Cognisant of the fact that a unified voice was essential to gain credibility and weight in the world’s International Affairs[2], the European Community further formalised its pro-Arab approach through the Venice Declaration in 1980 by calling for the PLO involvement in the Peace negotiations and the Palestinian right to self-determination[3]. Further to this, the already established European Union committed to the recognition of a Palestinian State in the 1999 Berlin Declaration “when appropriate”[4] and recognised Jerusalem as the capital for both states later in 2009[5]. In this spirit, it has been largely argued that the European Community had set the grounds for the signing of the Declaration of Principles in 1993[6] which defined the Oslo parameters making the EU the “middle ground” party in the negotiations[7]. Since 1980 it has consistently advocated for a Two-State solution, and the Green Line as the border between Israel and Palestine[8] serving as a normative example internationally[9]. Hence, being this ‘definer’ of normality confers on the EU a certain political weight in international affairs- a fact that should not be overlooked[10].

Moreover, the European Union, as the largest donor to the Palestinians, has strongly committed economically to the Palestinian state-building enterprise in a belief that occupation will perish under strong institution building[11]. With the final aim of achieving Palestinian statehood, the EU has been supporting the Palestinian Authority institution and infrastructure building[12]. Again, the EU has also taken an economic lead in the Palestinian right to self-determination and demonstrated its commitment to the Two-State Solution by strengthening future Palestinian state infrastructure. As the Secretary-General, António Guterres affirmed earlier this year[13]-“A two-State solution is the only way to achieve the inalienable rights of the Palestinian people and secure a sustainable solution to the conflict”.

The most recent example of the European Union’s legitimising role in framing the conflict’s terminology and drawing red-lines has been the 2013 Differentiation Strategy. This Strategy has further underlined the European understanding of Israeli boundaries disregarding the “Greater Israel” conceptualisation and set the grounds for Palestinian self-determination[14]. Although there are precedents of EU´s differentiation between the State of Israel and the West Bank, the Differentiation Strategy has been understood as the crystallisation of these efforts in a more unified policy and a consequence of the European Parliament (EP) and activists groups’ pressure together with the European Commission frustration after the many failed attempts to end the conflict[15]. The Differentiation Strategy needs to be taken in the context of the post-Lisbon era and the increasing power of the European Parliament which has criticised the EU’s hesitant attitude to condemning Israeli unlawful action[16]. Given its less institutional character, the EP has held a more critical view and proof of this is its acknowledgement of the necessity to recognise Palestinian statehood concurrently with the Peace Talks and not as the consequence of these.[17]

The European Council on Foreign Relations (ECFR) defines the EU Differentiation Strategy as a “variety of measures taken by the EU and its member states to exclude settlement-linked entities and activities from bilateral relations with Israel” as a means to deter settlement construction[18] and a reminder of Oslo parameters. When signing the Free Trade Agreement, Israel had to agree to exclude any products originated in settlements, thus, becoming unable to export them to Europe, as well as excluding settlement entities from the EU’s Horizon 2020 programme -which provides research grants. These guidelines prevent settlement entities from accessing EU funds and, presently, 18 EU member states have issued advisories which aim to warn EU businesses of the legal and economic consequences of dealing with such entities[19]. As the EU’s Ambassador to Israel, Lars Faaborg-Andersen, put it: “The EU said it will accept mutually agreed changes to the pre-67 lines, or whatever the parties can agree on. However, until such an agreement is reached, it will continue to differentiate between Israel within internationally recognized borders and the settlements outside those borders”[20].

The problem emerges when the EU Differentiation Strategy is not consistently applied – as many states have preferred to comply with the guidelines through EU institutions but not bilaterally[21]. The discord among EU member states became even more apparent when in 2015 the European Commission issued an interpretative notice[22] on labelling settlement products to prevent them from having the same preferential treatment Israeli products have in the EU[23] -which provoked strong opposition from countries such as Greece, Hungary and the Czech Republic[24]. Moreover, Israel responded fiercely to this policy and accused the labels of being anti-Semitic since, contrary to the 2013 strategy, the labelling involved action from the Israeli exporters and not only from Europe[25]: Netanyahu declared, “we remember history and we remember what happened when the products of Jews were labelled in Europe. The labelling of products of the Jewish state by the European Union brings back dark memories”[26]. Eventually, the product labelling was not equally applied among member states[27] and sparked strong criticism.

Whilst EU Law aimed to unify EU’s foreign policy on trading and funding issues, it has also evidenced the difficulty of getting a consensus among the 28 member states, given the disparity of their interests and their historical backgrounds –e.g. the tendency of a more pro-Israeli predilection of Eastern European countries[28]. Acting effectively given the divisions among EU member states and their own national and regional priorities as well as interests has been a daunting task thus far. The ascent of Euro-Scepticism after the economic crisis has contributed to the rise of populists and right wing leaning governments which tend to be more pro-Israeli[29]. As a result, any agreement will be based on the “lowest common denominator” [30] explaining the EU’s moderate approach and preventing any drastic measures such as the labelling to be equally implemented or realised.

This lack of unity among member states is also exemplified in the recognition of the State of Palestine. When the Palestinian Authority presented its candidature in the United Nations in 2011 and despite a UN report which endorsed Palestinian readiness for statehood,[31] European members could not reach a consensus. Moreover, contrary to what was expected, Sweden’s recognition of the Palestinian State in 2014 was not mirrored by others; the remaining states who today recognise Palestinian statehood did so whilst part of the Soviet Union, and some of these same states, such as the Czech Republic, are now close allies of Israel[32]. The Berlin Declaration which established that the recognition should be realised “when appropriate” is again another illustration of the EU’s overly-cautious behaviour, reluctant to take stronger measures and ´rush into´ Palestinian sovereignty. However, as the Swedish Foreign Affairs Minister, Margot Wallström, upheld: “Some will state this decision comes too soon. I am afraid, rather, that it is too late.” Further to this, there is no unanimity among European member states on whether the EU should recognise Palestine collectively or bilaterally[33]. Yet, the problem is rather whether it will ever be appropriate: sovereignty should be a priority in the State-Building enterprise but it is undermined by the facts on the ground which are not properly condemned or addressed creating in a vicious circle. As Lovatt argues[34], the statehood readiness that the EU considers necessary to recognise Palestine can hardly be achieved amid the limitations that the stem from territorial fragmentation in the West Bank.  

Clearly, the European Union is a heterogeneous actor: to many member states national interests are still more powerful motivators than achieving a common EU foreign policy, making major decision-making on international relations both convoluted and treacherous. Attempts to promote a more coherent foreign policy by, e.g. the Lisbon Treaty and the creation of the European External Action Service (EEAS), have proven to have limited scope for action or effectiveness[35]. On the top of that, instability in the European community -Brexit, the Ukraine crises and the rise of populism, among others- has increased the EU’s challenges[36] deprioritising the MEPP[37]. This heterogeneity hampers the diffusion of its normative discourse and the creation of a single identity. Normative power if not internalised within local institutions loses its full capacity to cause an impact[38].

In this vein, major condemnation of the settlement policy would entail recognising Israel’s direct responsibility, thus, the EU’s differentiation strategy tends to understand settlements as a separate entity. Even when the EU´s infrastructure has been demolished or seized by Israel due to their settlement policies in the West Bank, European foreign policy has always avoided imposing sanctions to Israel [39]which could be partially explained by the cooperative relation between the two actors.

In addition to the individual state alliances, the EU maintains strong economic and research links with Israel, being its main trading partner[40] -cooperation materialised through the “Association Agreement” in 2000[41] and further integrated Israel within the EU market via the European Neighbourhood Policy (ENP) in 2005[42]. Not only does Israel’s trade with Europe amount to a third of its total trade but also, Israel is one of the most significant trading partners to the EU in the Mediterranean Area and has been ranked as its 24th partner globally in 2016 [43]. Institutional and economic links between Europe and Israel could have reached an “everything without membership” status in 2013 through a partnership offered by the EU if Peace Talks had not failed a year later[44]. In sum and as Freedland well puts it “if one reason for Israel to end the occupation and make peace with the Palestinians was to improve its international standing, that motive has lost its urgency”[45]. It seems that maintaining trade relations with Israel is still more profitable than promoting its identity with consistency[46]by being more critical of the settlement activity. Still, the EU has continued to place emphasis on its compliance of International Law and in its “middle ground” normative role.

The Differentiation Strategy, or the “New Approach” as coined by Harpaz[47] is based on “‘[T]he respect of EU positions and commitments in conformity with international law on the non-recognition by the EU of Israel’s sovereignty over the territories occupied by Israel since June 1967’”[48] reinforcing its understanding of the conflict. As stated previously, coherence and continuity confer actors’ legitimacy and, thus, leverage in International Affairs. “EU’s self-identity”[49] is grounded on its “consistency, effectiveness and continuity of its policies and actions”[50] as well as “strict observance and the development of international law, including respect for the principles of the United Nations Charter”[51] as established in the Lisbon Treaty. European normative power may provide external legitimacy by being consistent with International Law[52], but it does not lead to major changes on the ground. In other words, not rewarding the State of Israel for its settlement policy –referring to the Differentiation Strategy[53] does not halt the settlement policy itself.

Furthermore, if more drastic measures to condemn Israel policies vis-á-vis the occupied territories were to be taken, they would require prior US backing. The High Representative of the European Union for Foreign Affairs and Security Policy, Federica Mogherini, could not be clearer in that respect: “Nothing without the United States, nothing with the United States alone”[54]. The US is the only capable actor of exercising effective pressure on Israel and even if the EU were to make use of all its leverage on both parties, this would not necessarily result in a compromise between the PA and the Israeli government[55]. US approval, as well as support, is required to lead the MEPP[56].

The EU Differentiation Strategy has been insufficient to pressure Israel and failed to force any recognition of Israeli state responsibility as the perpetrator and driving-force of increased settlement activity, by only tackling non-governmental actors based in the settlements[57]. Yet the EU is still cognisant of the dangers this activity presents to achieving a Two-State solution and the danger of reaching a one-state reality. As recently acknowledged by António Guterres: “Negative trends on the ground have the potential to create an irreversible one-state reality that is incompatible with realizing the legitimate national, historic and democratic aspirations of both Israelis and Palestinians”.[58]

The EU has been managing rather than resolving the conflict which proves once again the urgent need for a new “new approach”.[59]A non-confrontational attitude[60]towards Israel is certainly not a strong enough tool to force Israel to reconsider its policy vis-á-vis the occupied territories. The EU’s relation with Israel is based on a policy of incentives which places the country in a privileged position in trade relations and turns any effort to differentiate Israel from Greater Israel almost purely normative. There is a misconception in understanding settlements as a separate entity from the State of Israel as the Differentiation Strategy does. Notwithstanding that the EU has taken the lead in establishing the red lines of the conflict, these appear to be far too unambitious to properly threaten the settlement expansion.

The European Differentiation Strategy can, thus, be taken as an example of the limits of the European role in achieving a Two-State Solution. Due to the lack of unity among member states, the strong economic and institutional ties with Israel and the difficulty of pursuing a stronger policy unilaterally at odds with the US, the European Union has chosen to take a cautious approach. Maintaining the current bilateral and multilateral relations with Israel bears more fruit than any benefits reaped from an overt confrontation. Avoiding confrontation still allows the EU to maintain its coherency and, thus, to some extent its external legitimacy.

On the one hand, the Differentiation Strategy can be seen as an EU attempt to preserve its legitimacy internationally since the time for abandoning the Two-State Solution is not ripe after all efforts invested in it and given the unpopularity of the alternatives. On the other hand, it also proves the urgent need for a real shift in the EU’s thinking. By tackling the consequences of settlement activity instead and disregarding its roots, the conflict has reached a stalemate which has not actively contributed to reaching the sovereignty required for Palestinian statehood and, thus, the achievement of a Two-State Solution.

However, despite the fact that a halt or decrease in the settlement activity has not come to reality, the Differentiation Strategy can still be understood as an active approach towards the conflict resolution strengthening the role of the EU as the middle ground party.  Moreover, after the US confirmed its budget cuts to UNRWA, the European Union has pledged additional funds directed to the UN agency and the Palestinian institution-building enterprise[61] which, together with the Union’s rejection of the US latest decision on Jerusalem, can serve as confidence builders for the Palestinians towards the EU.

Amid the difficulties and limitations previously described, the EU has recently taken a more active role in the conflict with the purpose of reactivating the Peace Talks. Its engagement on the ground is now under the scrutiny of the EU foreign ministers who are committed to reviewing the modalities applied thus far. Mogherini clarified in her declaration: “The purpose of this review, that will be conducted mainly by our colleagues in the European Commission, will be exactly to make sure that all the modalities of our engagement will be as efficient and as effective as they can be to reach the goal of the two-state solution.”[62] At an Ad Hoc Liaison Committee (AHLC) extraordinary session hosted by the EU earlier this year, the Union has committed to engage in further multilateral talks with the Quartet, Norway and the Arab partners[63].  Further to this, Abbas’s decision to hold an International Conference by mid-2018 which aims to re-address the conflict multilaterally –meaning the Middle East Quartet and the Arab League- was particularly well-received by France and Russia[64]. This new impulse to reactivate and re-address the talks could provide the EU with the space to translate its normative and financial power into significant changes on-the-ground. It remains to be seen what 2018 will bring for the MEPP but the one thing is clear: the EU continues to have a legitimising role in the negotiations despite the limitations.

[1] Persson, A. (2018A). ‘EU differentiation’ as a case of ‘Normative Power Europe’ (NPE) in the Israeli-Palestinian conflict. Journal Of European Integration, 40(2), 193-208.

[2] Keukeleire, S., & MacNaughtan, J. (2008). The Context and Nature of EU Foreign Policy. In S. Keukeleire & J. MacNaughtan, The Foreign Policy of the European Union (pp. 9-34). United Kingdom: Palgrave Macmillan.

[3] Persson, A. (2015). The EU and the Israeli-Palestinian conflict, 1971-2013. Lanham: Lexington Books.

[4] EEAS. (2016). Middle East Peace process – EEAS – European External Action Service – European Commission. EEAS – European External Action Service. Retrieved 20 March 2018, from; Council of the European Union, Conclusions on the Middle East Peace Process, 3058th Foreign Affairs Council meeting, 13 December 2010, p. 14,

[5] Ibid. 3.

[6] Persson, A. (2017). Shaping Discourse and Setting Examples: Normative Power Europe can Work in the Israeli-Palestinian Conflict. JCMS: Journal Of Common Market Studies, 55(6), 1415-1431.

[7] Ibid 6 ; House of Lords. (2007). 26th Report of Session 2006–07: The EU and the Middle East Peace Process. London: The Stationery Office Limited. P. 33.

[8] Ibid. 1.

[9] House of Lords. (2007). 26th Report of Session 2006–07: The EU and the Middle East Peace Process. London: The Stationery Office Limited.

[10] Manners, I. (2002). Normative Power Europe: A Contradiction in Terms?. JCMS: Journal Of Common Market Studies, 40(2), 235-258.

[11] Ibid. 3.

[12] Ibid. 9.

[13] UN News Centre. (2018). Amid ‘difficult reality’ in Middle East, two-state solution more important than ever – UN chief. UNSCO. Retrieved 27 April 2018, from

[14] Harpaz, G. (2017). The EU’s New Approach To the Two-State Solution in the Israeli-Palestinian Conflict: A Paradigm Shift or PR Exercise? Leiden Journal of International Law, 30(3), 603-628. doi:10.1017/S0922156517000218

[15] Lovatt, H., & Toaldo, M. (2015). EU Differentiation and Israeli settlements. ECFR.EU. Retrieved 10 April 2018, from

[16] Pardo, S., & Touval, Y. (2013). The EU and Israel: Much ado about love. The Jerusalem Post | Retrieved 29 April 2018, from

[17] Gianniou, M. (2016). Promoting Cohesion and Consistency in EU Foreign Policy: The European Parliament and the Israel-Palestine Conflict. Mediterranean Quarterly, 27(4), 61-80. Gianniou

[18] Lovatt, H. (2016). EU differentiation and the push for peace in Israel-Palestine. ECFR.EU. Retrieved 21 April 2018, from, p. 2.

[19] Persson, A. (2018C). Why there’s no chance Europe will solve the Israeli-Palestinian conflict. Retrieved 5 April 2018, from; Lovatt, H., & Toaldo, M. (2015). EU Differentiation and Israeli settlements. ECFR.EU. Retrieved 10 April 2018, from

[20] Lazaroff, T. (2015). Israel cheapens memory of Holocaust by likening settlement labels to Nazi boycott, EU envoy says. The Jerusalem Post | Retrieved 22 April 2018, from

[21] Ibid. 18, p. 5

[22] European Commission. (2015). Interpretative Notice on indication of origin of goods from the territories occupied by Israel since June 1967. Retrieved 23 April 2018, from

[23] Lietz, A. (2017). Palestine-Israel Journal: Toward a Progressive EU Agenda for a Two-State Solution. Retrieved 12 April 2018, from

[24] Ibid. 1.

[25] Gomel, G. (2016). Europe and Israel: A Complex Relationship. Instituto Affari Internazionali, 1-8.

[26] Ibid 18, p.8

[27] Ibid. 23.

[28] Ibid. 18.

[29] Ibid. 19.

[30] Bulut Aymat, E. (2010). European involvement in the Arab-Israeli conflict | European Union Institute for Security Studies. Retrieved 14 April 2018, from page

[31] Greenberg, J. (2011). U.N. report: Palestinian Authority ready for statehood. Washington Post. Retrieved 27 April 2018, from

[32] Persson, A. (2018B). If not now, when should Europe recognise Palestine?. Retrieved 6 April 2018, from

[33] Ibid.

[34] Lovatt, H. (2017). Rethinking Oslo: How Europe can promote peace in Israel-Palestine. ECFR.EU. Retrieved 24 March 2018, from

[35] Lehne, S. (2017). Is There Hope for EU Foreign Policy?. Carnegie Europe. Retrieved 27 April 2018, from

[36] Ibid.

[37] Gomel, G. (2016). Europe and Israel: A Complex Relationship. Instituto Affari Internazionali, 1-8.

[38] Gordon, N., & Pardo, S. (2015). Normative Power Europe meets the Israeli-Palestinian conflict. Asia Europe Journal, 13(3), 265-274.

[39] Keukeleire, S. and  J. MacNaughtan, J. (2008) The Foreign Policy of the European Union . United Kingdom: Palgrave Macmillan.

[40] Ben-Hur Levy, Y. (2014). EU-Israel relations: Confrontation or co-operation?. Centre for European Reform. Retrieved 6 April 2018, from

[41] Scazzieri, L. (2017). Trump, Europe and the Middle East peace process: A path out of the quicksand. Centre for European Reform. Retrieved 6 April 2018, from

[42] Ibid. 23.

[43] EEAS. (2016). Israel and the EU – EEAS – European External Action Service – European Commission. EEAS – European External Action Service. Retrieved 26 April 2018, from

[44] Ibid. 37.

[45] Freedland, J. (2017). The talking is over, the occupation goes on. Will there ever be peace in the Middle East? | Jonathan Freedland. the Guardian. Retrieved 12 April 2018, from

[46] Gordon, N., & Pardo, S. (2015). Normative Power Europe meets the Israeli-Palestinian conflict. Asia Europe Journal, 13(3), 265-274.

[47] Ibid. 14.

[48] European Commission. (2015). Interpretative Notice on indication of origin of goods from the territories occupied by Israel since June 1967. Retrieved 23 April 2018, from cited in HARPAZ, G. (2017). The EU’s New Approach To the Two-State Solution in the Israeli-Palestinian Conflict: A Paradigm Shift or PR Exercise? Leiden Journal of International Law, 30(3), 603-628. doi:10.1017/S0922156517000218

[49] Ibid. 1. Persson 2018-A

[50] The Lisbon Treaty. Article 13. Retrieved 7 April 2018, from

[51] The Lisbon Treaty. Article 3. Retrieved 10 April 2018, from

[52] Ibid. 14.

[53] Ibid. 14.

[54] Lazaroff, T. (2018). E.U. to U.S.: ‘You can’t solve the Israeli-Palestinian conflict alone’. The Jerusalem Post | Retrieved 22 March 2018, from

[55] Ibid. 14.

[56] Shoukri, A. (2018). The two-state solution is still the only game in town. Retrieved 5 April 2018, from

[57] Ibid. 14

[58] Ibid. 13.

[59] Bouris, D., & Huber, D. (2017). Imposing Middle East Peace: Why EU Member States Should Recognise Palestine. IAI Istituto Affari Internazionali. Retrieved 12 April 2018, from

[60] Ibid. 14.

[61] Stone, J. (2018). EU pledges €42.5m extra aid to Palestinians after Donald Trump cuts US contribution. Retrieved from

[62] EEAS. (2017). EU Foreign Ministers: a renewed impulse towards a two-State solution in the Middle East – EEAS – European External Action Service – European Commission. Retrieved from

[63] EEAS. (2018). Remarks by HR/VP Federica Mogherini at the joint press point ahead of the extraordinary session of the International Donor Group for Palestine (Ad Hoc Liaison Committee, AHLC) – EEAS – European External Action Service – European Commission. Retrieved from

[64] Lynch, C. (2018). Trump’s Attempt to Strike “Ultimate” Middle East Deal Faces New Setback. Retrieved from