In bulldozing Israeli democracy, Benjamin Netanyahu could become the BDS movement’s greatest ally

Daniel Boguslaw

The Intercept  /  March 5, 2023

Capital is beginning to flee Israel in the wake of the prime minister’s judicial overhaul.

In recent years, the Israeli government has identified boycott, divestment, and sanctions of the Jewish state over its treatment of Palestinians as a top threat to the country. Today, right-wing Prime Minister Benjamin Netanyahu may be the BDS movement’s greatest ally.

In his bid to evade prosecution for influence peddling and bribery, Netanyahu has forged a political alliance with Israel’s extremist religious parties, allied himself with the remnants of the anti-Arab terror organization Kach, and now charged forward with plans to gut the Israeli Supreme Court. Ahead of Israel’s 2022 election — the fifth in four years — Netanyahu put forward a proposal to effectively strip the judiciary of its moderating influence on Israeli society while transferring power to the executive branch and what is now an extremist-controlled Parliament.

Already, the effects of an unmoored and emboldened Israeli far right have emerged, with a full-on pogrom — endorsed by Israel’s Finance Minister Bezalel Smotrich — taking place late last month in the occupied West Bank town of Hawara.

The Israeli government’s far-right turn has spurred tens of thousands of Israelis from across the political spectrum to take to the streets in protest — and BDS members are watching closely as its goal of making Israel an economic and cultural pariah is finally materializing on the horizon.

“The BDS movement has tracked the most recent divestments and threats of divestment from Israel, concluding that the self-identified ‘Start-up Nation’ is increasingly and gradually looking like a Shut Down Nation,” Omar Barghouti, one of the co-founders of the BDS movement, told The Intercept.

Leading figures at Israel’s major universities have warned that the efforts to force judicial reform through Israel’s Parliament could lead to widespread brain drain and have a devastating effect on Israel’s education system, scholars, and cultural institutions writ large.

Investment firms, long the target of BDS pressure, are signaling that keeping their money in Israel might end up being bad for their clients’ bottom lines. The firms are warning that the erosion of democracy in Israel could be followed by capital flight and decreased investment as seen in Poland and Hungary in the wake of similar anti-democratic reforms — a de facto divestment owing to market pressures themselves.

In the past, sanctions against Israel have largely failed to materialize, lacking a critical mass of Western countries that have long treated Israel as a geopolitical ally. But as signs of growing unease mount, Irish parliamentarians renewed calls for increased sanctions, and infighting in the European Union over security cooperation and unchecked support is starting to spill into view.

“These economic-financial woes will only strengthen BDS campaigning worldwide to pressure companies and investment funds to dump apartheid Israel, as many of them eventually dumped apartheid South Africa,” Barghouti said.

In the early 2000s, activists opposed to the Israeli occupation of Palestine created a plan to achieve a global realignment toward Israel. Building on the anti-globalization efforts of the 1990s and effective boycotts against South African apartheid, activists sought to create a multipronged campaign focused on mobilizing economic and cultural pressures to force changes in Israeli society. Boycotting Israeli products and cultural institutions, divesting from Israeli companies, and imposing sanctions for the violation of international law formed the three pillars of the BDS movement.

In recent years, American politicians and pro-Israel advocacy groups have worked at the state and national levels to criminalize BDS protests under the banner of antisemitism. Anti-BDS laws have proliferated in over 30 states, and found widespread buy-in from sitting U.S. senators. Ironically, this full-throated support of Israel may catalyze many of the outcomes they hoped to criminalize.

“Anti-BDS laws are a direct effort by the government of Israel to penalize Americans for criticizing how Palestinians are treated. It is more objectionable now than it was at any time this idea that we will listen to the prime minister of Israel on this issue,” Gadeir Abbas, an attorney at the Council on American-Islamic Relations, told The Intercept. CAIR has worked to oppose bills seeking to criminalize the BDS movement in the United States. “For Palestinians, Israel has always been anti-democratic, and now that anti-democratic energy is enveloping all of Israel. I don’t think it’s clear to anybody what will happen next.”

In early February, just days after claiming that Wall Street firms were sticking firmly to Israel in the face of the protests roiling the county, Netanyahu was forced to confront an internal report from JPMorgan warning that the “idiosyncratic risk” posed by judicial reform could destabilize Israel’s credit rating. Netanyahu attempted to prevent JPMorgan from releasing negative analysis, according to the Israeli press, and met with major investors in France to calm fears about economic turmoil in Israel.

Already some $4 billion has flowed out of Israeli banks in the wake of the proposed judicial reforms, with European bank HSBC joining JPMorgan to suggest political turmoil could significantly damage Israel’s economy. The changes pose such a grave economic threat, a member of Israel’s monetary committee — the Israeli equivalent of the American Federal Reserve Board of Governors — resigned in protest. Even former Treasury Secretary Larry Summers, who attended MIT in the 1970s alongside Netanyahu, told Bloomberg that Netanyahu’s judicial reforms, which raise “serious and profound questions about the rule of law,” “could have quite serious adverse effects on the Israeli economy.”

The HR firm Papaya Global, which has invested tens of billions in Israel, announced at the end of January that it would pull funds out of Israel alongside other smaller tech firms, signaling that the tech sector, which accounts for 10 percent of Israeli employment, could also see significant damage in the coming months.

Israeli universities are also sounding the alarm that judicial reform could devastate international collaboration and research funding, isolating them from the rest of the world.

“This is liable to manifest itself as a brain drain,” leading Israeli academics wrote in an open letter, “and in the fact that faculty members will hesitate to join our ranks; that students, research students, post-doctoral students, and international colleagues will not come to Israel; that our access to international research funds will be limited; that foreign industries will withdraw themselves from cooperating with Israeli academia; and we will be excluded from the international research and educational community.”

While Israel has faced almost no sanctions for its repeated violations of international law, cracks have started to show. In 2021, Norway committed to withdrawing its sovereign wealth fund investments in Israeli companies tied to West Bank settlement expansion. In coming months, Norway may announce a decision to further withdraw hundreds of millions from Israeli banks.

Ireland has repeatedly advanced bills to ban the import of Israeli products, nearing success on multiple occasions only to have the U.S. State Department quash the country’s efforts. Irish parliamentarians who have long called for sanctioning Israel may find new support in light of the recent political upheaval. In January, the Irish foreign minister called on Israel to pay compensation for the destruction of EU-funded buildings in occupied Palestine.

In a letter to Netanyahu, Ada Colau wrote, “As mayor of Barcelona, a Mediterranean city and defender of human rights, I cannot be indifferent to the systematic violation of the fundamental rights of the Palestinian population,” thereby ending the city’s ties to Israel and its “twinning” arrangement with Tel Aviv.

The EU also quietly backed off security cooperation with Israel last year and could find full-throated support for Netanyahu less and less tenable in the face of over 90 countries — including Germany and France — decrying Israel’s increasingly hostile attacks against Palestine at the U.N.

In February, the European Union was also forced to issue a statement heading off alarm that the international body would intervene in the fight over judicial reforms. “Israel is a democratic country with functioning democratic institutions and it is not for us to comment on ongoing domestic discussions,” it said. While Israel is not an EU member state, the European body has repeatedly decried the consolidation of power by authoritarian leaders in Hungary and Poland, going beyond statements to cut billions of dollars in funding to the two European nations.

“This far-right government with its strong fascist tendencies, promises to once and for all destroy apartheid Israel’s ludicrous, deeply racist claim of being a ‘democracy,’” Barghouti, the BDS movement co-founder, said. “This assertion, seared into the consciousness of tens of millions of Americans over decades of sophisticated propaganda campaigns, has essentially flourished by erasing the Palestinian people subjected to Israel’s system of colonial oppression.”

Daniel Boguslaw is an investigative reporter based in Washington, D.C.