Israeli Financial Chief Warns of Unpriced Sanctions Risk
Translated & summarized from Calcalist by baba
A declaration by 12 countries signals potential measures against settlement economic activity, causing concern among Israeli banks. Alkalai highlighted the severe economic consequences of such sanctions, drawing parallels to Russia's isolation, and stated the local market is not adequately factoring in this significant risk.
The story in 6 lines · by baba
- Israeli financial chief Ella Alkalai warns the market is ignoring the risk of international sanctions.
- A declaration by 12 countries signals potential measures against economic activity in Israeli settlements.
- The E1 area development is seen as a critical flashpoint that could trigger severe international backlash.
- Alkalai compares potential sanctions to those on Russia, warning of severe economic isolation for Israel.
- The Israeli financial market is not adequately pricing this significant geopolitical and economic risk.
- The banking system is preparing for potential legislation prohibiting funding for projects beyond the Green Line.
This concern stems from a recent declaration by 12 countries, including the UK, France, and Canada, signaling their intent to take measures against economic activity in Israeli settlements.
The Israeli banking system is already preparing for potential legislation in countries like the UK that could prohibit financial institutions from funding projects beyond the Green Line. A legal review for the Banking Association suggests that while binding legislation may take time, an immediate risk is the "chilling effect" where international financial entities might tighten scrutiny on Israeli counterparts due to legal and reputational concerns.
Alkalai emphasized the dramatic difference between grassroots boycott movements like BDS and state-imposed sanctions, likening BDS to "child's play" in comparison. She explained that when sanctions become law, they are no longer optional and can render business with certain Israeli entities illegal for international firms, regardless of their personal inclinations.
The focus on the E1 area, situated between Jerusalem and Ma'ale Adumim, is seen as a critical flashpoint. Alkalai described the continued development of E1 as a potential trigger for severe international backlash, as it is perceived as a point of no return that would sever the connection between the northern and southern West Bank. This move is viewed by many nations as an irreversible step and a declaration of annexation, potentially legitimizing other dangerous geopolitical processes.
Alkalai drew parallels to the sanctions imposed on Russia, warning that if similar measures are enacted against Israeli contractors and their financiers, it could lead to a severe financial isolation. She noted that unlike Russia, which has energy and agricultural resources, Israel is heavily reliant on the global financial system for survival. The potential halt of exports or disconnection from global finance could cripple the Israeli economy, making the risk-reward ratio "unimaginable."
Regarding the broader economic impact, Alkalai suggested that international boycotts could act as a significant trigger for capital flight and corporate relocation, similar to trends already observed due to perceived erosion of judicial independence. She observed that the local market is heavily betting against such severe outcomes, with the risk not being priced into bank and insurance stocks, or even the shekel's value.
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