BICOM

In the early hours of Friday 24 June it was clear the British people had voted to leave the EU. Just after 8am Prime Minister David Cameron announced he would leave office with a new Conservative leader, and Prime Minister, to be elected in September. This was a seismic event for Britain and the impact is still being felt in Europe and around the world. But what does it mean specifically for the relationship between Britain and Israel?

The economic implications are varied. The UK is Israel’s second largest trading partner, bilateral trade is worth £5 billion a year and has doubled in the last decade. Israeli companies listed in the UK have been hit by the market volatility and the value of the pound has decreased significantly meaning Israeli goods sold in the UK will become more expensive to UK consumers. The expanding hi-tech partnership between Israeli programming and British design and marketing expertise is unlikely to be affected as the European single market doesn’t yet cover digital services. In the longer term, Britain will need to negotiate a separate trade agreement with Israel as Israel’s association agreement with the EU will no longer apply to UK-Israel trade once the UK leaves. If the UK falls into recession then bilateral trade could decrease in value as UK consumers spend less money. But there could be enhanced terms for some Israeli exports, especially agricultural produce, to the UK market once it is out of the EU.

On the political level, the departure of David Cameron is a big negative. He is a good friend of Israel and his Government has taken concrete action against boycotts of Israel and he was a staunch ally during Operation Protective Edge in 2014. He also has a productive working relationship with Prime Minister Netanyahu that has developed over six years. It was therefore no surprise that Netanyahu quickly issued a statement last Friday describing Cameron as “a respected leader and a true friend of Israel and the Jewish people”. British politics now has the look and feel of a US Presidential election year. Until he is replaced in September, the Prime Minister is a lame duck, and the two main political parties are consumed by lengthy, bitter leadership elections. When a new Prime Minister is in place Israel will have to start afresh, building up relationships with the new Downing Street team.

In terms of diplomacy, the picture is more confused. In the immediate term the UK remains a member of the EU, and will continue to take part in all Israel-related foreign policy discussions. The PM will attend monthly European Council meetings with other Prime Ministers, as will all UK Secretaries of State. But in practice, as we saw this this week, their influence is hugely diminished. The current French Initiative to hold an international conference to create new proposals for a deal between Israel and the Palestinians is a case in point. In normal circumstances the UK would play an important constructive role as the conference takes shape acting as a bridge between the US and EU positions ensuring sensible proposals are put forward. They may still do so, but UK diplomats are likely to be extremely distracted and lacking clout with EU partners. The impact of Brexit on the EU’s policy towards Israel is debatable. In the past, the UK has been an important moderating voice, but arguably often falls into line with common EU positions. The UK will no longer be present for these debates so Israel will look to other allies in the EU such as Germany. While the UK was a very significant player in the EU foreign policy space, Israel has been building up relations with several countries in Eastern Europe and most recently became significantly closer to Greece and Cyprus.

In the longer term the UK’s foreign policy could rebalance away from Europe and gravitate more to US positions. It may feel the need to rebut any suggestion of diminished influence by taking more of a lead on the global stage. The UK has a very large foreign aid budget and the best armed forces in Europe. It has committed significant resources to the fight against ISIS and shares common strategic interests with Israel. None of this work is connected to EU membership but is a function of the UK’s military and intelligence capability and its existing alliances in the Middle East. Defence and Intelligence cooperation is a very important element of the Israel-Britain relationship and is a prized asset for senior officials from both counties. This cooperation is purely bilateral and EU membership plays no part in it. Although the UK is a member of Europol it is expected that after Brexit some kind of accommodation will be made to ensure that European police forces can still benefit from UK expertise. In addition, in light of Israel’s recent rapprochement with Turkey, Israel has upgraded its relations with NATO.   The UK and Israel, through the auspices of NATO, can further enhance their security ties.

One consequence of Brexit could be a further deepening of UK relations with the Arab States and increased bilateral trade, particularly with Saudi Arabia and the Gulf. In the past Israel might have feared such a development and viewed it as a zero sum game in which it would only lose out. But the Middle East today has been transformed and scarred by the Syrian conflict, the rise of ISIS and Iran’s expanding regional influence. Israel and certain Sunni Arab states are experiencing a convergence of interests where they share common objectives fighting jihadi terrorism and checking Iran’s ambition. The UK can play a constructive role within this fascinating new web of alliances. There is still some residual tension as a result of its role in brokering the Iran nuclear deal but if it is minded to, a UK free from the EU could find fertile ground in the Middle East to broaden existing alliances and significantly expand trade in goods and services.

James Sorene is CEO of BICOM