Israel and its settlement enterprise are getting a crash course in coercive diplomacy. In the first few hours and days after the Biden Administration announced it was placing financial sanctions on four extremist Israeli settlers, there was a bit of confusion in Israel about what it all meant. Demonstrating the absurdity of the moment, Israeli Finance Minister Betzalel Smotrich told fellow parliamentarians that, “it is not possible for an Israeli citizen with Israeli money in an Israeli bank to be deprived of rights and assets due to an American order.”
Within a day, one of the sanctioned settlers, a violent extremist named Yinon Levi who the Biden Administration said was involved in forcing Palestinian communities off their land, had his personal and business accounts frozen by Israel’s Bank Leumi. A state-owned bank followed suit and froze the account of a second sanctioned settler. The banks understood something the Israeli finance minister didn’t seem to grasp — the United States is a very powerful country.
It’s true that putting financial sanctions on four individual settlers is by itself, a woefully inadequate response to what the President described as “an unusual and extraordinary threat to the national security and foreign policy of the United States.” Those sanctions, however, are arguably the softest of the economic weapons created in the executive order. If the president ever wants to use the full range of sanctions he signed into, it could very well defund the entire Israeli settlement enterprise. However, because the Israeli economy is in reality not at all distinct from the settler economy, sanctions of that scale could force a reckoning for which Israelis are entirely unprepared.
Biden’s executive order allows for sanctioning violent Israeli settlers, but also those complicit in, or who plan or direct settler violence — including soldiers who don’t enforce the law against settlers. Human rights groups have long documented how Israeli soldiers accompany and even participate in settler violence against Palestinians, and the two groups often share the same objective of forcibly displacing Palestinian communities. In the case of Yinon Levi, one of the extremists sanctioned last week for using violence and intimidation to drive Palestinians from their homes, the evidence of the military’s role is fairly clear.
Nearly a week after Yinon Levi was sanctioned for his role in forcible displacement, Levi’s wife, Sapir, stated: “Every time there is a problem in the area with Arabs, we call the army and they come and they do what they do. We have the full backup of the army […] If Biden has a complaint to us, he can talk to the army.”
One day later, Israeli public broadcaster Kan 11 News reported that the United States is preparing to add IDF officers to the sanctions list. If the Israeli Military Advocate General does not provide the State Department with satisfactory answers to its queries about military involvement in sanctionable activity within 60 days, the report stated, it will add IDF commanders to the sanctions list.
The executive order also includes sanctions for entities, including Israeli state entities, that engage in or whose leaders engage in violence against Palestinian civilians.
Already included in the first round of sanctions was David Chai Chasdai, who as previously arrested and then put in administrative detention for his role in leading a pogrom last year in Huwarra, which left one Palestinian man dead and torched 36 homes.
Israeli Finance Minister Smotrich got into hot water last year when, just a few hours before settlers set out on that pogrom, he liked a tweet that said, “Erase Huwarra.” The author of the tweet was David Ben Zion, deputy head of the Samaria Regional Council, a governing body of 35 Israeli settlements in the northern West Bank, notably including those that surround the village of Huwara. Ben Zion, is also a board member of the Jewish National Fund, which plays an active role taking over Palestinian land for the benefit of Israeli settlers. Sanctioning Ben Zion could easily open the door to sanctions against the entire Samaria Regional Council, jeopardizing funding for 35 settlements, and perhaps even the JNF.
The executive order also allows for sanctions on any person or entity providing material support or services to a sanctioned individual. For instance, a crowdfunding campaign to replace the funds frozen due to US sanctions, like the one launched by an Israeli NGO called the Har Hevron Fund, is expressly prohibited. Likewise, even facilitating the transfer of funds, like Israeli Bank Hapoalim, credit card processor PeleCard, and crowdfunding site GiveChak are doing, is grounds for being put on the sanctions list.
Far more consequential is the simple fact that Israeli banks give mortgages to Israeli settlers, including some of the most violent and extremist ones. Israeli communications companies install cellular antennas on Palestinian land to provide service to settlers, and in some cases even pay rent to Israeli settlers for the use of that land. What will Israeli banks do if they conclude it is too risky to continue servicing those loans? What about utility companies like the Israel Electric Company, which services remote Israeli settlements as well as major Israeli cities? Can it continue to bill sanctioned individuals? Can it even continue to provide them electricity without being accused of providing material support?
Taking things even further, the Department of Treasury’s financial crimes unit sent an alert to 16,000 financial institutions designed to ensnare the flow of funds to the entire settler ecosystem. The alert orders banks to actively look for and report transactions with organizations linked to violent extremist groups in the West Bank — or entities that list even a founder who was previously associated with West Bank extremist groups.
That might include Shurat HaDin — Israel Law Center, a hegemon in the Israeli lawfare space. Co-founder Nitsana Darshan-Leitner, according to a 2007 leaked State Department cable, told US diplomats “that in many of her cases she receives evidence from [Israeli government] officials, and added that in its early years [Israel Law Center] took direction from the [Israeli government] on which cases to pursue.” The same cable noted that Darshan-Leitner co-founded the organization with her husband, Aviel Leitner. Aviel, formerly Craig, was convicted in Israel of participating in a shooting attack against a Palestinian bus in the occupied West Bank.
It might also include Regavim, the settler organization co-founded by Israeli Finance Minister Betzalel Smotrich to assist and encourage Israeli authorities to forcibly displace Palestinian communities in the West Bank. In 2023, the first year Smotrich was given control over the Israeli military government of the West Bank, the number of Israeli demolitions rose to the highest on record in at least 13 years.
Sanctions are so brutal and extraordinary because they are so antithetical to the very idea of due process — the government can seize assets without anyone ever being charged with a crime. For that reason, sanctions are also not accountability measures; they are a diplomatic tool for creating leverage in the pursuit of foreign policy goals.
One of the foreign policy objectives listed in Biden’s executive order includes ensuring “the viability of a two-state solution and ensuring Israelis and Palestinians can attain equal measures of security, prosperity, and freedom.” But is not individual violent settlers who stand in the way of Palestinian security, prosperity, and freedom — Israeli settlements and the systems of apartheid and occupation they breed are responsible for that.
The Biden Administration has been floating the idea of recognizing Palestinians statehood as an immovable paving stone in a path that eventually leads to a two-state solution. If the president is serious about that, defunding the settlements would be a great first step. If not, it will be a sign that the executive order was for domestic political consumption.
Michael Schaeffer Omer-Man is the director of research for Israel-Palestine at Democracy for the Arab World Now (Dawn). He worked as a journalist in Israel-Palestine for over a decade, including as editor-in-chief of +972 Magazine
