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Impact of Israel boycott questioned as another US church steps into controversy

  • The Mennonites follow in the footsteps of several other churches, including the Presbyterians and the United Church of Christ
  • The exact impact of BDS and related measures is itself the subject of much politically motivated invective
  • The Israeli government is taking BDS, which also includes calls for academic and cultural boycotts, extremely seriously
Around 300 people protest outside Governor Andrew Cuomo's office in New York City.
Mark Apollo | Pacific Press | LightRocket via Getty Images
Around 300 people protest outside Governor Andrew Cuomo's office in New York City.

The financial effects of a Palestinian-led boycott against Israel are unlikely to be catastrophic, according to industry experts, whose comments come after another U.S church called for divestment from companies that "are profiting from the occupation."

When the U.S. Mennonite Church last week passed its Israel-Palestine resolution, it did not see itself becoming a part of the Boycott Divestment, Sanctions (BDS) movement - a group that is targeting Israeli policies vis-à-vis the Palestinians. Yet, it did step straight into a controversy that has emotions running high and of which the effects are hotly contested.

"As a national church, we do not fully endorse all components of the broad BDS movement or approve all of the tactics it employs. However, we believe divestments are in order," was how the church's Executive Director, Ervin Stutzman put it in a written reply to CNBC.

That distinction is likely to have been lost, though, on both supporters and critics of the BDS movement. The first have already claimed the church's resolution as another victory in their campaign, the latter fail to see how one divestment is much different from another divestment.

Backlash among Israel supporters

The Mennonites follow in the footsteps of several other churches, including the Presbyterians and the United Church of Christ, that have voted through varying divestment resolutions. This, along with the wider BDS campaign, has led to a backlash among Israel-supporters who have been pushing for measures against companies that divest.

"There are laws in the U.S. against such decisions," said Oded Rose, CEO of the Israel-America Chambers of Commerce trade organization in Tel Aviv, referring to several U.S. states passing legislation or taking executive action that penalize companies that respond to the BDS movement. Rose hadn't heard of the church's resolution and doubted it would have an impact, "They're very small, aren't they?"

The Mennonite church is one of the smaller denominations in the U.S., with some 80,000 members, and the dollar amount that the resolution will affect is not yet known. "Since this resolution simply provides a very broad guideline for individuals and companies to consider, it would be next to impossible to predict the actual financial impact which this resolution will have," said Stutzman.

One of the authors of the resolution, Andre Gingerich Stoner, explained that the resolution wasn't only written with immediate economic pressure in mind, there was also a symbolic component: "It will have a minimal economic impact. The greater impact is the moral statement and the appeal that it's making to others."

The exact impact of BDS and related measures is itself the subject of much politically motivated invective. The movement and its backers claim numerous victories, including the withdrawal from Israeli projects and businesses by companies such as telecom firm Orange and transport company Veolia of France as well as Dutch pension fund PGGM. Many of the companies deny that their decisions are in response to BDS.

BDS opponents dismiss economic impact

Opponents of BDS dismiss the economic impact, pointing at a very healthy growth in foreign investment in Israel, as well as economic growth as a whole, over the more than 10-year period that the campaign has been active. Data from the Organization for Economic Co-operation and Development (OECD) shows that foreign inflows have fluctuated over this 10-year period but have ultimately climbing to $12.3 billion last year from £4.8 billion in 2005.

American thinktank the Rand corporation published a study in 2015 into the cost of the Israeli-Palestinian conflict that factored in BDS in its scenarios. One of the authors, Ross Anthony, contacted by CNBC after the Mennonite vote, said that it was a matter of what economists call "opportunity costs"; money that would have flowed into the Israeli economy, had BDS not existed.

"Total investment dollars would go up in Israel but they wouldn't go up as fast as they might have otherwise if the BDS movement hadn't taken place," said Anthony. The cumulative effect between 2014 and 2024, in Rand's non-violent resistance scenario would be a cost of some $80 billion to the Israeli economy, of which some $44 billion would be due to BDS, he said.

Such an effect would not be "catastrophic", said Anthony: "In terms of the Israeli economy, which is quite large, it doesn't amount to a huge number."

But what is not huge for an economy can be problematic for individual businesses. "The biggest effect has been on the investment sides, with companies refusing to invest," said Anthony.

Nowadays, when investment decisions are made that involve Israel, some firms may hesitate, particularly if the investment involves the occupied territories and the Israeli settlements.

Dan Reisner, a partner at Israeli law firm HFN has been advising companies for years on how to deal with BDS and similar pressures. He acknowledges that it is something that is discussed in the board rooms but: "What we're seeing without any exception is that the realization of huge commercial and financial benefit totally outweighs any concern they may have of crossing the BDS line."

The effects of BDS are much smaller than he anticipated even five years ago, he said. "I have seen cases where businesses in the West Bank have been for sale, and yes, the issue of 'what does it mean if I buy them' was always on the table. But that didn't stop the deals. Quite often it just created a bit more work for lawyers."

Rose, of the Israel-America Chambers of Commerce, also dismisses the effect: "We haven't heard from any of our members that it has affected their business either way."

Michael Nagle | Bloomberg | Getty Images

The Israeli government is taking BDS, which also includes calls for academic and cultural boycotts, extremely seriously and has taken measures against its proponents that some have termed draconian.

The main concern is that BDS feeds into a narrative of delegitimization, or as Reisner put it: "I'm less concerned today about any potential economic consequences it's all about what you think of Israel and whether you think Israelis are the good guys or the bad guys."

The pushback against BDS in the U.S. includes efforts to punish companies that comply. Several states, including Georgia, Florida, Illinois and New York have adopted various anti-BDS measures, including directing state entities not to do business with companies that boycott Israel.

Rand's Anthony said that such counter-moves had not been included in the cost of conflict scenarios. He found it "hard to believe it would have no effect on companies' decisions."

The Mennonites say that they're not worried about anti-BDS legislation because what they're doing is different. But if there are consequences, said Stoner, they're willing to stand up for what they believe.

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