Introduction to the Conflict
On August 11, the Israeli government responded to Norway’s decision to partially sell its investments in several Israeli companies. This decision was triggered by ethical concerns about the war in Gaza. Norway’s sovereign wealth fund, worth around 2 trillion US dollars, has decided to divest from 11 companies associated with Israel and terminate contracts with asset managers who work in the country.
Background on the Decision
The fund started an urgent review after media reports revealed that it had invested in a company that produces parts for Israeli military jets. While Israel has described Norway’s move as "deeply worrying" and "politically motivated", some analysts believe that Israeli officials are intentionally downplaying the issue because they fear encouraging the boycott, divestment, and sanctions (BDS) movement that has been campaigning against Israel for the past two decades.
The BDS Movement
The BDS movement has achieved several symbolic victories since its foundation in 2005. It has put institutions, companies, and governments under pressure to reduce their relationships with Israeli companies involved in the occupation of Palestinian areas. Israel and the United States regularly accuse the movement of anti-Semitism. The Bundestag, Germany’s Lower House of Parliament, even passed a resolution in 2019 and confirmed it in 2024, labeling the movement as "anti-Semitic" and forbidding it from receiving public funds.
Recent Developments
After the start of the Israeli military operation in Gaza, the BDS movement led to significant divestments from companies such as Axa and Scotiabank. The movement also initiated the withdrawal of investments from Samsung and 7-Eleven in Israel. A BDS-organized consumer backlash also targeted companies like McDonald’s and Pret, while several cities and universities in the United States adopted resolutions to reduce their relationships with Israeli-connected companies.
Economic Impact
Although the sale by Norway alone will only have a limited economic influence on Israel, economist Benjamin Hertal from the Israeli University of Haifa warned that it could set a dangerous precedent. "[Norway is sending] a signal about the activities of Israeli companies that may not be liked by others," Hertal said. The sovereign wealth fund in Norway still holds stocks in almost 50 Israeli companies and is planning to manage all Israeli projects internally and restrict future investments in companies in the Israel-Aktien-Benchmark index.
Norway’s Evaluation of Israeli Stocks
The fund held stocks in 65 Israeli companies worth around 1.95 billion US dollars at the end of 2024. The BDS movement welcomed Norway’s decision as a "great ethical victory". The Lo union, one of the most influential worker organizations in Norway, has urged the government to take firmer measures. The members of the union recently voted for a complete economic boycott of Israel.
International Pressure
Norway’s announcement follows a steady trickle of divestments across Europe. In April last year, the Irish ISF Strategic Investment Fund sold its investments in six Israeli companies. Several councils in the United Kingdom have also met demands that require their pension funds to divest from Israeli investments. Many of these decisions were associated with the Israeli settler program in the occupied West Bank, which the United Nations and the European Union consider illegal under international law.
Israel’s Economy
Israel’s economy has been resilient despite the war. However, the increasing international pressure, emphasized by Norway’s recent decision, signals a growing urge to hold Israel accountable for its actions in Gaza and the West Bank through targeted sanctions. Dany Bahar, Senior Fellow at the Center for Global Development, believes that the effects of boycotts and divestments on Israel’s growth and ability to wage war remain modest.
Sanctions and Their Impact
The EU is also considering whether access to the Horizon Europe Research Fund should be contingent upon Israel’s human rights record in Gaza. The plan is currently being stalled due to a lack of consensus. Germany, traditionally one of Israel’s closest allies, announced this month a halt to all military exports that could be "used" in Gaza. Nine other countries, including South Africa, Bolivia, and Malaysia, have imposed full economic sanctions against Israel.
Conclusion
The increasing international pressure on Israel, including sanctions and divestments, may have a significant impact on the country’s economy and its ability to wage war. While the effects of boycotts and divestments remain modest, the growing urge to hold Israel accountable for its actions in Gaza and the West Bank may lead to more severe consequences in the future.
