Some European Firms Retreat from Israel-Linked Finance amid War Pressure

 An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)
An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)
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Some European Firms Retreat from Israel-Linked Finance amid War Pressure

 An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)
An Israeli national flag flies over a city highway during rush hour, amid the ongoing conflict in Gaza between Israel and Hamas, in Tel Aviv, Israel, November 4, 2024. (Reuters)

Several of Europe's biggest financial firms have cut back their links to Israeli companies or those with ties to the country, a Reuters analysis of filings shows, as pressure mounts from activists and governments to end the war in Gaza.

While banks and insurers are often vocal about their environmental and governance aims, they are less forthcoming about disclosing their potential exposure to war.

UniCredit put Israel on a "forbidden" list as the conflict escalated in October last year, said a source familiar with the matter, confirming a study by Dutch NGO PAX.

While in line with the Italian bank's defense-sector policy of not directly financing arms exports to any country involved in conflict, it goes beyond Italy's guidelines on arms exports to Israel.

UniCredit declined to comment on its move and the Israeli finance ministry also declined to comment.

Meanwhile, Norwegian asset manager Storebrand and French insurer AXA have sold shares of some Israeli firms, including banks.

Although corporate filings offer only a glimpse into such exposures, they show companies have been readjusting.

"We don't know whether this represents the beginning of a shift in the industry, one that recognizes the power banks have in choosing where to allocate capital, and where not," said Martin Rohner, executive director at the Global Alliance for Banking on Values, which focuses on sustainable financing.

"Investing in the production and trade of weapons is fundamentally opposed to the principles of sustainable development," Rohner added.

Israeli Finance Minister Bezalel Smotrich told a press briefing last week that although there are challenges to Israel's economy, firms are still raising money. "I sit with foreign investors and they believe in our economy," he said.

Reuters has reported that Israel's investor base has narrowed since it entered Gaza last year in response to attacks by Hamas, and it is feeling the effects of rising borrowing costs.

The potential wider effects can be seen in the approach taken by Storebrand, which a filing showed divested a holding worth about $24 million in Palantir, citing the risk of violations of international humanitarian law and human rights.

US group Palantir, which provides technology to Israel's military, did not respond to a request for comment.

Storebrand's annual investment review said that, as of the end of 2023, it had excluded 24 firms, including Israeli companies, across its portfolios in relation to the occupation of Palestinian territories.

The International Court of Justice, the United Nations' highest court, ruled in January of plausible risk of irreparable harm to Palestinian rights to be protected from genocide.

The same court said in July that Israel's occupation of Palestinian territories including the settlements is illegal.

Israel has rejected the rulings, which combined with growing pressure from activists and governments, are nevertheless having an impact on investment decisions.

AXA, one of Europe's largest insurers, British bank Barclays and German insurer Allianz have increasingly been targeted by campaigners.

"Increasing demand for greater transparency and scrutiny can only mean that financial institutions will intensify and broaden their self-assessment of their commercial associations with arms-related businesses or states," said David Kinley, professor and chair of human rights law at the Sydney law school.

The Ireland Strategic Investment Fund (ISIF) has exited six Israeli companies, selling holdings which amounted to about 3 million euros ($3.26 million), including some of Israel's largest banks, a spokesperson told Reuters.

Earlier this year, the 15-billion-euro Irish fund said that the risk profile of such investments were no longer within its investment parameters.

And Norway's $1.8 trillion wealth fund, the world's biggest, may divest shares of companies that aid Israel's operations in the occupied Palestinian territories which violate its ethics standards for businesses.

WAR EXPOSURE

Investments in Israeli banks are also under scrutiny.

The UN included them in 2020 in a list of companies with ties to settlements in the occupied Palestinian territories as part of its mission to review the implications on Palestinian rights.

A study by research firm Profundo, commissioned by corporate watchdog Ekō, shows that AXA sold almost all of its holdings in Israeli banks stocks earlier this year, retaining only a marginal stake in Bank Leumi.

Reuters verified the data with LSEG. A representative for Bank Leumi did not respond to a request for comment.

A spokesperson for AXA declined to comment on whether AXA had cut its holdings, adding that it is not invested in the banks targeted by activists. The UN list is among the criteria AXA takes into account for investment decisions, they added.

'A CLEAR LINE'

Foreign direct investment into Israel fell by 29% in 2023 to its lowest since 2016, UN Trade and Development data shows.

While UNCTAD 2024 figures are not available, credit ratings agencies have flagged the war's unpredictable impact on investment in Israel as a concern.

Although the US remains Israel's biggest military and financial backer, Spain, Ireland and Norway have recognized a Palestinian state, French President Emmanuel Macron has called for an arms export halt and Britain has suspended some licenses.

When it comes to international politics, "it should be down to the governments to take a clear line," said Richard Portes, professor of economics at London Business School, adding: "To put the burden on the private firms, where does this end?"

In an example of how activists are targeting companies directly, Barclays came under pressure from a campaign in Britain, prompting it to withdraw sponsorship from summer music festivals, while the Financial Times reported in August that it considered pulling out of an Israeli government bond sale.

Barclays said in a statement that it remained "fully committed" to its role as a primary dealer and that such activities fluctuated each quarter. The bank fell out of the top five dealers of Israeli bonds in the second and third quarters, after ranking third in 2023.



Hezbollah’s ‘Statelet’ in Syria’s Qusayr Under Israeli Fire

Smoke billows from al-Qusayr in western Syria following an attack. (SANA)
Smoke billows from al-Qusayr in western Syria following an attack. (SANA)
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Hezbollah’s ‘Statelet’ in Syria’s Qusayr Under Israeli Fire

Smoke billows from al-Qusayr in western Syria following an attack. (SANA)
Smoke billows from al-Qusayr in western Syria following an attack. (SANA)

Israel has expanded its strikes against Hezbollah in Syria by targeting the al-Qusayr region in Homs.

Israel intensified its campaign against Hezbollah in Lebanon in September and has in the process struck legal and illegal borders between Lebanon and Syria that are used to smuggle weapons to the Iran-backed party. Now, it has expanded its operations to areas of Hezbollah influence inside Syria itself.

Qusayr is located around 20 kms from the Lebanese border. Israeli strikes have destroyed several bridges in the area, including one stretching over the Assi River that is a vital connection between Qusayr and several towns in Homs’ eastern and western countrysides.

Israel has also hit main and side roads and Syrian regime checkpoints in the area.

The Israeli army announced that the latest attacks targeted roads that connect the Syrian side of the border to Lebanon and that are used to smuggle weapons to Hezbollah.

Qusayr is strategic position for Hezbollah. The Iran-backed party joined the fight alongside the Syrian regime against opposition factions in the early years of the Syrian conflict, which began in 2011. Hezbollah confirmed its involvement in Syria in 2013.

Hezbollah waged its earliest battles in Syria against the “Free Syrian Army” in Qusayr. After two months of fighting, the party captured the region in mid-June 2013. By then, it was completely destroyed and its population fled to Lebanon.

A source from the Syrian opposition said Hezbollah has turned Qusayr and its countryside to its own “statelet”.

It is now the backbone of its military power and the party has the final say in the area even though regime forces are deployed there, it told Asharq Al-Awsat.

“Qusayr is critical for Hezbollah because of its close proximity to the Lebanese border,” it added.

Several of Qusayr’s residents have since returned to their homes. But the source clarified that only regime loyalists and people whom Hezbollah “approves” of have returned.

The region has become militarized by Hezbollah. It houses training centers for the party and Shiite militias loyal to Iran whose fighters are trained by Hezbollah, continued the source.

Since Israel intensified its attacks against Hezbollah in Lebanon, the party moved the majority of its fighters to Qusayr, where the party also stores large amounts of its weapons, it went on to say.

In 2016, Shiite Hezbollah staged a large military parade at the al-Dabaa airport in Qusayr that was seen as a message to the displaced residents, who are predominantly Sunni, that their return home will be impossible, stressed the source.

Even though the regime has deployed its forces in Qusayr, Hezbollah ultimately holds the greatest sway in the area.

Qusayr is therefore of paramount importance to Hezbollah, which will be in no way willing to cede control of.

Lebanese military expert Brig. Gen Saeed Al-Qazah told Asharq Al-Awsat that Qusayr is a “fundamental logistic position for Hezbollah.”

He explained that it is where the party builds its rockets and drones that are delivered from Iran. It is also where the party builds the launchpads for firing its Katyusha and grad rockets.

Qazah added that Qusayr is also significant for its proximity to Lebanon’s al-Hermel city and northeastern Bekaa region where Hezbollah enjoys popular support and where its arms deliveries pass through on their way to the South.

Qazah noted that Israel has not limited its strikes in Qusayr to bridges and main and side roads, but it has also hit trucks headed to Lebanon, stressing that Israel has its eyes focused deep inside Syria, not just the border.