Israeli settler violence: How the US undermined its own sanctions regime
On his first day in office, President Donald Trump terminated the first-ever US sanctions programme specifically designed to address Israeli abuses against the Palestinians.
The move drew predictable praise from ultranationalist, hardline factions in Israel, and condemnation from observers worldwide. But a year after former President Joe Biden issued an executive order to launch the programme, it is critical to assess his own administration’s role in undermining it.
Biden’s executive order was a bold step, giving tangible weight to decades of US foreign policy rhetoric by authorising targeted sanctions against individuals and entities responsible for destabilising activities in the occupied West Bank.
For the first time, US sanctions policy confronted Israeli actors complicit in settlement expansion, settler violence and Palestinian dispossession - realities that US officials had long described as "an obstacle to peace" but never enforced consequences for, nor officially recognised as violations of international law.
Yet the Biden administration’s initial show of resolve was quickly eclipsed by political timidity and a failure of executive will. This retreat pulled the punch of the West Bank sanctions, reducing them from a potent foreign policy instrument to a glancing blow.
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The programme’s unravelling began last March, when the US Treasury's Office of Foreign Assets Control (OFAC), the agency responsible for administering US sanctions, issued a guidance letter to the Bank of Israel that read as if it could have been ghostwritten by Israeli Finance Minister Bezalel Smotrich or his extremist cronies.
Following a swiftly mounted pressure campaign, the guidance letter defanged Biden’s executive order by shielding sanctioned entities from financial disruption and curbing the strategic ambiguity that gives US sanctions their chilling effect on third-party transactions.
Pivotal moment
The letter also explicitly permitted transactions sustaining livestock on sanctioned farm outposts. These outposts are not benign agricultural ventures; they are, as Smotrich himself has acknowledged, “a mega-strategic tool” for Israeli expansionism.
The letter, which claimed alignment with multiple US sanctions programmes, ultimately served as a concession that appeased critics and marked a pivotal moment: it signalled to hardline factions in Israel’s leadership, and their US allies, that even Washington’s most powerful foreign policy tool - economic sanctions - could be manipulated when their activities were the target.
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The Washington Post’s reporting on the multimillion-dollar sanctions lobbying industry offers a telling context for the quiet unravelling of Biden’s executive order.
Just as sanctioned entities and Gulf allies have found ways to navigate US sanctions policy through well-paid advocates, the American enablers of Israel’s most hardline factions - already well-versed in the workings of Washington’s power corridors - were surely steps ahead.
In an enforcement system already “stacked against” impartiality, as former McKinsey chief economist James S Henry put it, pressure from domestic allies, coupled with diplomatic pressure from Tel Aviv, likely ensured the executive order’s swift dilution.
Biden's actions conveyed a clear message: the US would not leverage its immense economic power to truly challenge extremist Israeli abuses
Yet, unlike typical sanctions lobbying efforts - which at best result in softened enforcement, preemptive insulation from sanctions, and narrow exceptions for, or delisting of, individual designees - this case stands apart as an unprecedented instance of an entire sanctions programme being hollowed out. Never before has a US sanctions framework been so systematically eroded from within, leaving it functionally defective in achieving its intended objectives.
The Biden administration’s capitulation to these pressures exposed a troubling lack of resolve. This was more than a failure to effectively apply and enforce sanctions; it undermined American sovereignty and emboldened those who were supposed to be targeted by the sanctions.
By caving, the administration debased its ability to cement the policy shift set in motion by the executive order, eroding both its own credibility and the integrity of the West Bank sanctions programme.
Biden’s actions conveyed a clear message: the US would not leverage its immense economic power to truly challenge extremist Israeli abuses in pursuit of territorial conquest, even when those abuses blatantly contradicted official American foreign policy objectives.
Opportunity squandered
These concessions squandered a critical opportunity to give real weight to decades of official US policy opposing Israeli expansionism.
When Biden first imposed sanctions on individual settlers, Israeli banks reportedly froze targets’ assets - a prudent, decisive response driven by the significant legal and reputational risks associated with engaging with US-sanctioned entities.
Such actions, reflecting the independence of Israeli banks from Smotrich’s heavy-handed politics, are typically seen from US banks bound by American law or foreign banks with deep ties to the US financial system. This demonstrated the sanctions’ potential efficacy and their capacity to reverberate across Israeli institutions.
But instead of building on this momentum by escalating targeting to the larger actors or entities that finance and facilitate the settler violence and takeover of Palestinian land, the Biden administration not only weakened its most effective tool, but actively diluted its most significant designation.
Zeev Hever, the head of Amana - an operational arm of Israel’s settler movement - has long described farm outposts as the movement’s “main means” of land acquisition and Palestinian displacement. Amana, sanctioned by Canada and the UK, appeared poised to face similar action under Biden’s executive order and was ultimately sanctioned last November.
Yet, even in its most significant designation, the Biden administration immediately undercut its impact. On the very day it sanctioned Amana, the administration issued a general license allowing it a wind-down period that ended on 10 January, effectively blunting the designation’s consequences.
By limiting the sanctions’ effects to a mere two-week period - the Trump administration delisted Amana, along with all other designees, upon taking office last month - the administration reduced the designation to little more than a symbolic gesture.
Biden’s sanctions order, for all its shortcomings, offered a rare chance to reshape US foreign policy on Israel-Palestine, addressing the core issue of Israel’s illegal settlements in the West Bank. Yet, Biden's administration failed to fully commit to that course. Trump, who showed tenacity in securing the Gaza ceasefire that Biden could not achieve for 15 months, has signaled no such resolve in the West Bank - rather than sanctions or accountability for settler violence, he has indicated a willingness to green-light Israel’s annexation (alongside his talk of a US takeover of Gaza).
Global accountability
While the US wields a unique monopoly on sanctions with extraterritorial reach, other global powers can still make a significant impact by denying abusive Israeli entities access to their markets and financial systems.
With Israel shielded from global accountability and Washington failing to act, extremist Israeli ambitions risk unfolding unchecked - not only at the expense of Palestinian lives and rights, but also US interests. Further Israeli settler violence and Palestinian dispossession will undermine any remaining prospects for peace and strain US alliances with Arab countries.
The Biden administration’s failure to follow through on its executive order revealed how fragile and ineffective sanctions programmes become without White House resolve.
As the Trump administration signals an imminent return to his first-term policy of abandoning the West Bank - and now Gaza - to ethnic cleansing and annexation, other countries must step up, as seen with the formation of The Hague Group, which was established to enforce ICJ and ICC rulings against Israel. It is essential that those in Israel-Palestine driving expansionist policies designed to dispossess and displace Palestinian civilians face meaningful consequences.
Otherwise, only impunity will prevail.
The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Eye.
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