The "usual" reasons why we should reach a peace agreement with the Palestinians have been joined recently by the economic argument. According to this argument, if we don't reach an agreement in the near future, the economic boycotts against us will increase and a serious economic crisis will develop here.
If, on the other hand, we reach an agreement, it will have huge economic benefits: Defense expenses will be reduced, Israel will be able to trade with the entire Arab world, and thus we will enjoy real prosperity.
I am not downplaying the risk of an economic boycott, but in order to analyze the situation we must break the issue down to its components: The reason for the boycott calls, the economic benefit expected from an agreement with the Palestinians and the financial cost of such an agreement.
There is no doubt that the Western world thinks that the reality in which one people controls another people is an unacceptable phenomenon in the 21st century. The world is less impressed by issues like "who started it" and "who is right." The way it sees it, there is an undesirable situation and therefore it must be changed. Nevertheless, most of the world's countries understand that there is a logic in the Israeli claims as well, and therefore the right thing to do would be to solve the conflict in an agreement which will take our interests into account too.
But alongside this understanding, there is one thing the world does not accept: Israel's one-sided settlement activity. In the eyes of most of the world, creating more and more facts on the ground contradicts the willingness to hold negotiations with real intentions. That is what they are angry about and that is the reason for the initiatives to boycott us.
The second component is the economic benefit which will develop from a peace agreement with the Palestinians. Well, this benefit is much smaller than what we are being promised. Let's mention just one small fact. The Arab League's initiative (or the Saudi initiative) speaks about normalization with Israel only if the latter withdraws from all the "occupied lands," meaning: From the Golan Heights as well. In other words, an agreement with the Palestinians alone will not lead to any formal or practical change. We should also remember that the peace agreements with Jordan and Egypt were very promising and contributed very little to the trade between the countries.
And here we reach the third component: The cost of an agreement with the Palestinians. Such an agreement will require the evacuation of at least 120,000 Israelis from their homes. Based on the experience of the disengagement, the direct cost of compensating those residents will be at least NIS 120 billion ($34 billion)! And we have yet to mention the cost of relocating infrastructures and the IDF's deployment. The world will not pay a cent to fund the evacuation of settlements. It's an internal Israeli problem. Where will we raise such an imaginary sum?
Now we'll join the ends of the three issues together and reach two conclusions: First of all, a peace agreement with the Palestinian has a certain, high financial price for a period of at least a decade. Will the investment pay off in a decade or two? It may and it may not. It depends on several variables, with a very low level of certainty. Secondly, our conduct – and especially our declarations on the settlements – call for economic boycott initiatives.
Israel should therefore reach understandings with the United States and Europe that the settlement construction will be restricted to the existing construction line of the Judea and Samaria communities, so that as long as negotiations are being held with the Palestinians nothing will be built on "new land." An American proposal of this kind was presented about a decade ago and was rejected. Israeli willingness today will moderate the de-legitimization against us and allow us to conduct negotiations not under pressure and hysteria.