Israeli Prime Minister Benjamin Netanyahu recently said his country should reduce its dependence on trade with other countries, as the state faces a growing threat of economic sanctions.
“We will increasingly need to adapt to an economy with autarkic characteristics, the word I most hate,” he said, evoking a potential future in which Israel will have to be economically self-sufficient. “There’s no choice. In the coming years, at least, we will have to deal with these attempts to isolate us.”
The rare acknowledgement of the diplomatic fallout from Israel’s war in Gaza came as the country presses on with its ground assault of Gaza City. But Israel’s options for navigating economic isolation are more constrained than Netanyahu acknowledges.
The premier’s vision—and other recent speeches—drew widespread criticism in Israel, including a reaction from markets, which dipped following his words, although the premier’s office later said that he was only referring to self-sufficiency of arms production.
“Autarky is malarkey,” said Amir Mizroch, an Israeli communications advisor and former regional technology editor at the Wall Street Journal, “It’s great to be able to say, ‘we need to make our own bunker-buster bombs.’ But how are you going to build the factories? How are you going to get them all the parts, for instance, for the tanks that have been blown up or for drone production?”
“We are not a manufacturing country,” Mizroch added. “If you want to have a super Sparta that is able to stand by itself and be super strong, this country is not designed for it.”
Israel’s defense exports hit a record $14.8 billion last year, driven largely by missiles, rockets, and air-defense systems, which collectively made up around 48 percent of export volume.
More than half of the country’s defense contracts were with Europe, but Israel is facing severe diplomatic and commercial pressure from the bloc. In mid-September, the European Commission has proposed to suspend parts of a free trade deal known as the European Union-Israel Association Agreement, which entered into force in the year 2000, focusing on goods rather than services.
The bloc is Israel’s largest trading partner. The proposed tariff measures would affect around 37 percent of Israel’s total exports to the EU—worth around 16 billion euros ($18.7 billion) in 2024—to impose some 220 million euros ($257.7 million) in additional costs.
The EU is also moving to suspend 14 million euros ($16.4 million) in direct support for various Israeli projects but will keep in place EU funding for Israel’s Yad Vashem Holocaust memorial as well as peacebuilding initiatives. The measures would only enter into force if all member states agreed to them.
International cooperation, as well as business and research partnerships with Israel’s cherished technology sector, are increasingly under pressure. In June, the Erasmus University in Rotterdam, Netherlands, suspended future research collaborations with three Israeli universities. Some European pension funds have divested from Israeli companies or international companies whose products are used in Israel due to human rights concerns.
In mid-September, the Italian Adriatic port of Ravenna refused entry to two trucks, said to be carrying explosives to Haifa in northern Israel, as protests mounted among Italian dockworkers and other labor groups opposed to the offensive in Gaza. This followed similar actions to prevent arms shipments to Israel by dockworkers in other European countries, such as France, Sweden, and Greece.
In late September, Microsoft cut off some services to a unit of Israel’s Ministry of Defense after an investigation found that its technology had been used to conduct mass surveillance on people in Gaza. In addition, the country’s existing defense production lines depend on imported components and material, while its exports fund research and development.
“Programs like Arrow and David’s Sling rely on U.S.-Israeli co-production and multinational supply chains,” Mizroch said. “Production lines depend on imported energy, alloys, electronics, and propellants. Cut Israel off from markets and inputs, and you starve the very complex you want to scale.”
“Even if and when these factories are built, good luck keeping them all supplied and protected in a country the size of New Jersey, surrounded by enemy missiles and drones,” he added.
Michael Milshtein, the head of the Palestinian Studies Forum at the Moshe Dayan Center for Middle Eastern and African Studies, said that this “Sparta vision” reflects views of a minority of Israelis. But they are the ones heavily influencing government policies and the conduct of the war in Gaza.
“The majority of people in Israel are terrified by this idea of being Sparta: an isolated, kind of pariah state, which is always in an existential phase of ongoing warfare,” Milshtein said.
However, he added that the cultural values of part of the Israeli population, primarily represented the Religious Zionism party of Finance Minister Bezalel Smotrich, support the isolationist idea because their only goal is the creation of a Jewish state encompassing the land from “the river to the sea”—a religious state governed by religious principles.
These views are based on the premise that global public opinion can be ignored and that international criticism and even isolation are a price worth paying for to realize the vision of a Greater Israel. Most Israelis would rather live in a “normal country,” said Milshtein, enjoying the respect of the international community—a country whose prosperity is based on an open economy, not in “a sort of North Korea.”
Milshtein said he fears that an international tsunami is getting closer to his country. “Many Israelis are beginning to understand that this won’t be limited to politics and international relations, but that they will start to feel it in their own daily life, from the price of foods to the capacity of getting out of the country,” he said.
Israel imports far more goods than it exports, but its exports of services make up for the trade deficits in goods, yielding a modest overall trade surplus of 2.4 percent of the country’s gross domestic product in 2024, according to the latest World Bank data.
Energy is particularly problematic: Israel is self-sufficient in natural gas but imports basically all the oil it needs. Israel is also heavily reliant on food imports, which comprise more than 90 percent of the country’s grains and fish; more than 80 percent of legumes, seed oils, peanuts, and nuts; and more than 60 percent of beef according to the country’s Agriculture and Raw Food Security Ministry.
The government has recently launched a new strategic system for monitoring risks in food imports, especially given the increasing international boycotts, which may affect supply routes from abroad, the agriculture ministry said.
“The Israeli economy is very simple,” said Manuel Trajtenberg, a visiting senior researcher and former executive director at Tel Aviv’s Institute for National Security Studies. “We sell brains to the world, and we buy all the rest. Autarky means that you sell Jewish brains to one another and produce all the rest.”
He warned that the Israeli economy couldn’t exist in its present format if it went in the direction of reducing economic ties to the world. “The upshot will be not just a dramatic fall in the standard of living, but in our ability to maintain an army, security, and of course all our social services,” Trajtenberg said.
The country’s trade unions have also joined the chorus of voices in Israel, ranging from academics to newspaper commentators and opposition politicians, decrying the autarkic vision.
“I don’t want us to be Sparta. I wish for our children to live in Athens, not Sparta,” said Arnon Bar-David—the chairman of Histadrut, a wide-ranging national trade union—during a recent internal meeting. “Athens knew how to fight, but also how to nurture culture, art, and the well-being of its citizens. I want to live in a country that invests in the future of its children and its people.”
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