By Harvey Morris in Jerusalem

Israel risks being ostracised by the European Union, its biggest trade partner, unless the Israeli-Palestinian conflict is solved, according to a report by foreign ministry analysts.

The report, which outlines diplomatic challenges facing Israel in the next decade, was prepared in August. It was leaked this week, amid growing concern from European capitals about civilian losses in Israel’s current military operations in Gaza.

It said the emergence of a unified foreign policy in the 25-member EU could harm Israeli interests by challenging the influence of the US, Israel’s main ally.

“This could put Israel on a collision course with the European Union,” the report said.
“Such a collision course holds the risk of Israel losing international legitimacy and could lead to its isolation in the manner of [apartheid] South Africa.”

Foreign ministry officials insisted that the confidential document, prepared for circulation among officials, represented a minority view within the ministry. “It does not commit the foreign ministry to anything,” said a senior official.

Although they have strong trade ties, political relations between Israel and the EU have come under strain this year.

The Israeli government expressed anger after European states supported a UN General Assembly resolution that called on Israel to heed a World Court ruling against its West Bank separation barrier.

European governments have criticised Israel’s actions in Gaza, where more than 100 Palestinians have been killed in a big incursion that has entered its third week.

Jack Straw, the UK foreign minister, was among those who accused Israel of over-reacting to attacks by militants.

He said Israel was not meeting its obligations under international law.

Ariel Sharon, Israeli prime minister, said yesterday that the operation would continue as long as Israelis were being targeted.

He also told the Knesset foreign affairs committee that his promised evacuation of Jewish settlements in the Gaza Strip would begin next May and last for three months.

The parliament will vote on his Gaza plan in 10 days’ time.

The EU, together with the US, United Nations and Russia, is a member of the international quartet that sponsored the peace “road map” launched last year.

Europe accounts for almost a third of Israel’s exports, excluding diamonds.

Israel is the EU’s 20th largest customer. It hopes to be included in the EU’s Wider Europe policy that aims to upgrade the bloc’s relations with its neighbours.