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In an important step toward the economic isolation of Israel due to its genocide in Gaza, Norway’s Government Pension Fund Global last week it would divest from yet more Israeli companies.

Norway’s sovereign wealth fund is the world’s largest, with total investments in Israel once at $1.9 billion. The decision to divest was taken gradually but is consistent with the Norwegian government’s growing solidarity with Palestine and criticism of Israel.

Taking a leading role along with Spain, Ireland and Slovenia, Norway has been a vocal European critic of the Israeli genocide and human-made famine in Gaza, actively to the International Court of Justice’s investigation into the genocide and formally the state of Palestine in May 2024. This diplomatic and legal stance, coupled with its financial divestment, represents a coherent and escalating effort to hold Israel accountable for its ongoing extermination of Palestinians.

The Israeli economy was already in a state of freefall even before the genocide. The initial collapse was related to the deep political in the country, a result of Prime Minister Benjamin Netanyahu and his extremist government’s to co-opt the judicial system, thus compromising any semblance of democracy that remained in the country. This resulted in a significant lowering of investor confidence.

Israel’s war and genocide only accelerated the crisis, pushing an already fragile economy to the brink

Dr. Ramzy Baroud

The war and genocide, beginning on Oct. 7, 2023, only accelerated the crisis, pushing an already fragile economy to the brink. According to reports from the Israeli Ministry of Finance, foreign direct investments by an estimated 28 percent in the first half of 2024 compared to the same period in 2023.

Any supposed subsequent recovery in foreign investments was deceptive. It was not the outcome of the world rallying to save Israel, but rather a consequence of a torrent of US funding in to help Israel sustain both its economy and the genocide in Gaza, along with its other war fronts.

Israel’s gross domestic product was  by the World Bank to be about $540 billion in 2024. But the war on Gaza has taken a considerable bite out of Israel’s economy. Estimates from within Israel are complex, but all data points to the fact that the economy is suffering and will continue to suffer for the foreseeable future. Citing reports from the Bank of Israel and the Ministry of Finance, the Israeli business newspaper Calcalist in January that the cost of the war on Gaza had reached more than $67.5 billion by the end of last year.

Keeping in mind that the ongoing war costs continue to rise exponentially, and with other consequences of the war — including divestments from the Israeli market by Norway and other countries — projections for the Israeli economy look very grim indeed. The Israeli Central Bureau of Statistics reported that the economy, already in a constant state of contraction, by another 3.5 percent between April and June.

This collapse is projected to continue, even with the unprecedented US financial backing of Tel Aviv. Indeed, without American help, the precarious Israeli economy would be in a much worse state. Though the US has always Israel, its help in the last two years has been the most generous and critical yet.

Israel receives of US taxpayer money per year, as a result of the most recent 10-year memorandum of understanding, which was signed in 2016. But what is equally valuable, if not more so, are the loan guarantees, which allow Israel to borrow money at a much lower interest rate on the global market. The backing of the US, therefore, has enabled investors to view the Israeli market as a safe haven for their funds, often guaranteeing high returns. This applied to the Norwegian sovereign wealth fund just as it did to numerous other entities and companies.

This collapse is projected to continue, even with the unprecedented US financial backing of Tel Aviv

Dr. Ramzy Baroud

Now that Israel has become a bad brand, affiliated with unethical investments due to the genocide in Gaza and growing illegal settlement expansion in the West Bank, the US, as Israel’s main benefactor, has stepped in to fill the gaps.

The emergency supplemental of April 2024 allocated a total of $26.4 billion for Israel. While much of the money was earmarked for defense expenditures, most of it will percolate into the Israeli economy. This amount, in addition to the annual military aid, allows the Israeli government to minimize spending on defense and keep the economy from shrinking at an even faster rate.

Additionally, it frees up the Israeli defense industry to continue producing sophisticated new military technology that will ensure Israel’s continued competitiveness in the arms market. The military-industrial complex, a significant part of the Israeli economy, is thus not only sustained but given fresh impetus by American aid, ensuring the war machine continues to function with minimal financial disruption.

All this should not diminish the importance of divesting from the Israeli financial system. On the contrary, it means that divestment efforts must increase significantly to balance out the US push to keep the Israeli economy from imploding.

Moreover, this should also make US citizens who object to their government’s role in the genocide in Gaza more aware of the extent of Washington’s determination to save Israel, even at the price of exterminating the Palestinians. Indeed, the flow of funds from the US is not a passive action; it is an active collaboration that directly enables the Israeli genocide in Gaza.

• Dr. Ramzy Baroud is a journalist, author and the editor of The Palestine Chronicle. His latest book, “Before the Flood,” will be published by Seven Stories Press. His website is www.ramzybaroud.net. X: @RamzyBaroud