The paper points at two inter-linked problems in the framework of EU-Israel bilateral relations: the first is the co-existence between the bilateral and the multilateral in the EU foreign policy. While allowing for the particular nature of the bilateral relations a fairly central place, the EU is yet committed to a rather consistent regional framework; therefore, the extent to which it can be flexible in interacting with the key institutions of the Israeli political economy is arguably limited. This is entwined with the inevitable 'conditionality' between economic cooperation and progress in the Israeli-Palestinian conflict resolution. The second problem is rooted in the structure of the Israeli political economy. The Israeli competitive advantage embodies to a great extent the cooperation with the EU, under the European Neighbourhood Policy; still, the implications of the oligarchy in Israel, being a fundamental, even if hazardous institution, are hardly addressed. Likewise, the main economic interests of the EU in Israel do not include the business derivatives of the oligarchy. As a result, since Israel is a networked society with strong ties between the oligarchy and the political circles, the public impact the EU has is constrained, not allowing for its genuine influence to be advanced.
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