The Netherlands was Israel’s largest nominal investor in 2023, and also the main European destination for Israeli capital, largely thanks to financial flows routed through Amsterdam’s Zuidas business district, new research shows.

Dutch firms invested more than €49 billion in Israel last year, while Israeli investors channelled €47 billion into the Netherlands, according to a report by the Centre for Research on Multinational Corporations (Somo), published on Tuesday.

Roughly two-thirds of all European investment into Israel passes through the Netherlands, Somo said, making the country a key financial conduit and potentially a pressure point as the European Union considers action over Israel’s human rights violations.

EU foreign ministers are meeting on Tuesday to discuss whether to suspend the bloc’s association agreement with Israel. The talks follow a proposal from Dutch foreign minister Caspar Veldkamp.

There is no consensus among EU countries about suspending the agreement entirely, but one diplomat told Euronews earlier that ministers had discussed a partial suspension, possibly targeting cooperation on free trade, research and technology.

Genocidal economy

Somo said the EU’s role as both Israel’s largest trade and investment partner means it plays a central role in sustaining what it called Israel’s “genocidal economy.” A suspension of the agreement would have immediate consequences for financial and trade relations, Somo’s Lydia de Leeuw told the Volkskrant.

The Netherlands’ role is inflated by its function as a hub for tax avoidance, Somo said. Of the €49 billion reported as Dutch investment in Israel, around 12% comes from letterbox companies, entities with no real economic activity that exist mainly to exploit tax advantages, according to the Dutch central bank DNB.

In addition, many real companies also route their profits through Dutch structures to reduce their tax burden. It is unclear how much of the money sent to Israel genuinely originates from the Netherlands, or how much of the Israeli investment into the Netherlands stays in the local economy.

Israeli statistics give a much lower figure for inbound investment from the Netherlands at just €13 billion, highlighting a discrepancy of around €42 billion, the VK said in its report.

“Some Israeli companies pay less tax in Europe because of Dutch structures, and that ultimately benefits the Israeli economy,” Somo tax expert Jasper van Teeffelen told the VK.

EU investments

The Somo research also shows the value of the EU’s investment in Israel is nearly twice that of the United States. Together, EU member states had investments in Israel worth €72.1 billion in 2023, compared to €39.2 billion for the United States in the same year.

After the EU and the US, the biggest investors in Israel are China, Canada, and Switzerland, according to the data they submitted to the IMF.