Germany is conditioning research support and cooperation with Israel on the exclusion of Jewish communities in Judea, Samaria and eastern Jerusalem, AFP reported on Thursday, citing the Haaretz newspaper.
According to the report, Berlin's decision "represents a significant escalation in European measures against the settlements." Haaretz noted that a 1986 treaty of the German-Israeli Foundation for Scientific Research and Development states that the foundation will only sponsor projects "within the geographic areas under the jurisdiction of the State of Israel" before the 1967 Six Day War.
The Germans reportedly want to apply that clause to the "German-Israeli funding program (DIP)", an agreement signed in 1970 that is renewed annually on March 31, as well as to an agreement between the states providing "German funding for industrial and applied research and development," Haaretz said.
The report comes ahead of a visit to Israel by Chancellor Angela Merkel. Merkel will visit Israel at the end of February at the invitation of Prime Minister Binyamin Netanyahu, for annual talks between the two governments.
During an Israeli delegation’s visit to Berlin in December of 2012, Merkel and Netanyahu “agreed to disagree” over Israeli construction in areas the Palestinian Authority (PA) claims for a future state.
Germany is a steadfast supporter of Israel and is widely seen as the Jewish state's closest ally in Europe, but Merkel has been critical of Israeli construction in areas the PA wants for a future state.
In October, she met with PA Chairman Mahmoud Abbas in Berlin and urged Israel to show "restraint" in the building of Jewish communities in Judea and Samaria.
While Haaretz said the German demand was effectively extending a ban on Jewish communities in so-called “disputed territories” to "private companies", an Israeli diplomatic source told AFP there was "nothing new here."
“The territorial limitations have applied since 1986 and nothing has changed," said the Israeli source.
A spokeswoman for the German foreign ministry told AFP Berlin had "a great interest in continuing and expanding scientific cooperation with Israel."
Europe has voiced continuous criticism over Israeli construction in Judea, Samaria and eastern Jerusalem, and several months ago published new guidelines which boycott Israeli entities operating beyond the 1949 Armistice Lines.
On Wednesday, Lars Faaborg-Andersen, the EU's ambassador to Israel, threatened that both Israel and the PA would have a "price to pay" if the current peace talks collapse.
He also threatened that initiatives for Israel to keep building on land over 1949 Armistice lines was fueling more initiatives from the EU to boycott Israel.
Last week, four key European states summoned Israeli ambassadors to protest over Israeli announcements of new construction, which Prime Minister Binyamin Netanyahu denounced as "hypocritical," calling out the EU over its obvious anti-Israel bias.
In response, the Israeli Foreign Ministry summoned European diplomats to explain their countries' one-sided criticism of Israel.