ABSTRACT
The prospect of a comprehensive Arab-Israeli peace agreement requires Israel to prepare for a new regional economic order in which Europe will play a central role. On the face of it, peace between Israel and its Arab neighbours should open up new commercial possibilities and enable the integration of Israel into the rest of the Middle East, thereby reducing its reliance on Europe. In early 1989, Israeli Prime Minister Yitzhak Shamir told a representative of the European Parliament that the EC should distinguish between economic and political aspects of its relations with Israel. This has been a common theme in Israeli dealings with the EC, but since its agreement with the Palestine Liberation Organization (PLO), the Israelis have called specifically for Europe to compensate Israel in the economic sphere for steps it has taken on the political front. Meantime, Israel wants Europe to acknowledge some of the sacrifices it expects to make in order to achieve peace with the Palestinians.
