(Economist) - THE prize-winning Psagot Winery in a West Bank settlement north of Jerusalem has become a favourite destination in recent years for right-wing Israeli and American politicians, eager not just to quaff Cabernet but also to score political points by highlighting the return of the Jews to their biblical homeland. Sixty-five per cent of the 250,000 bottles produced here each year are exported. Under new European Union rules adopted this week those bottles sold in Europe will no longer be labelled “Produce of Israel” but “Produce of the West Bank (Israeli settlement)”.

Yaakov Berg, the winery owner, is not concerned for his own business. “People who buy our wines know where we are and want to buy them,” he says. “This will probably only make them more popular.” He is already planning a line of Christmas gift-boxes with additional settlement products, which he believes will be a hit in evangelical communities in America. Some of his fellow producers may, however, see sales fall as European retailers refuse to stock their products.

Labelling produce from the Israeli settlements in the West Bank, the Golan Heights and East Jerusalem has been a subject of diplomatic disagreement between the EU and Israel for more than seven years. The Europeans, like the rest of the world, do not recognise Israel’s sovereignty in the lands captured in the six-day war in 1967 and regard Israeli settlements there as illegal. Although Israel enjoys preferential access to Europe’s market and gets grants for research programmes inside the “green line”, it has refused to abide by the EU’s previous labelling regulations. These new guidelines put the onus on EU members to ensure that imports from the settlements declare the correct provenance.

Israel’s response has been to accuse Europe of discrimination. Israel’s prime minister, Binyamin Netanyahu, questioned why such guidelines do not exist for other cases where there are contested borders, such as Northern Cyprus, accusing the EU of a “double standard” and said the move “brings back dark memories”, alluding to the Holocaust.

The new measure represents a diplomatic blow for Israel as well as a victory for the BDS (Boycott, Divestment, Sanctions) movement, which calls for a boycott of all Israeli produce. However, as European diplomats were at pains to point out, the new guideline is not intended to constitute a boycott of Israel in any sense. It is, they said, to ensure consumers are not misinformed.

Whatever the moral justification of this step, it is unlikely to amount to more than an exercise in gesture politics. Israel’s Economics Ministry reckons that it could cause no more than $50m-worth of damage to Israeli producers a year, out of some $300m exported from the settlements (and some $18.9 billion that Israel exports to Europe)