By John O'Donnell and Padraic Halpin
DUBLIN (Reuters) -Ireland is poised to curb planned sanctions on Israel, blunting a law central to its protest over the war in Gaza, after pressure from business groups concerned about the impact on investment, four people with knowledge of the matter said.
Ireland's government is one of the most outspoken critics of Israel's assault in Gaza but, unlike others such as Spain, it hosts the European headquarters of some of the U.S.'s biggest companies, making it uniquely vulnerable to pressure from the U.S.
Mainly U.S.-owned foreign multinationals employ around 11% of Irish workers and contribute most of the corporate tax that makes up almost a third of all Irish tax receipts.
Although many governments have condemned Israel's offensive in Gaza and its annexation of territories in the West Bank, it has remained largely unsanctioned, shielded from economic pressure by its close alliance with Washington.
REPRISAL THREATS
Ireland has been preparing to sanction trade with Israeli settlements in the occupied Palestinian territories for a year, provoking criticism from Israel, international company lobby groups and threats of reprisal from U.S. lawmakers.
Dublin would be moving ahead of any wider sanctions by the European Union, unnerving local business.
Business representatives in Ireland have this year urged the government to delay any law and reduce its scope, the sources said, to avoid antagonising U.S. companies and investors, discouraging them from investing in Ireland.
Government officials are now poised to limit the scope of the legislation to goods only, catching a handful of products imported from Israeli-occupied territories such as fruit that are worth just 200,000 euros ($234,660.00) a year.
This would exclude the wider category of services that opposition parties have demanded be added, a move the government has been considering. Critics argue this could pull foreign multinational software companies, for example, into unworkable sanctions.
Although no final decision has been taken, the people said the government would likely follow the advice of some senior officials and business organisations who argued against widening the bill to services.
AWAITING ADVICE FROM ATTORNEY GENERAL
Foreign Minister Simon Harris has told parliament he would receive advice from the attorney general "shortly" on whether services can be included. He previously flagged concerns that it may not be legally possible.
A spokesperson for the foreign ministry pointed Reuters to comments by Harris in parliament on Thursday that the bill would be brought for debate before parliament breaks for holidays in mid-December but that wider European measures would have far more weight.
Business lobby groups and company representatives have in recent months visited government officials, underscoring their concerns that the bill will further upset relations with the U.S. and Israel, the people said.
In those meetings, company representatives have argued that penalising Israeli settlements could hit multinationals from the U.S., allied with Israel, and imperil investment in Ireland, an argument that resonated with some officials, the people said.
The Irish Business and Employers Confederation, the biggest industry lobby group, whose members include pharmaceutical, software and banking companies, has publicly shared its concerns about Ireland's stance, saying the U.S. could penalise multinational companies in Ireland for boycotting Israel.
FRAUGHT RELATIONS
The attention Dublin is getting over its stance on Gaza is coming at a delicate time for Ireland, whose pro-business corporate tax policies have helped turbocharge its economy.
Ireland sells around a third of its goods exports to the U.S., and is in the crosshairs of U.S. President Donald Trump for sending far more to the U.S. than it imports. It exported more than 72 billion euros of goods to the U.S. last year.
Ireland is the European home of some of the biggest U.S. tech firms, international finance, as well as a production hub for pharmaceutical giants who make and ship key elements of drugs such as Viagra, Botox and weight-loss treatment Zepbound.
Dublin is also pushing for a swift vote on proposals from the EU Commission to suspend free-trade arrangements on Israeli goods, although getting this through in the face of German opposition is in question.
After Ireland became the first EU country to commit to trade restrictions last October, Slovenia introduced a ban on imports of goods in August while Belgium, Spain and the Netherlands announced similar bans on goods last month.
Ireland's relations with Israel have been fraught. Last December, Israel shut its embassy in Dublin amid a row over Ireland's criticism of its war in Gaza, including Ireland's recognition of a Palestinian state last year.
"I believe the idea that foreign investors would leave Ireland has been much exaggerated," said Alice-Mary Higgins, a member of the joint committee on foreign affairs and trade, charged with scrutinising the bill, who backs the inclusion of services.
"What is the alternative? To reward profiteering in goods and services on stolen land?"
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(Reporting by Padraic Halpin and John O'Donnell in Dublin; Editing by Sharon Singleton)
