Britain and Israel Strike Deal to Keep East Jerusalem Consulate Open, but With Sharply Fewer Diplomats

Britain and Israel reached a compromise on Thursday that averts a major diplomatic clash over the British consulate in east Jerusalem. The consulate, which has operated since 1839, can stay open. It will be renamed the U.K. Mission and sharply reduced in staff. Israel had threatened to close it entirely over British sanctions on goods from Israeli settlements in the occupied West Bank.

The dispute began in September, when London announced sanctions alongside 11 other Western countries. The measures ban goods produced in the settlements and target companies and individuals who help expand them. British Foreign Secretary Ed Miliband called them the "beginning of a new approach" to the Israeli-Palestinian conflict. Israel responded by giving Britain 30 days to close the consulate.

The facility predates Israel's founding by more than a century and has historically operated independently of the U.K. Embassy in Tel Aviv. It serves as Britain's main diplomatic link with Palestinian officials in east Jerusalem, the West Bank and Gaza.

Under the arrangement, Britain's consul general and 19 diplomats will leave Israel, and no more than seven diplomats will remain at the renamed mission. Israeli officials have not said whether those who stay will keep their accreditation and diplomatic immunity. Miliband indicated that such protections were likely part of the negotiations, saying that "without an understanding, we would not have the necessary assurances" for staff and premises.

The two governments described the outcome differently. Israeli Foreign Minister Gideon Saar presented it as proof that Israel answers measures taken against it. He said Israel had followed through on its September vow to retaliate, including by removing the consulate's diplomatic status. "We did not want to reach this point, but the actions of the UK Labour Government brought us here," he said, adding that talks aimed at preventing further deterioration in relations.

Miliband said the U.K. does not accept Israel's legal right to close the consulate and reaffirmed Britain's position that east Jerusalem is occupied territory. He said the renamed mission would stay independent and operational, keep working with Palestinians, and be rebuilt in the coming months. He ruled out retaliation as long as "credible" discussions with Israel continue.

Israeli political scientist Jonathan Rynhold of the Begin-Sadat Center at Bar-Ilan University told CBS News that both sides moderated their responses because their security and business ties are too valuable to risk. "They found something to do without blowing the whole relationship up," he said.

The dispute is part of a wider decline in Israel's relations with several European governments. Spain has withdrawn its ambassador and imposed an arms embargo, and France formally recognized Palestinian statehood last year. Israel has also clashed with Ireland and Norway. Besides Britain, the countries that announced sanctions or plans for them in September were Canada, Denmark, Finland, France, Iceland, Ireland, Norway, Poland, Portugal, Spain and Sweden.