Israeli Trade Minister Ehud Olmert claimed on Tuesday a deal has been reached with the European Union in a dispute over the labelling of exports produced in Jewish settlements.
But the EU has firmly denied any such deal.
“We have decided to label on the products the town in which they were produced," said Olmert.
Until now, Israeli authorities refused to indicate on products whether they were made in the occupied West Bank, Gaza Strip or the Golan Heights.
Under the terms of a trade agreements with the 15-nation bloc, goods labelled “made in Israel” get preferential treatment from EU customs authorities, with many escaping import duties altogether.
But only products which originate from within the internationally-recognised borders of Israel are entitled to such a tax break.
Jewish settlements are illegal under international law, a stance not recognised by Israel.
“The mention of the town should not be interpreted in any way as a political concession over the borders of Israel which will not be determined by an arrangement over a type of customs with the European Union," added Olmert.
However, in Brussels, a spokeswoman for European Trade Commissioner Pascal Lamy was blunt: “There has not been any agreement.”
Olmert made proposals to resolve the issue of rules of origin, she said. But Lamy said the topic still needed to be discussed.
Olmert and Lamy had held discussions on the long-standing dispute over so-called rules of origin in Brussels on Monday.
Israeli media reports said on Tuesday the suggested compromise deal has been severely criticised by the Israeli foreign ministry, which regards it as a "buckling to European pressure".
“I think patience has been given new meaning by the way that we've tried to deal with this issue"
EU external relations commissioner
Israeli Foreign Minister Silvan Shalom did not confirm the agreement but signalled his displeasure.
By demanding more accurate labelling "the EU is making a decision about the final status of the agreement between us and the Palestinians," charged Shalom. “We believe the EU should leave this in the hands of the Israelis and the Palestinians.”
EU External Relations Commissioner Chris Patten expressed frustration last week at Israeli foot-dragging on the dispute.
“I think patience has been given new meaning by the way that we've tried to deal with this issue," he said.
The sums involved are relatively small. Some $7 million worth of goods, out of EU-Israeli trade amounting to $22 billion last year, is believed to come from Jewish settlements built illegally on occupied Palestinian territory.