Britain’s move to impose an effective trade embargo on Israel’s West Bank settlements is fraught with diplomatic and economic risk. Yet insiders say it also represents a political opportunity for British prime minister Andy Burnham’s Labour government. Britain’s new foreign secretary Ed Miliband is due to give details to the House of Commons on Tuesday of a UK ban on goods and services from the settlements, in response to Israel pushing ahead with controversial plans to build in the sensitive E1 zone of the West Bank.Critics of the Israeli move say it would cut the territory in two, making a Palestinian state there unviable. Rather than an unfortunate side effect of the settlement expansion, this may well be Israel’s aim, judging by the belligerent statements of some of the most senior members of Binyamin Netanyahu’s government.Miliband, who when he was Labour leader pushed for British recognition of a Palestinian state a decade before it happened, says the issue is a “red line” that Israel has crossed.He has promised a “reset” of relations with the Jewish state, which has reacted with fury and is threatening to recognise Argentina’s claim over the Falklands Islands in retaliation.The diplomatic risk is obvious, as Britain announces the move just weeks before Burnham is expected to meet the volatile US president and Israel ally Donald Trump for the first time, on the margins of a United Nations gathering in New York.The US ambassador to Israel, Mike Huckabee, has already accused Britain of “Jew hate” – an interesting accusation to fire at Miliband, whose family heritage is Jewish.There is also clear economic risk, given the fact that several US states have on their statute books laws that prevent US companies trading with countries that boycott Israel. Huckabee also claimed that a quarter of the pharmaceuticals used in Britain originate in Israel, saying: “Are they willing to give those up?”Israel’s government has said it will respond. “If Britain acts against Israel, Israel will act against Britain,” said Gideon Saar, the Jewish state’s foreign minister.Israeli president Binyamin Netanyahu with US president Donald Trump at his Mar-a-Lago resort in Palm Beach, Florida, last year. Photograph: Tierney L Cross/The New York Times