Relations between the European Union and Israel have taken a dive after Jerusalem condemned a decision of the 28-nation bloc to specially label products made in West Bank settlements.
The Israeli foreign ministry said the EU has taken an "exceptional and discriminatory step" for what the ministry called "political reasons".
The EU move, which came after months of procrastinating, underscores the EU's unhappiness over Israel's continued expansion of settlements on territory that Palestinians seek for their future state.
The EU is now seeking to differentiate between its relations with Israel and with the settlements, fearing that a continued status quo would never push the Israeli government into changing its settlement policies.
Once the labelling is implemented, European consumers will be able to read on the label of most products if a piece of merchandise or goods - mostly fruit and vegetables - was produced on Israeli settlements.
The EU Commission insisted there was no overt political motive driving the move, adding that the guidelines are merely a technical measure it was forced to impose.
Three member states - Britain, Belgium and Denmark - had already imposed special labelling, forcing the EU to streamline measures throughout the 28 nations.
However, Israel insists the step was inspired by an international boycott movement against Israel and noted that it comes at a time when the country is confronting a "wave of terrorism" amid stepped-up Palestinian attacks.
The Israeli foreign ministry said that "it is puzzling and even irritating that the EU chooses to apply a double standard concerning Israel" while other territorial disputes are treated differently.
The ministry also said the step "raises questions" about EU's role in the region and could have implications on Israel's relations with Europe. It added that the measure also will harden Palestinian positions and make it more difficult to resume peace talks.
Earlier this week in anticipation of the move, Israeli Cabinet minister Yuval Steinitz said "we cannot conceive it but as some disguised anti-Semitism".
The labelling should affect less than 1% of all trade between the EU and Israel, which stands at around 30 billion euro (£21 billion).
EU officials have said that in Britain, where the labelling is already in place, it has had no negative economic effect.
Israel, however, sees it as a political stigma that would push consumers away.
The Palestinians claim the West Bank and east Jerusalem - territories captured by Israel in the 1967 war - as parts of a future independent state.
The international community opposes Israeli settlements in the two areas, saying they undermine the goal of dividing the land.
More than 550,000 Jewish settlers live on occupied land.