JERUSALEM (VINnews) Britain is considering expanding its sanctions regime against Israel in the coming months, including possible measures targeting Israeli banks that finance construction or mortgages in settlements in Judea and Samaria, according to senior British officials cited by Israel’s Channel 12.

The expanded package is expected to take between six and nine months to develop, according to the report. Possible measures could also target Israeli retail chains involved in settlement-related activity.

The reported plans come as relations between Britain and Israel have deteriorated sharply over Israel’s settlement policy in the West Bank, particularly plans to develop the strategically important E1 area east of Jerusalem.

British Foreign Secretary Ed Miliband announced the first measures this week, including a ban on imports of goods produced in Israeli settlements and restrictions on British businesses providing services to settlements. London has also previously imposed sanctions on individuals and organizations accused of financing or facilitating settler violence.

The British government says the measures are aimed at settlement expansion and activity that it believes undermines the possibility of establishing a Palestinian state alongside Israel. In a joint statement issued Tuesday, Britain, France, Canada and nine other countries said settlement expansion and settler violence in Judea and Samaroa were undermining the prospects for a two-state solution. The countries said they would introduce or consider national restrictions on trade in goods from settlements.

Miliband has been particularly critical of Israel’s plans for E1, saying the project could divide Judea and Samaria and undermine the viability of a future Palestinian state. The British government has described Israeli settlements in the region as illegal under international law.

The dispute escalated after Israel announced a series of retaliatory measures against Britain. Israeli Foreign Minister Gideon Sa’ar said Tuesday that Israel would close Britain’s consulate in East Jerusalem within 30 days. The consulate plays a major role in Britain’s diplomatic and consular relations with the Palestinians. British diplomats working there are expected to lose their diplomatic status when the closure takes effect.

Israel is also removing British representatives from the U.S.-led coordination center for postwar Gaza in Kiryat Gat and terminating Britain’s training program for Palestinian Authority security forces in the West Bank. In addition, Israel has barred 12 British politicians and other citizens from entering the country, according to Sa’ar. Among those barred is former Labour Party leader Jeremy Corbyn.

Sa’ar said Israel’s response was coordinated with Prime Minister Benjamin Netanyahu and accused Britain of interfering in Israel’s internal affairs and upcoming elections. Israel is scheduled to hold national elections in October.

The British government has defended its actions. Prime Minister Andy Burnham said Wednesday that Britain must continue to act according to its values and support what he described as justice for Palestinians. The government has emphasized that the sanctions target settlement activity and not Israel’s existence or the Israeli people.

The United States, meanwhile, has criticized the European measures. U.S. Ambassador to Israel Mike Huckabee described the sanctions as discriminatory, while Secretary of State Marco Rubio warned that the measures could further destabilize the region.

The British measures are part of a broader international shift over Israeli settlement policy. France, Canada and nine other countries joined Britain in Tuesday’s statement, while several European governments have already imposed restrictions on settlement goods or are considering additional measures.

Britain had already taken tougher action in June, when it coordinated sanctions with Australia, Canada, France and Norway against individuals and organizations accused of financing or enabling settler violence. London also advised British businesses against economic and financial activity in Israeli settlements.

The economic impact of the new trade restrictions is expected to be limited because the volume of direct British trade with Israeli settlements is relatively small. The political significance, however, is considerably greater, as Britain remains one of Israel’s traditional Western allies.

For Israel, the dispute has become another front in a widening diplomatic confrontation over its policies in Judea and Samaria. For Britain and its allies, the measures are intended to pressure the Israeli government to halt settlement expansion and preserve the possibility of a two-state solution.

The possibility of further sanctions against Israeli financial institutions would mark a significant escalation. If implemented, measures affecting banks that provide mortgages or financing for settlement construction could have a substantially greater economic impact than the current restrictions on settlement goods. For now, however, British officials have not publicly confirmed such banking sanctions, and the details of any future package remain under discussion.