The Irish ambassador to Israel has been summoned by the Israeli government after Prime Minister Benjamin Netanyahu strongly condemned a bill before the Seanad which, Mr Netanyahu claims, "seeks to... harm the state of Israel."
The legislation has been tabled by Independent Senator Frances Black, who says it "seeks to prohibit the import and sale of goods, services and natural resources originating in illegal settlements in occupied territories."
However, in a statement the Israeli Embassy in Ireland denounced the bill, saying that it "only offers an incentive to those who wish to boycott Israel and stands in stark contrast to the guiding principles of free trade and justice."
Mr Netanyahu "has instructed that the Ambassador of Ireland in Israel be summoned to the Foreign Ministry to discuss this subject".
Meanwhile, Tánaiste and Minister for Foreign Affairs Simon Coveney has said the relentless expansion of Israeli settlements on Palestinian territory is unjust, provocative and undermines the credibility of Israel's commitment to a peaceful solution to a conflict that we all want an end to.
Speaking in the Seanad, Mr Coveney said the settlement of communities of an occupying power to alter the demography of an area is unambiguously illegal under international law.
The process of establishing settlements also violated the rights of the occupied population, he said.
The Tánaiste was in to the upper chamber for the second reading of Ms Black’s Control of Economic Activity (Occupied Territories) Bill 2018.
He welcomed the presence of the Palestinian ambassador Ahmad Abdelrazek, who was watching from the public gallery
However, Mr Coveney said that he recommended that the Government oppose the Bill.
He said Ireland's approach on the Middle East needs to constantly be reassessed.
Mr Coveney added that his view was Ireland's approach in our efforts to negotiate a two state solution that is fair to both sides should be focused on intensive diplomacy and on straight blunt discussion.
He said the Government's efforts should be focused on a stronger, more unified position within the European Union, which is how the EU could be more persuasive with an Israeli government.
He insisted that in the interim the Government would continue to support the Palestinian Authority, and Palestinians generally.
Senator Black said the legislation was about respecting international law and standing up for the rights of vulnerable people and a chance for Ireland to state strongly that is does not support the illegal confiscation of land and the human suffering that inevitably results.
She thanked the Tánaiste for his sincere engagement, before agreeing to the adjournment of the Bill.
It received support from Sinn Féin and Labour, as well as Independent Senator David Norris.
The discussion in the Seanad is continuing.
Senator Michael McDowell noted that the Tánaiste had indicated in writing to Senator Black that the Goverment would come back to the Bil before the summer.
He said the eyes of the world are on us as to how we deal with this Bill. He added that the fact Ireland was the first country to do it was not a reason not to do it.
Govt will not recognise Jerusalem as capital
Earlier, the Taoiseach said the Government will not recognise Jerusalem as the capital of Israel.
Leo Varadkar was responding to questions from opposition TDs about his recent visit to Irish troops in Lebanon.
Labour's Brendan Howlin and Joan Burton TD, Deputy Louise O'Reilly of Sinn Féin, Fianna Fáil leader Micheál Martin and Richard Boyd Barrett of Solidarity-People Before Profit asked the Taoiseach for his view on the matter.
Mr Varadkar said the Government disagreed with the decision by the United States to recognise Jerusalem as Israel's capital and he said the Irish Embassy in Israel remains in Tel Aviv.
He said the US decision has made it harder for it to be an honest broker in a future solution.
Mr Varadkar said the Government will be increasing funding to organisations that help Palestinians.