Boycott, Disinvestment and Sanctions, BDS, is already working. Not to devastate Israel’s economy – that’s still a remote prospect – but to do something just as effective: Destroy its global standing.

Israel wants its international brand to be that of the startup nation, but however hard it promotes the gay-friendly villa-in-the-jungle cliché, all its achievements in the field of innovation are not enough to blot out the occupation.

The European Union as an institution is not part of the BDS movement, far from it, but its announcement this week that agreements with Israel only apply within the 1967 borders illustrates how crushing an essentially symbolic move can be.

Economy Minister Naftali Bennett called it an “economic terror attack”, missing the point, as did all the other usual suspects who jumped up and down, predictably referencing the Holocaust and declaring that the European Union could stuff their association agreements.

The European Union hasn’t introduced a ban on settlement goods, which in any case don’t make up a significant proportion of Israeli exports. It’s not even heralding the stricter labeling guidelines that the European Union has been threatening for a while. The immediate impact on the settlements will be minimal; they were never in the running for EU funding in any case.

It’s not really about the economy, not yet. It’s about Israeli intransigence and the efforts of the most pro-settler government in the country’s history to create a kind of sleight-of-hand whereby the occupied territories are actually part of Israel.

The financial effects of BDS are very hard to quantify. Certainly, the BDS movement likes to grant itself far sharper teeth than it currently has. Threatening global businesses with world-wide campaigns against their interests is hardly going to leave multinationals quaking. Neither does Israel need to tremble when a students’ union passes a BDS resolution.

It’s debatable whether economic boycotts even work, and what is clear is that the only kind that can have an actual impact are concrete and universally applied (comparisons between Israel and South Africa are always clumsy, but it is relevant to note that it took some 20 years for the idea of comprehensive sanctions against the apartheid state to take hold).

The economic impact may well come later, but for now, the real effect of BDS lies somewhere else entirely.

To the delight no doubt of professional hasbaraniks, whose ideal news cycle is one without any mention of Israel (except of course features on hi-tech), the Arab Spring has delegated Israel-Palestine to a side-show. And this lowered public profile suits Israel just fine, keen as ever to maintain the status quo.

While the occupation rots away from within, it remains pleasantly distant from the average citizen’s life. Prime Minister Benjamin Netanyahu’s government can pretend the real answer to the country’s problems lies in some kind of economic tinkering, or “sharing the burden” by drafting ultra-Orthodox Jews.

But it suits pro-Palestinian activists much better to keep the conflict in the lens of the mainstream media. The second intifada is far behind us – its non-violent resistance, delegitimization, or whatever you choose to call it, that is the new supposedly existential threat. When Stephen Hawking refuses to visit Israel, or Alice Walker calls on Alicia Keys not to play there, that scoots the whole issue right back into the headlines.

It’s a marketing nightmare, without a single gun being fired: Consistent appearances in the public arena reinforcing an overwhelmingly negative image.

For a pop star of whatever flavor to perform in Israel has now become a de facto political statement. And why should businesses choose to invest in ventures that can lead to questionable publicity?

There’s a reason why the Israeli government is so exercised about BDS: It works. Whether you agree with its philosophy or not, or find its proponents objectionable – like all activist movements, it attracts an extremist political fringe – BDS is non-violent and legal, a classic example of civil society action to which there is no possible military response.

But the Israeli establishment, doggedly militaristic, doesn’t understand the use of soft power, and it’s going to take much more than an Israeli Mr Gay International winner to change that.

Israel’s economy is flourishing, for now, but the same can’t be said for its prime brand. Britain has the royal family, Sweden has Ikea, and Israel has the occupation. So much for the Startup Nation.

Daniella Peled is editor of the Institute for War and Peace Reporting and has written widely from across the Middle East and Afghanistan.