Israel has been told that its accession to an exclusive club of the world’s most developed economies is all but assured when the 30 member states meet in May.

But a draft report of the Organisation for Economic Cooperation and Development (OECD), seen by The National, concedes that Israel has breached one of the organisation’s key requirements on providing accurate and transparent data on its economic activity.

The information supplied by Israel, the report notes, includes not only the economic activity of its citizens inside its recognised borders but also Jewish settlers who live in the occupied territories of East Jerusalem, the West Bank and the Golan in violation of international law.

Israel’s accession to the OECD on such terms threatens to severely embarrass many of the organisation’s member states, especially those in the European Union that are publicly committed to avoiding collusion with the occupation.

The OECD report proposes that these legal difficulties may be circumvented by asking Israel to produce new statistics within a year of its accession excluding the settler population – even though, an OECD official has admitted, Israel would have the power to veto such a demand after it becomes a member.

“The OECD seems to be so determined to get Israel through its door that it is prepared to cover up the crimes of the occupation,” said Shir Hever, a Jerusalem-based economist.

Israel has been lobbying for nearly 20 years to be admitted to the OECD, founded in 1961 for wealthy industrialised democracies to meet and co-ordinate economic and social policies. It includes the United States and most of Europe.

“The financial privileges are relatively modest, but there is great prestige to being accepted,” Mr Hever said. “Israel has worked so hard to gain admission because it believes accession will confer international legitimacy on its occupation.”

Several countries with a lower development level than Israel have already been accepted, including Turkey, Mexico and the Czech Republic.

Israel’s past rejections, it is widely assumed, were because many states were uncomfortable about admitting Israel while it was occupying the Palestinian territories of East Jerusalem, Gaza and the West Bank and the Syrian-owned Golan Heights.

However, Israel was formally invited to begin discussions about membership in 2007 after intense lobbying by Stanley Fischer, the governor of the Bank of Israel. Membership is expected to bring financial stability to Israel’s economy, attract investment and reduce the country’s risk premium.

The OECD’s secretary general, Angel Gurria, visited in January, after a review of Israel’s economy, and suggested that admission this year was a sure thing.

However, a leaked draft report by the OECD’s committee on statistics, produced last month after the review, shows there are major problems with the data presented by Israel.

According to its rules, the OECD takes account of economic activity outside a candidate state’s recognised borders in very limited circumstances, such as with remittances from migrant workers.

But given that this status does not apply to the illegal settlers living in the occupied territories, the OECD committee argues that either the settlers be excluded from the data or everyone living in the territories – including Palestinians – should be factored in.

“Israel has been caught out because it has always refused, even in its own internal data, to differentiate between Israel and the occupied territories,” Mr Hever said. Both East Jerusalem and the Golan have been annexed by Israel in violation of international law.

“The OECD is treating Israel as though it has seven million citizens when, in reality, it has 11 million subjects, of whom four million are Palestinians living under occupation,” Mr Hever said. “If they were included in the figures submitted to the OECD, Israel would have to be refused accession because of the enormous disparities in wealth.”

Meron Benvenisti, a former deputy mayor of Jerusalem, noted recently that there was a 20:1 ratio in the difference in gross domestic product per capita between an Israeli and a Palestinian living in Gaza.

But rather than conclude that Israel has failed to meet the organisation’s entry criteria, the committee proposes a workaround: Israel can be accepted to the organisation and given a year to submit new data excluding the settlers.

Tim Davis, an OECD official with the statistics committee in Paris, said he could not comment on the report because its contents were confidential but agreed that there was nothing to stop Israel reneging on such a commitment in the future. “In a case like that, nothing could be done in practice. We work on the basis of co-operation, not pressure.”

Israel is reported to have failed other entry conditions, including corruption and copyright violations.

The OECD has required member states to crack down on corrupt practices since it approved a convention against bribery in 1997. Israel, however, was ranked in 32nd place in a major index on corruption last year, with much of it relating to the country’s US$6 billion (Dh22bn) arms industry.

European and US defence firms have threatened to derail Israel’s OECD bid if it does not clean up its act.

Israel is also believed to be violating intellectual property rights, again in breach of OECD rules. US and Swiss firms have accused Israel of failing to regulate the international marketing of drugs produced by its largest pharmaceuticals company, Teva.

Israel’s bid for OECD membership has been opposed by the leaders of its Arab minority, one-fifth of the population. Last month the Higher Follow-Up Committee, the minority’s main political body, petitioned the OECD to reject Israel.

It has pointed out that half of Israel’s Arab citizens are living below the poverty line, a rate three times higher than among Israeli Jews, and that on average Arab citizens earn salaries that are one-third less than Jews. Mohammed Zeidan, head of the committee, blamed the disparities in wealth on what he called Israel’s “racist and discriminatory polices”.

Another OECD report, published in January, showed that, even on the basis of Israel’s figures excluding the Palestinians, Israel would still have the widest social gaps of any member state if it were accepted.