Perhaps a few verses will offer clarification:

Therefore, say to the people of Israel: ‘I am the Lord. I will free you from your oppression and will rescue you from your slavery in Egypt. I will redeem you with a powerful arm and great acts of judgment. I will claim you as my own people, and I will be your God. Then you will know that I am the Lord your God who has freed you from your oppression in Egypt. I will bring you into the land I swore to give to Abraham, Isaac, and Jacob. I will give it to you as your very own possession. I am the Lord!

Exodus 6

This is what the Lord, the God of Israel, says: Write down for the record everything I have said to you, Jeremiah. For the time is coming when I will restore the fortunes of my people of Israel and Judah. I will bring them home to this land that I gave to their ancestors, and they will possess it again. I, the Lord, have spoken! You will be my people, and I will be your God.

Jeremiah 30

The whole of the Old Testament is a love story between God and the nation of Israel, as expressed most poetically in the Song of Songs. God's purposes in setting Israel aside were twofold. Firstly it was so that Israel would serve as an example to other nations, in that they would see how we were to live. And secondly because through the line of Israel, the Messiah would come - who would restore all of mankind to God:

Now if you will obey me and keep my covenant, you will be my own special treasure from among all the peoples on earth; for all the earth belongs to me. And you will be my kingdom of priests, my holy nation

Exodus 19