October 1991, Page 7

The Arrogance of Power

Israel's US Lobby Loses First Round to Bush in Loan Guarantee Battle

By Richard H. Curtiss

"No on a Peace conference and on a halt to West Bank settlements, but yes on old aid and new loans? This combination may suit Israel's Likud government, but it cannot possibly suit the United States."

—The Washington Post, Sept. 6, 1991

Israeli Prime Minister Yitzhak Shamir has been preparing for three years for his inevitable showdown battle with the Bush administration. Despite scarcely veiled warnings from President George Bush and Secretary of State James Baker that, if pressed, they would fight back, the Israeli Prime Minister picked the date, September 1991, and the place, the US Congress.

The issue was Shamir's demand for a "normal" aid package of $3.2 billion for fiscal year 1992, plus $10 billion in US loan guarantees, to be paid in $2 billion increments over five years. The guarantees would enable Israel, despite a poor credit rating, to borrow money at favorable rates.

Although Israel's US lobbyists called it a "humanitarian" measure to provide housing for Soviet Jewish immigrants, the Israeli government had already built the funds into its 1992 budget to free up funds for increased defense expenditures and more Jewish settlements in occupied areas.

The Bush administration increasingly hinted that such loan guarantees, and possibly other US economic assistance, would be linked to a freeze on Jewish settlements and Israeli attendance at a peace conference with its Arab neighbors.

No linkage, Shamir vowed publicly, and his legions of paid and volunteer American lobbyists made plans to descend on Washington to ram both the aid and the guarantees through Congress, regardless of administration wishes, in the second week of September.

On September 4, however, both Bush and Baker contacted Senator Patrick Leahy at his home in Vermont to ask him, as chairman of the foreign operations subcommittee of the Senate appropriations committee, to delay introducing the loan guarantee legislation.

The next day, from Vermont, Leahy told reporters: "If the president of the United States asks for a delay in the guarantees to help the chances for peace in the Middle East, I believe I should support him."

That, coupled with earlier statements by Chairman David Obey of the foreign operations subcommittee of the House appropriations committee, signaled that if the Republican administration provided the leadership, powerful Democrats would cross the aisle to delay Israel's request until after its peace process performance could be assessed. It tilted the balance decisively in the administration's favor even before its battle in Congress with Israel's lobby had begun.

The following day, Sept. 6, in a made for television White House Oval Office appearance with the secretary of state, the president made his request:

"It is in the best interest of the peace process and of peace itself that consideration of this absorption aid question be deferred for simply 120 days. And I think the American people will support me on this."

By the time Israeli Ambassador Zalman Shoval delivered his aid request late on Sept. 6, it was clear there would be no immediate housing loan guarantees, and perhaps no aid to Israel at all, without linkage.

Although the American Israel Public Affairs Committee (AIPAC), Israel's principal US lobby, seemed initially intent on continuing to send in its troops, most members of Congress were only interested in the casualties, and how to avoid being among them. The best way would be to avoid having the loan guarantees reach the Senate and House floors, where members of Congress would have to vote on them.

If the guarantees do reach the floor, either as a separate bill or attached to the 1992 foreign aid bill, AIPAC may suffer its first defeat since 1981, when Senators supported the President in selling AWACS to Saudi Arabia, and 1978, when the US sold military aircraft to Egypt, Jordan and Saudi Arabia.

Increasingly, the confrontation looked like a case study in what Senator J. William Fulbright once called "the arrogance of power." It appeared, however, that while Israel and its American supporters had the arrogance to enter a battle they were unlikely to win, Bush had the power, as does any US president who undertakes a major foreign policy initiative.

The battle began early in 1989 when, in the Bush administration's first months, Baker made it clear to Israel's American establishment that the free ride of the Ronald Reagan administration, when Israel got what Israel wanted, was over. Addressing an AIPAC national convention, Baker shocked delegates by calling upon them to convince Shamir to give up his dream of greater Israel."

When Shamir ignored the first warning, the Bush administration issued a second one. He would not be welcome in Washington until he arrived with some plans for peace. From his Labor coalition rivals he borrowed a plan for West Bank elections to choose Palestinians with whom to negotiate. When, to his surprise, both the Bush administration and Arab governments gave substance to his plan, filling in details where he had left blanks, he brought down the Israeli Likud Labor coalition government rather than put his own plan into effect.

Shamir was able to put together a new government without the Labor coalition by bringing in religious extremists and groups even to the right of his own expansionist Likud bloc. While Shamir stubbornly negotiated for more US aid, upon which Israel's ramshackle, socialist economy was increasingly dependent, his Likud colleague, Housing Minister Ariel Sharon, invested it in housing for Jewish "settlers" in the Israeli occupied West Bank.

The two governments were on the verge of confrontation in the summer of 1990 when Iraqi strongman Saddam Hussain's invasion of Kuwait removed the pressure on Israel. Although America's Arab allies sought to establish "linkage" between the Iraqi occupation of Kuwait and the Israeli occupation of the Palestinian West Bank and Gaza and Syrian Golan Heights, the Bush administration shrugged it off.

At the end of the war, Israel claimed it had earned special treatment by not retaliating against Iraqi missile attacks. It got the special treatment in the form of $5.6 billion in combined US military and economic aid for 1991. The condition for receiving the final $650 million military aid component of this package, however, was that Israel would make no more funding requests until September, the last month of the 1991 fiscal year. In the interval, parties to the coming confrontation over loan guarantees made plans for the showdown battle that would define US Israeli relations for the remainder of the Bush administration.

The Peace Conference: The Importance of Just Showing Up

It's said that half of life is just showing up. That's about all that's expected of Palestinian participants in the Middle East peace conference envisioned by President George Bush and Secretary of State James Baker. Israeli Prime Minister Yizhak Shamir, however, is counting on the Palestinians not even to do that.

He has insisted upon an unprecedented veto power over individual Palestinian delegates. When Baker seemed to be allowing him to get away with it, Shamir advanced further conditions. To his original insistence that the Palestine Liberation Organization could not represent the Palestinians at the conference, he added the condition that no member of the Palestinian delegation could be a resident of East Jerusalem. Such representation, he said, would call into question Israel's "annexation" of that portion of the city, an act that no country in the world has recognized.

Shamir also sought to preclude Syrian attendance by announcing the "irreversibility" of Israel's "annexation" of the Golan Heights. This territory was seized from Syria during the 1967 war and then lost and recaptured by Israel in the 1973 war.

Syrian strongman President Hafez Al Assad, a ruler from the disliked Alawite minority in overwhelmingly Sunni Muslim Syria, may need an external threat, and be just as unenthusiastic about peace, as is Shamir. He has, nevertheless, agreed to attend the conference under pressure from Saudi Arabia, Egypt and the US, whose financial and political support he needs after the breakup of the Soviet Union.

Most other Arab states see little to lose and much to gain from a conference about Palestinian self-determination, a freeze on Jewish settlements, and eventual Israeli withdrawal from occupied lands.

Palestinians, as obsessed with their grievances as the most holocaust ridden Israelis, ask why they should meet an Israeli leader who already has promised followers he will not give up "one inch" of land for peace.

The answer, as most Arab rulers understand by now, lies in the Israel obsessed domestic politics of the United States. If Americans conclude, finally, that it is Shamir who is unwilling to reach a compromise peace, they will let their President use US aid to Israel as a club, not a carrot.

Shamir's last hope is to threaten to bring down his own government, and call elections that might empower even more extremist leadership, like that of Ariel Sharon. It's a little like an adult threatening to hold his breath until he turns blue.

Whether it's Shamir, Sharon, or anyone else, if the US freezes its aid until the Israelis freeze the settlements, eventually there will be a land for peace settlement that Arab moderates can accept. When that happens, US problems in the Arab and Muslim worlds, virtually all of which spring from its persistent tilt toward Israel, will diminish. With them will go the "chronic instability" that has characterized US Middle Eastern relations for the past half century.

Why Shamir Won't "Freeze" Settlements

"Within a number of years you will see on all the nearby mountains and hills homes and lights, and children playing. Men we will be able to arrive at peace."

—Israeli Housing Minister Ariel Sharon, speaking at the Jewish West Bank settlement of Maale Adumin, July 1991

The "nearby mountains and hills" to which Israeli Housing Minister Ariel Sharon referred in the statement above all lie within the Israeli occupied West Bank territory that the US and other signatories to UN Security Council Resolution 242 expect Israel to return to Arab rule in exchange for peace.

Including East Jerusalem, these occupied territories, in which Sharon is spending seemingly unlimited Israeli government funds, are only 22 percent of the original Mandate of Palestine.

In all, according to Housing Ministry Director General Arye Barr, 40,000 units are planned for startup in the West Bank between 1990 and the end of 1992, and another 2 1,000 are planned for East Jerusalem and adjoining West Bank areas. All are part of the Likud's long-term plan, begun in 1977, to "create facts" to make a land for peace settlement politically and physically impossible.

Even these figures understate the extent of the Israeli settlement program, since Sharon also is building 12 new "development towns" just inside the green line that marks the pre 1967 Israeli border. His "star plan" aims to link these completely new Israeli towns with some two dozen Jewish settlements just across the line in the occupied territories. This will make it even more difficult for peacemakers to force Israel to withdraw to the former green line, since the resulting border would divide economically connected areas.

Instead of investing Israel's housing funds economically, where there are job creating industries, Sharon has spent the money "strategically. " This single-mindedness explains the country's precarious economic condition and its inability to create jobs for the 350,000 Jewish immigrants who have poured into the country since the Soviet Union first relaxed its emigration restrictions.

The 21,000 East Jerusalem units will surround neighborhoods inhabited by 150,000 Palestinians. The purpose is to seal off East Jerusalem irrevocably from the rest of the occupied West Bank.

The "line of lights" described by Sharon will be from houses in the settlement of Maale Adumin, which is to be extended along hilltops running from East Jerusalem to the ridge overlooking Jericho in the Jordan valley. The purpose is to bisect the West Bank from West to East with a continuous line of Israeli settlement.

All of these new units are designed to increase the population in the crowded West Bank, already home to 750,000 Palestinian Arabs, from the present 100,000 to 200,000 Jewish inhabitants by the end of 1992.

The overriding political importance of the program explains why the Arab states, watching Israel's all or nothing gamble, have offered to end their economic boycott in exchange for a freeze on settlement activity, and why Israel has ignored the offer. It also explains the Bush administration's decision to make it clear that without peace talks and a settlement freeze in exchange for an end to the Arab embargo, there will be no possibility of obtaining the US loan guarantees Israel needs to carry its audacious land grab to completion.

The Vanishing Soviet Jewish Immigrants

"Tens of thousands of Soviet Jews have postponed or canceled plans to move to Israel even in the immediate aftershock of the failed Soviet military coup and the ensuing political instabilities. You might think, in a country founded as a Jewish homeland ... that immigration failure would be viewed as a disaster or at least an issue... the fact is, only one issue truly motivates Israel's leaders, and it isn't the immigration problem, or any other social issue... Instead, defense, security, Palestinian violence, Arab intransigence and territorial aggrandizement remain at the heart of the national debate. "

—Joel Brinkley, The New York Times, Sept. 8, 1991

Whereas a year ago as many as 20,000 Soviet Jews a month were reported streaming into Israel, today the inflow is perhaps a third of that, and dropping. Because of the all out drive to populate the occupied territories with Jews, there has been no serious effort to create new jobs, or even to build housing where jobs exist. New housing stands empty in remote parts of Israel, while rents soar in Tel Aviv. The Russians, with government subsidies during their first year in Israel, are forcing the Israelis out of low cost housing in the cities and into subsidized housing in the settlements.

The result is resentment of the new Soviet and Ethiopian arrivals by native-born Israelis or earlier immigrants. When the first year allowances run out and the new immigrants still cannot find jobs, however, it is they who begin to feel resentful and trapped.

Many of the unemployed Soviet Jews are physicians and teachers. Yet Israel remains a country where patients must wait up to two or three years for surgery, and where fewer than 9 percent of students overall enter college. (In the US, 50 percent of students and 90 percent of Jewish students go on to college.)

As reported elsewhere in this magazine, unemployed Soviet immigrants are said to be applying for Israeli passports, which would enable them to travel in search of jobs to other countries, but are frustrated by the requirement that they first pay back the funds spent on their transport to Israel. As a result, Soviet consular authorities in Tel Aviv report thousands of applicants for Soviet passports to enable newly arrived immigrants either to return to their homes or emigrate elsewhere.

Suicides are reported among unemployed Russians in Israel. In Egypt, a Soviet immigrant to Israel who managed to slip over the border jumped to his death from a Ministry of Interior window in Cairo rather than be returned to Israel.

In fact, Israel was not the destination of choice for most of the Soviet emigrants. More than 90 percent of the first Soviet Jews to leave the USSR on Israeli visas changed destinations when they reached transit points in Western Europe. Only after the Israeli government persuaded the Soviet Union to inaugurate direct flights from Moscow to Israel did Israel's monthly inflow soar.

Now, according to former Soviet dissident and political prisoner Nathan Sharansky, "Thousands and thousands of letters and phone calls are going back to the Soviet Union. They are telling their friends and relatives: This is a great country. But there are no jobs for us here. You should wait, maybe one or two years."

If the needs of these Soviet immigrants continue to be ignored as Israel concentrates on its "strategic" building program, there will be no new citizens to occupy the houses Ariel Sharon is building in the occupied territories and adjacent portions of Israel. For years there has been a steady, but concealed, outflow of Israelis to the US, Europe and Latin America. The Israelis acknowledge their loss only if emigrants remain outside Israel for more than six years. Those who return, even for a visit, are considered residents of Israel.

The result is that at any given time the population of Israel is overstated by an estimated 600,000 to 1 million persons. Given the absence of statistics for emigrants, it is impossible to state with certainty the real population increase in Israel over the past three years.

What does seem certain, however, is that Israel's population may soon be in equilibrium, or even resume its decline. If this happens, it will be the fault of the Israeli leaders who chose settlements over immigrants.

Housing Loan Guarantees: Hard to Postpone, Harder to Win

In an era of increasing economic hardship at home, and competing needs from an Eastern Europe falling apart, the Israeli case for aid without conditions was weak.

It was, perhaps, Bush administration silence on the matter that encouraged Yitzhak Shamir to take his desperate gamble, and his American lobbyists to support him by claiming the loans "would cost the taxpayer nothing" in view of "Israel's good credit record."

This was patent nonsense. Because Congress also planned for the US to pick up the service and placement charges normally assumed by the borrower, the minimum charge to taxpayers would be more than $3 billion. But that was only the beginning.

Israel has a good credit record only because the US eventually forgives all of its loans to Israel. And, for those waiting to be forgiven, Congress has assured Israel that the level of US economic aid will never dip below the amount necessary to cover all interest charges on all outstanding US loans.

Whether Israel "defaults," or whether the US taxpayer picks up all service charges and interest repayment on the loans is, therefore, a matter of semantics. The $10 billion in loan guarantees could cost the US taxpayer more than $100 billion over the 30 year life of the loans.

With immigration dropping rapidly, Israel planned to use any of the money which it no longer needed to build houses to increase its defense budget, create make-work jobs for the immigrants, and free up money for roads and infrastructure in the occupied territories.

These potential uses for the money only increased the Shamir government's appetite for the loans, Such usage would dramatically decrease, however, the likelihood that Israel ever would make any serious attempt to repay any part of them.

As the forces opposing the loans mustered the facts and figures likely to dissuade Americans from supporting them, Israel's US lobbyists resorted to sheer political intimidation. Senate aides were assuring callers as early as last June that the loans were "a done deal" and would be passed within a week of the Senate's Sept. 9 return from its summer recess.

At the same time, leaders of national Jewish organizations urged rabbis all over the United States to make political action in support of the loans the central theme of their sermons during Rosh Hashanah Jewish new year observances, which coincide roughly with the period in which Congress was expected to consider the proposal.

National Jewish leaders scheduled a "flyin" to Washington. Thousands of American supporters of Israel made appointments to visit members of Congress.

One point of speculation was the size of the appropriation to be recommended by the Bureau of the Budget to cover the first year's guarantees. Expected to range between $600 million and $1 billion, it would require Members of Congress to find and cut the money from domestic programs.

Cynics speculated that the initial silence from the White House could, in fact, be a trap. If a Democratic Congress took money from domestic programs to cover loans to Israel, and President Bush then chose to veto the bill, the resulting headlines would discredit Democratic complaints that Bush puts foreign programs ahead of domestic needs.

The President's preemptive action ended the speculation and, very likely, the battle. What remained to be seen was what would be said in Rosh Hashanah sermons, how many national Jewish leaders still would "fly in" to Washington, and how members of Congress could, at all costs, avoid an up or down vote that could create problems either with the Israel lobby or with their own constituents in the 1992 elections.

To preserve its mystique of invincibility, AIPAC's strategy traditionally has been not to enter battles it can't win. To postpone this one, however, seemed just as difficult as to fight it and lose.

Richard H. Curtiss is executive editor of the Washington Report on Middle East Affairs.