News Analysis: Israeli Concern Grows That U.S. Aid May Be Linked to Settlement Freeze

Prime Minister Yitzhak Shamir insisted Wednesday that Israel’s settlement-building drive in the administered territories is a “normal process that cannot be stopped.”

But his defiant remarks at the West Bank settlement of Beit Arye, which was celebrating its 10th anniversary, belied mounting concern in government circles that U.S. aid vital to Israel’s absorption of Soviet immigrants may be linked by Washington to a settlement freeze.

Along with the settlement issue, the Shamir government’s refusal so far to accept American ideas on a peace conference has incurred the Bush administration’s displeasure.

Israelis fear that could translate into a reluctance to provide the $10 billion in U.S. loan guarantees for absorption purposes, which Israel is expected to request in September.

Even more troubling are indications of opposition in Congress, long a bastion of pro-Israel sentiment.

So far, however, Israel’s powerful support among the legislators is holding up.

The House of Representatives on Wednesday overwhelmingly defeated an amendment to the foreign aid authorization bill that would have cut $82.5 million from Israel’s $3 billion aid grant for fiscal 1992.

Rep. John Bryant (D-Tex,), its sponsor, said the amount he proposed to cut equalled the amount Israel allocated for settlements in fiscal 1990, according to State Department figures.

But Bryant’s measure was swamped by a vote of 378-44.

Nevertheless, the fact that amendments suggesting linkage have been proposed by individual members of Congress hints at looming trouble for the loan guarantees.

This was reportedly the thrust of a report by Israel’s ambassador to Washington, Zalman Shoval, to a closed-door meeting of senior Israeli diplomats Sunday in New York, chaired by visiting Israeli Foreign Minister David Levy.

It was also the gist of a Reuter news agency report, quoting an unnamed senior U.S. administration official, which was widely featured in the Israeli news media Wednesday.

According to the report, the official forecast difficulties in approving Israel’s guarantees request if the current spate of settlement continues unchecked, and if the present blockage in the peace process remained uncleared.

A ‘MORAL OBLIGATION’

Other reports reaching Jerusalem predicted that if that is indeed the administration’s position in September, it may win unusually broad support on Capitol Hill, even from traditional friends of Israel.

The reports stressed the widespread unpopularity in U.S. official circles and public opinion of Israeli settlement-building and expansion at a time of intensive American diplomatic efforts to launch a peace conference.

Levy was to have brought Shoval’s report to the inner Cabinet’s weekly session here Wednesday.

No reports were immediately available from the inner Cabinet’s deliberations, which are often classified.

Shamir insisted Wednesday that the United States has a “moral obligation” to help Israel absorb new olim. But, publicly at least, he shows no signs of the flexibility asked by President Bush in his letters earlier this month to Israeli and Arab leaders.

Shamir’s June 6 letter replying to Bush specifically rejected the president’s suggestion that the United Nations be given observer status at a regional peace conference, and that the conference itself be reconvened periodically to hear progress reports on Israel-Arab negotiations.

Shamir’s flat “no” was accompanied by a demand for Israeli veto power over the composition of the Palestinian negotiating team.

Israel continues to insist, moreover, that the conference must be limited to a ceremonial opening and then dissolve permanently to bilateral talks between Israel and its Arab adversaries.

Israel’s conditions are a no-starter, as far as the Arab side is concerned. Syria, which demands an active U.N. role, has not yet replied to Bush. A reply from Jordan’s King Hussein was described as “unhelpful” by an administration official.

The lack of any “give” on the Arab side allowed Shamir to blame them for the bleakness of Middle East peace prospects in a speech to the Zionist General Council here Wednesday.

He also took issue with Bush’s proclaimed “new world order” in the aftermath of victory in the Persian Gulf War.

“Despite the destruction of Iraq’s offensive power in ‘Desert Storm,’ the basic problems of the region remain unchanged,” Shamir said in discussing the U.S.-led campaign to free Kuwait.

“The widespread tendency of Arab regimes to rely on war, terror and violence to achieve political goals has not changed. There is no movement in the approach of the Arab states toward Israel, and they are still in a state of war with us,” Shamir said.

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