U.S. Negotiating Deal with Israel on Conditions for Loan Guarantees

The Bush administration has committed itself to working out a loan guarantee agreement with Israel within the next six weeks, according to a top Jewish organizational official.

Malcolm Hoenlein, executive director of the Conference of Presidents of Major American Jewish Organizations, said Secretary of State James Baker will be meeting soon with Israeli Ambassador Zalman Shoval to “arrive at an understanding” on Israel’s request for U.S. guarantees covering $10 billion in loans.

The loans, to be taken out in $2 billion installments over five years, would be used to help resettle the hundreds of thousands of immigrants arriving from the republics that formerly constituted the Soviet Union.

A State Department source confirmed that Baker and Shoval will begin talking soon, but she did not provide a date.

Hoenlein said the time frame was outlined Tuesday by Brent Scowcroft, the White House national security adviser, during a meeting here with members of the Conference of Presidents.

Shoval has been meeting with various administration officials over the past few months to ascertain what conditions the United States would place on the guarantees. He discussed the matter last week with Richard Haass, Scowcroft’s top Middle East aide.

Shoval, who also met Tuesday with the Conference of Presidents, is the sole Israeli authorized to negotiate with the administration on this issue, an Israeli diplomat here said. He said Shoval has not agreed to accede to any cuts in Israel’s $10 billion request.

In Tuesday’s meeting, Scowcroft did not elaborate on what conditions the administration will seek.

But Hoenlein said Scowcroft raised two general areas of concern relating to Israeli settlements in the West Bank and the stagnant Israeli economy.

MANDATED SETTLEMENT FREEZE POSSIBLE

The administration is expected to try to use the loan guarantees to deter Israel’s large housing expansion plans for the West Bank, which President Bush views as an obstacle to peace.

Several members of Congress have proposed another possible condition on the guarantees that would require Israel to enact stringent economic reforms, including privatization of government-owned companies.

To discourage Israel from expanding Jewish settlement in the West Bank, Sen. Patrick Leahy (D-Vt.) has floated the idea of deducting from any new U.S. loan guarantees the amount that Israel spends annually on settlements.

An alternative idea of restricting Israel would be to mandate a freeze on new Israeli settlements or to somehow limit the rate of expansion.

Morris Amitay, a pro-Israel lobbyist here, expressed skepticism that Israeli Prime Minister Yitzhak Shamir would ever go along with a freeze, even if it means forgoing the U.S. guarantees.

But some U.S. Jewish leaders, such as Henry Siegman, executive director of the American Jewish Congress, are publicly urging Israel to scale back new settlement plans, arguing that Israel cannot afford to do without the U.S. loan money.

The Conference of Presidents has not taken an official position on the Leahy plan or other U.S. restrictions. But Shoshana Cardin, the umbrella group’s chairman, is expected to discuss the consequence of continued settlement-building with Shamir when she visits Israel next week.

CONGRESS TO ACT IN MARCH

Kenneth Bialkin, a former chairman of the Conference of Presidents who is now president of the Jewish Community Relations Council of New York, said he would support any U.S. conditions that would encourage privatization and thereby make it more likely that Israel would be able to repay the loans.

But Bialkin said he would oppose any conditions related to settlements as “political” and unrelated to Israel’s credit-worthiness.

On that point, Hoenlein said the Conference of Presidents prefers no linkages, but that economic ones are less objectionable.

The conference does not plan to mount a high-profile grassroots campaign like the one last fall that failed to get Congress to force the administration’s hand on the issue.

Jewish organizational leaders recognize that Congress is hesitant to fight the administration on the issue, given the political risk of appearing to dole out foreign aid during a recession.

As a result, the Jewish leadership has decided to work quietly with the administration to achieve a deal.

Republican Jewish activists are also refraining from pressing the administration on the issue.

“Very few, if any, will point to the guarantees as a litmus test of support for the president,” said one knowledgeable party activist.

But should the loan guarantee issue remain undecided through much of the spring, the Jewish vote could become an important consideration for Bush in California, New York and other large industrial states, the activist added.

Israel now has a three-month period to hammer out a deal with the administration before Congress revisits the 1991-92 foreign aid appropriations bill in March.

The bill was held up last fall in order to serve as the likely legislative vehicle for authorizing the guarantees. The bill also would provide Israel, by April 1, with the second $1.5 billion installment of its $3 billion annual foreign aid package.

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