Israel and U.S. Are Moving Closer Toward Deal on Loan Guarantees
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Israel and U.S. Are Moving Closer Toward Deal on Loan Guarantees

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Israel and the United States appear to be moving closer toward an agreement on U.S. loan guarantees that would enable both sides to show that they have not abandoned their respective positions on settlements in the West Bank and Gaza Strip.

This is the real job of the diplomats, said Jess Hordes, Washington representative of the Anti-Defamation League.

The Bush administration has to show that it is not acting contrary to its opposition to settlements in the territories, while the government of Prime Minister Yitzhak Shamir has to demonstrate that it has not abandoned its principle of supporting settlements, Hordes explained.

The U.S. guarantees are needed to help Israel borrow $10 billion from private banks over the next five years, on favorable terms. The money would be used to help absorb immigrants from the former Soviet Union and Ethiopia.

Both Secretary of State James Baker and Shamir staked out their positions this week in appearances before legislative committees in their respective countries.

Baker referred only briefly to the loan guarantees when he testified Wednesday before the Senate Foreign Relations Committee saying that the administration wants to help Israel absorb Soviet Jews in Israel.

But he stressed that the Bush administration does not want to do anything that “contradicts” U.S. policy that has been in effect since 1967.


Shamir told the Knesset Foreign Affairs and Defense Committee on Monday that Israel would not use any of the U.S. loan money in the West Bank or Gaza Strip.

But he also said Israel “will not accept any kind of dictate” from the United States “with respect to government policy.”

How to finesse these contradictory positions will again be on the table when Israeli Ambassador Zalman Shoval and Baker meet Friday.

Shoval returned from Jerusalem on Tuesday with orders to work out a compromise with Baker that does not require a freeze.

The outline of a compromise has already been reported in the Israeli and U.S. press and confirmed by sources here.

Baker has offered to allow Israel to complete some 9,000 housing units already under construction in the territories.

But this would be coupled with a requirement that Israel not start any additional construction. If Israel did, the guarantees would be withdrawn. This could be done easily, since the guaranteed loans will be issued in $2 billion annual installments over five years.

A third element to the proposal is that the United States would deduct from the total guaranteed the amount that Israel spends in the West Bank and Gaza Strip on housing and infrastructure to serve the settlements.

But what formula will be used to calculate that amount must still be worked out between the two sides and is likely to involve complicated negotiations.

Although Shoval is Israel’s only negotiator, Jacob Frenkel, governor of the Bank of Israel, the country’s central bank, is coming to Washington to discuss the loan guarantees with members of the administration and Congress.


American Jewish organizational leaders are urging the Bush administration and Congress to act expeditiously on the loan guarantees because of pressing needs in Israel.

The terms for the loan guarantees “should be worked out quickly between the governments of the United States and Israel,” Shoshana Cardin, chairman of the Conference of Presidents of Major American Jewish Organizations, said in a statement Wednesday.

She also said that recent reports of “a weakening of U.S. Jewish support for the guarantees are misleading and misguided.” The leadership of the American Jewish community “remains unanimous in supporting Israel’s request,” she said.

Republican Jewish leaders are also urging speedy approval of the loan guarantees.

Thirty-five members of the National Jewish Coalition pressed this point Tuesday in White House meetings with Brent Scowcroft, the national security adviser, and Samuel Skinner, President Bush’s new chief of staff.

Bush did not return in time from campaign stops in Florida to meet them.

Max Fisher, the Republican group’s honorary chairman, headed the delegation, which also met with Fred Malek, director of the Bush re-election campaign, and House Minority Whip Newt Gingrich (R-Ga.).

The Republican leaders argued for speedy approval of the guarantees, based on their sense that “the president’s standing in the Jewish community was salvageable if he got out in front on this issue,” said one of the 35.

(JTA correspondents David Landau in Jerusalem and Howard Rosenberg in Washington contributed to this report.)

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