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Israeli Settlement Expansion Cited As Reason for Tough Stance on Loans

The Bush administration’s tough conditions for providing Israel with loan guarantees for $10 billion are a direct consequence of Israeli settlement activities during the past year, a senior State Department official told a Jewish gathering here last week.

Dennis Ross, director of the State Department’s policy planning staff, said President Bush took the hard line in part because there was “a tripling of settlement starts” after the administration provided Israel with guarantees for $400 million last year.

“There were assurances, and in the aftermath of the $400 million of guarantees, settlement activity tripled,” Ross said in an address to the biennial convention of the American Jewish Congress.

The president has “felt strongly about the settlement issue from the beginning,” Ross said, and “there’s been no responsiveness to his concerns.”

The guarantees for $400 million were first authorized by Congress in the spring of 1990. But they were not released by the State Department until February 1991.

Ross, in remarks after his talk, recalled urging Bush to release the guarantees with the argument that the $400 million was just the tip of what the Israelis want. They’re not going to jeopardize future requests, Ross said he told the president.

In February 1991, reports had surfaced in the Israeli press of a plan by Israel’s Housing Ministry to build 12,000 housing units in the administered territories over the next three years.

At the time, Knesset member Dedi Zucker of the left-wing Citizens Rights Movement charged that the United States was withholding the guarantees because of those reports.

NO ‘WEDGE’ BETWEEN U.S. AND ISRAEL

But a letter from Prime Minister Yitzhak Shamir’s economic adviser assured the Americans that Israel planned to build only 1,000 to 1,200 units in the territories in the fiscal year ending Sept. 30, 1991, the Israeli daily Ha’aretz disclosed last year.

In fact, the actual number of housing starts for the first nine months of 1991 was 5,435, according to a Finance Ministry report.

Despite the conflict over the guarantees, Ross said he was confident that the U.S.-Israeli relationship would remain strong. While the temperature of relations between the two countries is rising, “the patient is not going to die,” he said.

“There is not going to be a wedge driven between the U.S. and Israel,” he said, adding: “I still hope we will be able to provide loan guarantees to Israel.”

Ross said he did not understand why there had been no response from Sens. Patrick Leahy (D-Vt.) and Robert Kasten (R-Wis.) to the administration’s final offer on the loan guarantees.

The deal would have provided initial guarantees for $300 million and allowed an agreed-upon amount of construction already under way in the administered territories to continue. But any further building would be cause to end the loan program.

The Leahy-Kasten proposal would have granted guarantees for more money up front. It would have provided the administration with broad leeway on guarantees for the remaining $9 billion, and it would also have deducted from the guarantees an amount equal to that spent by Israel on the settlements.

But it would have explicitly permitted what the Israelis call “natural growth,” meaning the occasional new house or public facility to be built in existing settlements.

‘NOT ONLY BECAUSE OF SETTLEMENTS’

Asked about charges from American Jewish leaders that the Bush administration had “misled” pro-Israel forces by explicitly denying last summer and fall that it would link the guarantees to settlements, Ross pointed instead to remarks made at that time by Israeli Ambassador Zalman Shoval.

Shoval warned last June that the Israeli government would have “no choice but to decide if it is more important to continue settlement-building in Judea, Samaria and Gaza, or to obtain American aid for the absorption of Soviet immigrants.”

Speaking Sunday morning at the AJCongress convention. Shoval referred to that prophecy.

“In retrospect, I’m not completely convinced in the accuracy of my prediction,” he said, “because what we see now is about more than settlements.”

“Let’s not blame ourselves,” he said. “The future will tell us why the loan guarantees didn’t go through. Believe me, it’s not only because of settlements.

“If Leahy-Kasten had gone ahead, in practice American policy (opposing settlements), erroneous as it is, would have achieved most of what it wanted to achieve,” Shoval said.

But he did not spell out why the administration was not willing to guarantee the loans. “Each of us is smart enough to make our own judgment,” he said.

He rejected the blame placed by Ross for not responding to the final administration proposal. “All the compromises were proposed by Israel and its supporters — none by the other side,” the ambassador said.

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