Baker: Israel Broke Commitment and Thus Lost Loan Guarantees

Israel did not get the $10 billion in loan guarantees it sought from the United States because it violated an understanding with Washington not to increase settlement activity in the administered territories, Secretary of State James Baker said.

Baker made the statement to a delegation from the American Jewish Committee on Friday, according to AJCommittee President Alfred Moses.

It may have been the first time the Secretary of State had recounted on the record private Israeli assurances against expanding settlements.

These commitments were not raised publicly during the negotiations earlier this year between Israel and the White House over terms for securing the guarantees.

The promise not to increase the pace of building settlements in the West Bank and Gaza was made in February 1991 as a condition for receiving guarantees for $400 million in loans to finance housing for new immigrants, Baker said. Those guarantees had been authorized by Congress the previous autumn.

The meeting with eight AJCommittee leaders, like a similar one the previous Monday with leaders from the American Jewish Congress, seemed design to help repair the rift between American Jewry and the administration that was opened by the bruising battle over the $10 billion in loan guarantees.

The earlier set of loan guarantees was accompanied publicly by an October 1990 letter from Israeli Foreign Minister David Levy to Baker, in which Israel promised to keep the United States informed about expenditures in the territories.

The Government Accounting Office charged subsequently that “incomplete information was provided” and that Israel had failed to live up the letter’s promise of full disclosure.

But reports of private commitments not to expand settlement activity beyond the existing “baseline” rate of growth, as Baker put it Friday, surfaced in the Israeli press last year.

As recounted through a series of leaked documents, the United States had expressed concern over reported Israeli plans to build 12,000 new housing units in the territories over a three-year period. In reply, Prime Minister Yitzhak Shamir’s office assured Washington that Israel had plans to build no more than 1,200 units, roughly the number it had built the year before.

On the basis of that official Israeli denial, the loan guarantees were then released.

As it turned out, building starts in the West Bank and Gaza rose to 8,110 in 1991, according to Israel’s Central Bureau of Statistics.

State Department officials, among them Dennis Ross, director of the State Department’s policy planning staff, have previously indicated that the tripling of settlement starts in the aftermath of the 1991 “assurances” led the administration to take its hard line stance on the $10 billion in loan guarantees.

The president promised to veto any congressional authorization of the guarantees which did not prohibit all new construction after Jan. 1, 1992.

Faced with this condition, Israel’s supporters in Congress put aside the request for the guarantees, though they say the issue will be raised again following elections in the United States and Israel.

AJCommittee President Moses said that the U.S.-Israeli understanding was news to him.

“What I had heard before is that a major reason for the administration’s ultimate stance on loan guarantees was indignation and outrage on how the $400 million was handled. I had not heard there was an understanding outside the document itself, that there would be no increase over the baseline.

“I had not heard that a specific understanding had been reached, and had been breached,” said Moses, who described Baker’s account of the understanding as “quite explicit.”

The discussion between Baker and AJCommittee leaders also dealt with Syria, Iran, Iraq, and non-conventional weaponry.

Moses said that regarding the peace talks, Baker foresees an agreement between the Israelis and the Palestinians on a self-governing authority in the territories.

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