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In Show of Support, Clinton Limits Deductions from Loan Guarantees

In another show of U.S. support for the Middle East peace process, President Clinton limited deductions from this year’s $2 billion annual loan guarantee for Israel.

Clinton cut $95 million from a proposed $311.8 million deduction, reducing it to $216.8 million, a State Department official said.

The loan guarantees enable Israel to borrow money in the commercial markets at a favorable rate.

“It’s in our national interest to help Israel continue to implement the peace process,” the official said, explaining the rationale behind the reduction.

During the peace process’s initial stages, the United States agreed to give Israel up to $10 billion in loan guarantees over five years to aid in the resettlement of Soviet Jews. After a protracted fight on Capitol Hill that engulfed the Jewish community, the first installment became available in 1992.

As part of the agreement, the United States deducts from the guarantee the amount Israel spends in the West Bank and Gaza Strip on non-security projects like settlement construction, the official said. The president has the authority to waive part of the deduction if he feels it is in the national interest.

Since 1992 Israel has borrowed a total of about $3.6 billion, according to the State Department. There was no deduction in 1992. For 1993, then-President Bush authorized a $437 million deduction primarily for settlements started under the government of former Israeli Prime Minister Yitzhak Shamir.

For this year, Israel has been authorized $2 billion, minus the $216.8 million, a State Department official said. Israel has not yet drawn on the guarantee for this year.

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