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Jewish Group Urges Linkage of Loan Guarantees, Settlements

A Jewish organization is publicly urging the Bush administration to link Israel’s request for loan guarantees to a freeze on Jewish settlements in the West Bank.

Americans for Peace Now is calling on the Bush administration to withhold the $8 million in loan guarantees until there is a complete freeze on settlement growth and a pledge to dismantle settlements constructed since Oct. 1999.

The group is also calling for 20 percent of the loan guarantee funds to be set aside for housing for settlers who want to relocate to homes inside Israel proper.

The move is being criticized by other Jewish groups, with at least one calling it a “big mistake.”

In the fall, Israel officially requested $8 million to help offset the country’s economic crisis and the looming threat of U.S. military action in Iraq.

The White House is expected to submit to Congress the request for $8 billion in loan guarantees and $4 billion in military aid, stretched out over three years.

The guarantees allow Israel to borrow money at a lower interest rate. There is no cost to the United States if Israel repays its loan. Israel maintains that it has never defaulted on a loan.

The request, which will also include additional aid for other Middle Eastern allies, such as Turkey and Jordan, is not expected to be sent until after any action in Iraq.

But the pitch for military aid and loan guarantees could encounter serious opposition in Congress.

Although congressional support for Israel is very strong, there are major budget constraints on the government, and approving a large aid package for Israel may prove difficult amid cuts in other programs.

The United States and Israel have been negotiating the conditions since October, when Israeli Prime Minister Ariel Sharon last visited the White House.

The White House has played down the loan guarantees until now, reportedly out of fear that it would be seen as a boost to Sharon and an interference in the Israeli elections.

Sources close to the talks say they have been cordial and productive, in contrast to the ones the United States held with Israel in 1991, between President Bush’s father and then-Israeli Prime Minister Yitzhak Shamir.

The United States refused to approve loan guarantees that the Likud government wanted to help settle immigrants from the former Soviet Union.

Bush, who was firmly opposed to Israeli settlements in the West Bank and Gaza Strip, feared that the loans would free up other funds for the settlements.

The issue evolved into a major point of contention between the White House and the Jewish community.

Bush ultimately approved the loan guarantees when Labor Party leader Yitzhak Rabin, who had a more conciliatory policy on settlements, became prime minister in 1992.

An official familiar with the negotiations this year said that talks between the two countries this time around were based on the conditions set out in the 1992 loan.

Specifically, U.S. funds will not be allowed to be used over the “Green Line,” Israel’s pre-1967 border with the West Bank and Gaza Strip.

In addition, all funds Israel spends from its budget on settlements in the West Bank and Gaza will be deleted from the amount of the loan guarantee, helping to ensure that U.S. money does not aid Israel’s expansion of the controversial settlements.

“From the White House view, it is a carrot and a stick to lessen settlement expenditures” by the Israeli government, the official said.

But these conditions are not enough for Americans for Peace Now, which is supporting the military aid but wants strings attached to the loan guarantees.

“Conditioning aid is nothing new,” said APN’s president and CEO, Debra DeLee.

“It’s our way of showing Israel that the United States is very committed to relations between the two countries, that the United States wants to help Israel in its time of economic stress and that the United States wants Israel to alter its policies on the settlements.”

A study released last week by APN suggests that the equivalent of more than half of U.S. economic aid to Israel is spent on settlers and settlements. It found that Israel spent $533.6 million in 2001 in the West Bank and Gaza.

While U.S. aid to Israel does not directly go to the settlements, APN is suggesting that because money is fungible, settlement growth indirectly benefits from U.S. economic aid.

An Israeli official in Washington said the APN’s figures are misleading because some of the money APN is citing is not used for expansion of settlements, but for protection of the settlements from terrorist attacks.

DeLee said it was important to place conditions on the aid, rather than seek a change in Israel’s settlement policy through diplomatic means, such as the road map for a Palestinian state that is currently being constructed by the United States, the United Nations, Russia and the European Union.

“The train is leaving the station,” DeLee said. “If we’re going to wait for the implementation of the road map, we’ll be waiting for quite a while.”

Some Jewish groups criticized the APN position.

“I think it’s a big mistake,” said Daniel Mariaschin, executive vice president of B’nai B’rith International.

“This kind of statement is not what Israel needs,” he said, adding that it could undermine Israel’s ability to use the settlements as a bargaining chip in negotiations.

Israel receives $3 billion in economic and military aid from the United States per year, and is supposed to receive an additional $200 million.

But the $200 million has not passed both houses of Congress and is expected to be dealt with in the conference committee of the omnibus spending package for the 2003 fiscal year.

One congressional source said Israel’s position for the $200 million could be weakened now that the proposal for the $12 billion is in the public domain because it may be seen as less of an emergency.

The $200 million had been in an emergency anti-terrorism bill that passed Congress last summer, but the provision was vetoed by the president because it was clumped into an aid package that was seen as extraneous. Bush promised, however, to support the aid for Israel if it came up again.

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