In the New Report on Loan Guarantees, Bush Won’t Address Settlement Spending

The Bush administration will not deduct money from its loan guarantees to Israel at this time — a blow to Palestinian attempts to link the guarantees to the barrier Israel is building in the West Bank.

The State Department was to have announced Tuesday the amount that it would deduct from the $3 billion available to Israel in loan guarantees for next year, because of Israeli spending on Jewish towns in the West Bank and Gaza.

But State Department spokesman Richard Boucher said that while the loan-guarantees law requires the administration to submit a report by the end of September, it does not mandate a decision about deductions by then.

“The process is under way,” Boucher said Tuesday. “But don’t expect us to start laying out specific amounts at this point because we’ve really not made those decisions, and our consultations with the Israelis on these matters continue.”

But Boucher also said reductions are likely at some point over the next two fiscal years because of Israel’s construction of a security fence and that U.S. and Israeli officials were holding talks on the exact amount.

One Democratic congressional aide suggested that Bush’s failure to follow the law could spawn a lawsuit.

“The letter of the law is very clear that there should be a specific amount reported by the State Department today,” the aide said. “No matter what your views on the Middle East conflict or loan guarantees, there are many members of Congress who will be demanding a more complete report to Congress.”

The loan guarantees law, authorizing $9 billion in guarantees over three years, says the president “shall submit a report to Congress no later than September 30 of each fiscal year during the pendency of the program specifying the amount calculated under the preceding proviso and that will be deducted from the amount of guarantees authorized to be issued in the next fiscal year.”

The Bush administration suggested this summer that money spent on a security fence in the West Bank could be deducted from the loan guarantees. Palestinians say the fence is a land grab; Israel says it’s the only way to keep terrorists from attacking Israeli civilians.

U.S. lawmakers vigorously defended the fence, and the Bush administration has since backtracked.

Bush told a group of rabbis on Monday that he supports the fence as long as its route does not preclude future negotiations between Israel and the Palestinians.

An Israeli official in Washington said the country’s strategy was to reach understandings with the Bush administration on both settlement issues and the security fence. Israeli and Palestinian officials have traveled to Washington frequently in the last few months to present their cases on both issues.

Peace activists had been eagerly anticipating the Bush administration’s calculations on how much Israel has spent in the West Bank and Gaza. While various reports estimated the figure at between $200 million and $250 million, a report recently published in Ha’aretz said the number could be as high as $556 million annually in nonmilitary surplus spending. Those numbers do not include spending on the barrier.

“Hopefully, the administration hasn’t been able to make a determination because of the new information out there,” said Lewis Roth, assistant executive director of Americans for Peace Now.

An administration official said it is unclear when the White House would reach a final number on the loan- guarantee deductions, and that it could be more than a year.

Israel issued a note for $1.6 billion last month, with U.S. guarantees. Israel can utilize the additional $1.4 billion available this year through December. Loan guarantees from the United States allow Israel to take out loans at a reduced interest rate. Direct aid to Israel is not affected.

Deductions based on settlement spending were applied to $10 billion in loan guarantees in the 1990s. In five years, the United States deducted $773.8 million, according to Americans for Peace Now.