Israel Sticking to Its Position As Bush Balks at Loan Compromise

Prime Minister Yitzhak Shamir says Israel will not withdraw its request for U.S. loan guarantees, even though Washington is insisting on conditions he rejects as unacceptable.

Shamir’s remarks to reporters at the Knesset were affirmed by Finance Minister Yitzhak Moda’i, who said Israel has not given up on receiving guarantees for at least part of the $10 billion in loans it needs for immigrant absorption.

But other government officials hinted strongly that Israel would seek alternatives to the U.S.-guaranteed loans in order to cover the cost of absorbing up to 1 million immigrants over the next five years.

In Washington, the Bush administration and Congress remained deadlocked on proposed legislation to provide the guarantees, which would enable Israel to borrow the money from commercial banks on far more favorable terms than it could get on its own.

Sen. Patrick Leahy (D-Vt.), chairman of the Senate subcommittee handling foreign appropriations, said after discussing the issue with President Bush on Tuesday that he was pessimistic about the chances of reaching an agreement.

“I’m frankly very, very discouraged,” he told reporters. “I thought we had a compromise that worked.”

Leahy’s plan would release guarantees for a portion of the money Israel wants to borrow within 30 days of the bill’s enactment and leave it up to the administration to decide when and under what terms to release guarantees for the remainder.

‘RIGID AND UNREASONABLE’ POSITION

State Department spokeswoman Margaret Tutwiler said Tuesday that compromise proposals coming from Congress “fail to meet” the Bush administration’s “basic requirement” that Israel freeze all settlement building in the administered territories.

Congress must meet the administration’s “fundamental test,” which is “fair and balanced” and in keeping with U.S. policy for 25 years that settlements in the territories are an “obstacle to peace,” she said.

In New York, the Anti-Defamation League attacked the Bush administration’s position as “rigid and unreasonable.”

“This holding humanitarian assistance hostage to intense, one-sided pressure on Israel is a disastrous development,” the group said in a statement from Melvin Salberg, its national chairman, and Abraham Foxman, its national director.

“It puts into question the administration’s moral commitment for helping refugees from the Soviet Union,” they said.

Bush told reporters earlier Tuesday that the administration wants to help Israel resettle immigrants but cannot do so as long as it keeps expanding settlements in the territories.

“I’ve said over and over again that we want to help in a humanitarian way, but that we are not going to shift and change the foreign policy of this country,” he said.

“Settlements are counterproductive to peace and everybody knows it,” he said.

But in Jerusalem, Shamir stressed that Israel would not change its settlement policy “one iota.”

At the same time, the Israeli leader denied that there is a crisis in U.S-Israeli relations, though he conceded there were “differences of opinion on important matters.”

He maintained that “the very good relations” between the two countries depend on Israel sticking to its principles. Eventually “the other side” will change its position, the prime minister said.

Bush also tried to play down the strains in U.S.-Israeli ties.

“We have close, historic relations with Israel, and they will always be that way. But we have a difference now in terms of the settlements,” he said.

Earlier Tuesday, Israeli Defense Minister Moshe Arens met with Secretary of State James Baker for 45 minutes. Neither side indicated whether the loan guarantees issue was on the agenda.

WORLD JEWRY CAN’T SUBSTITUTE

Many observers here and in Washington consider the loan guarantees doomed unless a compromise is reached quickly. The guarantees would be part of a U.S. foreign aid bill that must be adopted by March 31.

Benjamin Netanyahu, a deputy minister in the Prime Minister’s Office, said Tuesday that Israel “has ways” of coping with the situation if it does not receive the U.S. loan guarantees.

He did not elaborate but expressed confidence that Israel would be able to get guarantees from “other sources,” which he did not name.

Netanyahu admitted that Israel’s economy would be severely strained without the guaranteed loans. The government would appeal to the Jewish people and to financial organizations around the would and would convince them of the country’s economic future, the deputy minister said.

Jewish Agency Chairman Simcha Dinitz said Tuesday that it is unrealistic to expect contributions from world Jewry to replace the funds the loan guarantees would have made available to Israel.

Dinitz said in an Israel Radio interview that “under the existing conditions, there is no further reason for the present Israeli government to persist in pressing the American administration and Congress for loan guarantees.”

Danny Gillerman, chairman of the National Chamber of Commerce, called on Shamir and Labor Party leader Yitzhak Rabin to cooperate on “an economic crash program” in the absence of the guarantees.

The Israeli businessman called for massive privatization of industry and reforms in the capital market and in foreign trade.

(JTA correspondent Howard Rosenberg in Washington contributed to this report.)