State Department Denies It Opposed Loan Guarantees to Gain Saudi Support

The State Department has denied promising Saudi Arabia that it would oppose loan guarantees for Israel in return for the Saudis prodding Syria and Jordan to negotiate directly with Israel.

State Department spokeswoman Margaret Tutwiler said Tuesday that she “checked with the most senior level of this department and there is absolutely no truth to that story.”

The story, reported this week by the Israeli newspapers Ma’ariv and the Jerusalem Post, apparently emanated from a comment last week at the American Israel Public Affairs Committee’s annual policy conference.

At a panel discussion, Martin Indyk, executive director of the Washington Institute for Near East Policy, a pro-Israel think tank, referred to a silent bargain having been struck between the Bush administration and the Saudi government tying loan guarantees to the peace talks.

The Israeli newspapers said the deal was struck in April 1991 in a White House meeting between President Bush and Prince Bandar bin Sultan, the Saudi ambassador to Washington.

Indyk was not available for comment, but one pro-Israel lobbyist suggested that Indyk was “speaking figuratively, not literally.” The lobbyist called it “improbable” that there was such a U.S.-Saudi understanding.

Similarly, Morris Amitay, another pro-Israel lobbyist here, said he doubts the report is true.

But Amitay said the administration’s “hard line” toward Israel would make Arab countries “more conducive to negotiating” with Israel.

DELAYS MEANT TO ‘MISLEAD ISRAEL’?

Some analysts have speculated that if the report were true, it would explain why Bush last September surprised Israel and American Jewish leaders by announcing that the United States should postpone consideration of the loan guarantees for four months.

He subsequently took a strong stand against unconditional loan guarantees for Israel after having assured American Jewish leaders that no conditions would be placed on the guarantees.

Bush said he would approve the guarantees only if Israel agreed not to start any new construction in the administered territories during the five-year proposed loan period.

Bush’s September statement coincided with Secretary of State James Baker’s efforts to bring about direct peace talks between Israel and its Arab neighbors. Those talks in fact opened in Madrid in October.

Ma’ariv quoted unidentified sources in Jerusalem as saying that “the delays in granting the guarantees were meant, apparently, to mislead Israel and its supporters in Washington, while President Bush intended to abide by his agreement of April of last year with Bandar.”

Marvin Feuerwerger, senior strategic fellow at the Washington institute, said he had no way of assessing the story’s validity except that Bandar would have had a motive to leak such a story because it would “make him look better” in the eyes of his Arab allies.

Bandar is well known for having close contacts with Bush and earlier with President Reagan even before the events leading to the Persian Gulf War.