U.S. is Likely to Set New Conditions on Israel Receiving Loan Guarantees

Now that the 120-day “waiting period” President Bush requested last fall is up, Israel wants the administration to decide whether it is prepared to guarantee $10 billion in loans needed to help resettle immigrants from the former Soviet Union.

But rather than give an outright approval or denial to Israel’s request, the administration is expected to set conditions for providing the guarantees.

These are almost certain to include some sort of promise by Israel to end or limit new settlements in the West Bank and Gaza Strip. There is growing support for such restrictions in Congress, but lawmakers would prefer the administration to reach an agreement with Israel before acting on any legislation.

The administration position may become clear as early as Friday, when Secretary of State James Baker is scheduled to meet with Israeli Ambassador Zalman Shoval.

Shoval is expected to provide more conciliatory terms from Israeli Prime Minister Yitzhak Shamir, although it was unclear Thursday whether this would include any restrictions on settlements.

Shamir sent a letter to Baker this week that did not mention the settlements but said Israel was committed to move forward in the peace talks, despite the possibility of elections this spring.

“We believe that we have progressed at a respectable pace,” Shamir said, referring to the Arab-Israeli talks held in Washington in December and January.

SENATOR URGES AID PENALTY

The issue of settlements is a concern not only of the administration, but of some powerful members of Congress. One of them is Sen. Patrick Leahy, who, as chairman of the Senate Appropriations subcommittee on foreign operations, will decide when and whether the loan guarantees are taken up by Congress.

In a speech on the Senate floor Wednesday, Leahy said the amount of the guarantees approved by Congress “should be reduced by whatever the Israeli government spends to expand its settlement in the occupied territories.”

“We must have a way that if Israel continues to increase those settlements, they will lose American aid,” he said.

Leahy also said that the guarantees should be limited for the first year to $2 billion. Israel is seeking approval of $10 billion over a five-year period, in annual installments of $2 billion.

The senator also wants to see Israel institute economic reforms, to enhance its ability both to absorb the new immigrants and to repay the loans to private banks, “so that the American taxpayer does not have to step in, in the case of a default.”

A spokesman for Sen. Daniel Inouye (D-Hawaii), one of the two sponsors of the Senate legislation to provide the guarantees, said Inouye would work with Leahy.

But Nester Garcia, Inouye’s press spokesman, added that Inouye might not necessarily agree with all of Leahy’s conditions.

Leahy also pointed out that the loan guarantees will be provided as part of the 1992 foreign aid appropriations bill. The bill was to have been adopted last fall, but it was postponed when Bush requested the 120-day delay in consideration of the loan guarantees.

Instead, Congress adopted a resolution continuing foreign aid at the 1991 level, which runs out March 31.

Agreement is needed soon on the loan guarantees, because “without an acceptable loan guarantee package, I see no way there can be a new foreign aid package,” Leahy warned.

“Even with the loan guarantees, it could be impossible to get a foreign aid bill through Congress,” he added. He was apparently referring to the growing opposition to foreign aid because of the United States’ own economic problems.