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Bush Said to Reject Senate Deal on Loan Guarantees for Israel

March 17, 1992
See Original Daily Bulletin From This Date

Israel’s request for U.S. loan guarantees appears to be on its deathbed, though it could still be resuscitated at the last moment.

Prospects for winning approval of the guarantees dimmed over the weekend when President Bush reportedly rejected a proposed legislative compromise hammered out last week by Sen. Patrick Leahy (D-Vt.), chairman of the Senate subcommittee dealing with foreign appropriations, and Sen. Robert Kasten (R-Wis.), the panel’s ranking Republican.

Bush informed Leahy of his decision in a telephone conversation Sunday, according to pro-Israel sources. Leahy then canceled a subcommittee hearing on the loan guarantees that had been scheduled for Tuesday.

Leahy is scheduled to meet with the president on Tuesday, in a last-ditch effort to win support for the legislation, which would be included in the foreign aid bill that Congress must adopt by March 31. That is when the continuing resolution on foreign aid that Congress approved last fall expires.

The guarantees would enable Israel to borrow as much as $10 billion from commercial banks on favorable terms. The money would be used to help resettle 1 million immigrants from the former Soviet Union expected to arrive over the next five years.

The Bush administration supports guaranteeing the loans in principle, but is insisting that Israel agree to freeze all building in the administered territories. It is willing to allow Israel to finish projects already begun, but only if the cost of completion is subtracted from the amount of loans guaranteed.

Kasten and Sen. Daniel Inouye (D-Hawaii) co-sponsored a bill last fall that would provide the guarantees to Israel with no strings attached. But Bush has vowed to veto the bill, and pro-Israel lawmakers doubt they can muster enough votes for an override.


Under the compromise worked out by Leahy and Kasten, Israel would receive guarantees for the first $1 billion immediately, minus $150 million deducted for what Israel is expected to spend on settlements between April 1 and Sept. 30, the end of the current fiscal year.

The president would then have the discretion whether or not to provide Israel with guarantees for an additional $1 billion for this year and $2 billion annually for the subsequent four years.

But Bush balked at that proposal, insisting that the administration retain discretion of guarantees for the first $1 billion, as well.

If Leahy is unable to convince the president to change his mind, the Leahy-Kasten compromise could still be offered on the Senate floor as an amendment to the continuing resolution on foreign aid. But again, pro-Israel forces would have to muster votes from two-thirds of both chambers of Congress to override a likely presidential veto.

After March 31, the loan guarantees could be offered up any time during the year or as part of the 1993 foreign aid bill, which must be approved by Oct. 1. But the chances of Congress approving new foreign aid in an election year dominated by concern over the U.S. economic recession are considered to be slim.

This means that unless Bush and Leahy reach an agreement before March 31, the loan guarantees would probably not even be considered before the new Congress takes office next January, pro-Israel sources say.

Israeli officials already seem resigned to not getting the loan guarantees.

“We are a small people, but we are a proud people, and we will not beg or crawl for help,” Israel Defense Minister Moshe Arens declared.

Speaking Monday at a luncheon during the eighth national young leadership conference of the United Jewish Appeal, Arens expressed hope that “our friends in Washington” will provide the guarantees.

“But should they choose not to do so or to append intolerable conditions to this assistance, then without rancor and with continuing friendship for this great country, the United States, we shall have to do it ourselves,” Arens said.

His remarks were received with thunderous applause from the more than 3,000 people attending the UJA conference. They signed copies of a letter to Bush urging him to approve the loan guarantees without any conditions.

Arens said Israel cannot accept the U.S. conditions on settlements, because “we are being asked to renounce the right of Jews to live in Judaea and Samaria. We are being asked to abandon a key element of Israel’s security,”

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