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Baker Firm on Guarantees as Mideast Talks Resume

By John M. Goshko
The Washington Post

WASHINGTON

Secretary of State James A. Baker III gave Israel a blunt public warning Monday that unless it stops building Jewish settlements in occupied territories, it will not get $10 billion in U.S. loan guarantees to help resettle hundreds of thousands of immigrants from the former Soviet Union.

"The choice is Israel's," Baker said, appearing before Congress as Middle East peace talks resumed here and delivering what amounted to a take-it-or-leave-it ultimatum to Prime Minister Yitzhak Shamir's government.

"This administration is ready to support loan guarantees for absorption assistance to Israel of up to $2 billion a year for five years, provided though there is a halt or end to settlements activity," Baker told the House Appropriations subcommittee on foreign operations. "From our standpoint, it's up to Israel. She can determine whether she wants to take action which would permit the strong support of both the legislative and executive branches for these loan guarantees or not."

Supporters of Israel in Congress and the U.S. Jewish community acknowledge privately that if the administration holds to its position, there is almost no chance that Israel can continue settlements and still get Congress to authorize the loan guarantees. The United States already gives Israel $3 billion annually in military and economic aid, making the Jewish state the largest recipient of U.S. foreign assistance.

Israel's supporters say their canvasses of congressional sentiment indicate little enthusiasm on Capitol Hill for bucking the administration during an election year when voters are disenchanted with foreign aid and when American public opinion tends to view Israeli settlements policy as oppressive. Even in the unlikely event that the Democratic-controlled House and Senate do vote for the guarantees, Israel's backers admit it would be virtually impossible to muster the votes necessary to override a presidential veto.

The administration's stance marks one of the few times in Israel's 44-year history that the United States -- the Jewish state's principal financial and political backer -- has threatened to withhold aid if an Israeli government refuses to abandon a policy representing its top political and ideological priorities. The U.S. position could open the most serious rift with Israel since the 1956 Suez Canal crisis when President Dwight D. Eisenhower used the threat of a U.S. aid cutoff to force Israel to withdraw its forces from the Sinai peninsula.

The current dispute is potentially even more agonizing for Israel. On the one hand, Shamir's government is heavily dependent for support on a sizable bloc of Israeli opinion that believes there are compelling nationalistic, religious and strategic reasons for keeping the territories at all costs. On the other hand, if Israel is to grow by attracting approximately 1 million Jews from the former Soviet republics, it needs money.

Economists, including many in the Israeli government, have warned that unless the United States pledges to cover any defaults, Israel has no hope of borrowing $10 billion from commercial banks. Without these loans, the economists say, Israel cannot provide housing or create new jobs to absorb the immigrants and faces potentially massive problems of unemployment and other economic hardship. In fact, the Shamir government had counted so heavily on getting the first $2 billion in U.S. loan guarantees that it figured that amount into this year's budget.

These are obviously unattractive options for Shamir, who faces national elections in June. Nevertheless, his Likud Party bloc is ideologically committed to the eventual incorporation of the territories into Israel, and he now is likely to be forced to test a campaign strategy of portraying himself as standing up to U.S. efforts to interfere in Israeli affairs.

However, there is a growing sense among Middle East experts here that the administration believes the Israeli electorate will shrink from the prospect of a break with its longtime patron, the United States, and either will force Shamir and the Likud to be more flexible about settlements or turn to his political opponent, Labor Party leader Yitzhak Rabin, whose views on settlements are more in tune with Washington's.

Under the terms outlined by Baker, Israel would have to freeze all new settlements activity in the territories. It could complete any housing units that the two governments agree were under construction on Jan. 1, 1992, but for every dollar spent on completion, a dollar would be deducted from the amount of the guarantees.

Baker said the administration insists on the right to decide what constitutes settlements activity, and he included in his definition such things as clearing land or building roads or sewers in order to help increase the Jewish population of the territories. If the guarantees are approved and the administration subsequently determines that new settlements are being built, he said, "the United States should have the right to end, terminate or suspend any provision for absorption assistance at that point."

"I think the United States has the right to know, if we go forward with this, that we're not going to be financing, directly or indirectly, something we oppose and have opposed since 1967," Baker said. Israel captured the West Bank, the Gaza Strip and East Jerusalem during the 1967 Middle East War, and its subseequent settlements activity in these areas has been characterized by successive U.S. administrations as "unhelpful" or "an obstacle to peace."

By making public the conditions he had specified to the Israelis in private negotiations, Baker signaled that Bush has no intention of backing away from his belief that the settlements are a threat to Mideast peace and must be halted. The United States regards the settlements as an Israeli attempt to bolster its claim to the West Bank and Gaza Strip by flooding Jewish settlers into these areas, which have more than 1.7 million Palestinian inhabitants.

Yossi Ben Aharon, Shamir's chief of staff and a leader of the Israeli negotiating teams here for the peace talks, said that despite Baker's position, the Israeli government refuses to surrender its position that Jews have a right to live in the territories, which Israeli nationalists regard as the ancient Hebrew provinces of Judea, Samaria and Gaza. Ben Aharon added that Israel would continue to build settlements and would not withdraw its request for the loan guarantees.

In Jerusalem Monday, Shamir, speaking to American Jewish leaders before Baker testified, accused the United States of siding "with the Arab position" against Soviet Jewish immigration to Israel and said the Bush administration was trying to push Israel back to its pre-1967 borders, Washington Post correspondent Jackson Diehl reported.

The Israeli request originally was made last September, but was shelved for 120 days after Bush warned that it could interfere with the U.S.-sponsored peace process then getting underway. It subsequently became evident that Senate Majority Leader George J. Mitchell, D-Maine, and House Speaker Thomas S. Foley, D-Wash., were reluctant to stake their prestige on defending Israel's right to build settlements, and other key members of Congress, including Sen. Patrick J. Leahy, D-Vt., and Rep. David R. Obey, D-Wis. -- who respectively head the Senate and House subcommittees responsible for foreign aid -- strongly supported the administration move to link the guarantees to a settlements freeze.

Although Israel's hard-core congressional supporters are not likely to be enough to carry the day, Israel can still count on them to make a fight on its behalf. That happened at Monday's hearing when one panel member, Rep. Larry Smith, D-Fla., suggested that Baker's position jeopardized the secretary of state's ability to be an honest broker in the Mideast peace process.

"Nobody else is asking us for $10 billion in addition to the $3 billion to $4 billion that we give every year with no strings attached," Baker replied.

Smith said he found the answer "extremely offensive." Baker retorted, "I will determine when I finish my answers, not you." Slamming his eyeglasses on the table, Smith shot back: "I hope that someday the American public is going to determine whether you finish your answers. It's disgraceful."