November 1992, Page 12, 86
Special Report
How Israel Got the Loan Guarantees Opposed by 80 Percent of Americans
By Gene Bird
On Oct. 5, in the closing days of the 102nd Congress of the United States, a massive amendment was tacked on to the annual appropriation for U.S. Aid and Assistance. Probably few bills or amendments during this session of Congress had as much behind-the-scenes attention and involved as much negotiation between the White House and Congress. Possibly none got less attention in the media, once they were passed. And certainly none were passed despite such widespread public opposition as that engendered by the special amendment to the Senate version of HR 5368 that provided Israel with $10 billion in U.S. loan guarantees.
It was passed and sent to the president for signing in the closing rush by both houses, despite the fact that polls indicated that 80 percent of Americans (in some counts of mail received by Congress it was running over 90 percent) opposed granting the loan guarantees in the face of both Israel's policies on settlements and the current U.S. deficit.
Middle East peace organizations around the country and Arab-American ethnic organizations already have vowed to monitor terms of the agreement, particularly the promised slowdown of settlement building on the West Bank. They consider it likely that Israeli private settlement building and expansion of current settlements will continue almost uninterrupted during the five-year loan guarantee period, which began Oct. 1.
Public Opposition Ignored
There was practically no discussion in Congress of the many questions that might have been asked about the ultimate cost to U.S. taxpayers of guaranteeing massive loans entirely to support the Israeli economy during its promised transition to a free market. That had become the basic justification for the loans advanced by Israel and its U.S. lobby now that Jewish emigration from the former Soviet Union is lower to Israel than to the United States.
$10,000 Per Israeli
Israel expects the $10 billion in principal and the equal amount in interest that will be Uncle Sam's maximum liability exposure under the current legislation will trigger four times that in guarantees for loans and long-term borrowing for Israel from other nations. That figures out to $10,000 in economic benefits in Israel for each of its four million Jewish citizens in residence, who are expected to be the major beneficiaries of any Israeli government programs. The 800,000 Israel Arabs expect their lands to be confiscated for new highways and their villages to be cut off from their traditional farmlands by the largesse made available by the U.S.
Said one Israeli Arab after the vote, "We second-class citizens will. . . gain nothing from the banks to develop our sector. It is a sad day for us Israeli Arabs."
All of the money generated by the official U.S. loan guarantees of $2 billion a year are to be used within the Green Line. It will be almost impossible to verify that U.S. loan guarantees are not being used in the territories, however. Furthermore, much of the additional $40 billion in loans that Israelis expect to receive from other nations and private sources now that the U.S. has agreed to the initial $10 billion, may have no such restrictions. Some settlements in the occupied territories can proceed, particularly those "security" settlements along the Jordan and the ones in East Jerusalem, where extensive plans for expanding Jewish (but not Arab) housing remain in place.
While the amendment does establish a joint consultation process permitting the president to deduct dollar-for-dollar for any building across the Green Line, that starts only a year from now, giving Israeli Prime Minister Rabin the certainty of finishing all the housing underway now-plus any in Jerusalem that he might want to hurry along before Oct. 1, 1993-without deductions.
Special Provisions
There are other interesting provisions inserted to help the Israelis in their creeping conquest of the occupied territories: There is a 10-year grace period for repayment of any principal on the loans to be made by private banks, a highly unusual if not precedent-breaking federal intrusion into credit terms. And the Congress retained the right to override the president, whoever he may be in the next four years, if at any time he should decide that Israel was in violation of its pledges and he should try to cut off further disbursements. A simple majority resolution, placed specifically on the fast track in both houses of Congress, could come to a vote within days of any such cut-off, and the flow of loan guarantees be reopened, without forcing Israel to change any of its policies.
No other nation has ever received such provisions in guarantees.
No other nation has ever received such provisions in guarantees. But none other has the clout on Capitol Hill and the ability to quietly maneuver within the American political system without raising the real issue: Should the United States be granting Israel such massive economic assistance at a time of domestic economic troubles and without gaining a single major concession from Israel on land for peace? The guarantees directly affect the peace talks. Once acquired without any real strings attached, Israel can and probably will fail to give an inch of territory, water, land or authority to the Palestinians.
Timely Maneuvers
A series of maneuvers enabled the Israeli Labor government to win where the Likud had not. Among them was Rabin's announcement of a half-way freeze on settlements. By actually carrying out that policy in July and August, the new government gained the U.S. election-year backing of former Secretary of State James Baker.
Prime Minister Yitzhak Rabin named dovish Itamar Rabinovich to head the Israeli delegation to the talks with Syria, sending a tentative signal that Rabin's first priority would be a peace agreement with Israel's last major Arab antagonist. This was something the administration applauded, but the agreement was not reached before the loan guarantees were approved.
By modifying his justification for the guarantees, Rabin made them resonate with the transition from socialism to capitalism, a hugely popular theme with Congress and with Americans, whether in the former U.S.S.R. or in Israel.
Israel also sent a top-ranking team to Congress in September at just the right moment to help in drafting and persuading members that they need not fear American public reaction to loan guarantees for Israel. It would be a free lunch, costing the taxpayers nothing as an "off-budget" item since Israel had agreed to pay the necessary "scoring" or insurance costs on the guarantees. The fact that they were to be paid out of U.S. aid apparently was lost on everyone, since the media gave the loan guarantees virtually no coverage.
This lack of media coverage was facilitated by the stealth tactics used by the friendly conferees on the Hill. They drafted a simple amendment to the Foreign Aid Assistance Act that had already been passed by the House. The issue of the loan guarantees for Israel went back to the floor of the House as a part of amendments agreed to in conference. House members therefore avoided a yes-no vote on the unpopular loan guarantees, but instead simply voted for an aid package that included other necessary worldwide aid.
It was a classic Washington maneuver, stage-managed from the beginning by the administration at one end of Pennsylvania Avenue and Israel's loyal supporters in both houses of Congress at the other. The guarantees are a banker's dream: No matter what happens, they can count on collecting interest on the full $10 billion for 10 years, followed by principal and interest for the following 20 years. This is better quality "paper" than anything except direct U.S. government debt.
And to the joy of Israelis, there will be no one looking over their shoulder too closely at what they do with the funding. While every dollar spent on settlements in the occupied territories (including East Jerusalem) after October 1993 will be subject to deduction from the U.S. government-guaranteed loans, that is a small price to pay for opening the world's credit markets to give as much in five years to Israel as she received from all American government and private aid in 40 years.
Dotan Affair Momentarily Doused
The administration also aided Israel by negotiating at the last moment an interim resolution of the Dotan affair, a potentially sensational U.S.-Israeli confrontation that had threatened all summer to break into the mainstream media and provide a real embarassment for both governments. On Sept. 25, the Israeli team negotiated an agreement with the Justice Department permitting former Israeli General Rami Dotan to give written answers to the questions of U.S. investigators looking into cases of massive embezzlement of U.S. military aid to Israel. The team had been sent to prevent a threatened cut-off in U.S. military procurement assistance because of the activities of Dotan, who worked with major American corporations to divert U.S. aid funds from approved uses to accounts apparently set up by Israeli authorities for so far unexplained purposes.
Under the agreement, apparently Israel will not have to produce Dotan as U.S. Rep. John Dingell had insisted when his congressional committee sought to investigate the affair. Instead, Dotan will only answer written questions transmitted to him. Rep. Dingell had called for cutting off U.S. military procurement aid on Oct. 1 if Israel failed to agree to let Dotan and others give evidence. Although Dingell probably will not let the case be laid to rest so easily, his investigation will not interrupt the loan guarantees.
More Damage Control on Israeli Sales of U.S. Technology
The State Department also took damage control action on its own inspector general's report that Israel had as late as last year been selling American technology without U.S. authorization. The whole matter has been quietly laid to rest, despite clear evidence the IG was entirely correct, and Israel did illegally sell or transfer U.S. technology to South Africe, Taiwan and possibly China, among other nations.
Will the Rabin government now reward the world with serious land-for-peace negotiations with the Palestinians? While Americans wait and see if the loan guarantee package works for peace or for war, the smart money will be flowing to Israel. There will, at least for a time, be an economic boom beyond all expectations there. There will be so much for the Jewish sector that some of it may even, inadvertently, "trickle down" to Israel's forgotten Arabs.
Gene Bird, a retired foreign service officer, is the diplomatic correspondent for the Washington Report on Middle East Affairs.
