All Writings
September 13, 1991

Israel and The US: A Crisis Of Confidence

Unlike past US-Israeli discords which were readily patched up, there is a crisis of confidence brewing between the Bush administration and the Shamir government over Israel's request for a $10 billion loan guarantee. Ironically, the discord between the two governments has less to do with the loan itself than with what it represents.

For the Israelis, absorbing more than 10,000 Jews flocking into the country each month is a national imperative with humanitarian implications. Nearly 1 million immigrants are expected to reach Israel by 1995. Their resettlement represents Israel's principal ideological tenet: the ingathering of Jews into their ancient homeland. But the country's resources are meager at best. Thus, Israel is seeking to borrow the money at favorable interest rates from financial institutions around the world provided the US guarantees the payments.

Israel has repaid principal and interest on time in the past, and has never defaulted on any loans in its long history of borrowing. Seen from this perspective, Israelis are perplexed and dismayed over the Bush administration's decision to delay Israel's request on the grounds that such a loan guarantee may anger Arab states and undermine peace efforts. By linking the loan guarantee to the peace process and to an Israeli pledge to freeze Jewish settlements in the occupied territories, the US has set preconditions to the peace conference which Israel rejects out of hand.

Officials close to Shamir told me of their concern that the Bush administration's lack of ideological commitment to Israel has become more acute in the wake of the collapse of the Soviet Union. The US no longer views the Soviet Union as a threat to its interests in the Middle East, which diminishes Israel's historic strategic importance to the US. Moreover, the Gulf war victory and the emergence of the US as the supreme power in the region have compelled Arab states to clamor for US favor and patronage, further eroding Israel's importance.

Attending the peace conference under these circumstances adds considerably to Israel's sense of vulnerability. Thus the submission of the loan guarantees was meant to provide Israel not only with dollars urgently needed but also to gauge where the US stands in its commitment to Israel at this crucial juncture. The timing of the Israeli request was designed to do the following:

Draw the line on the settlement policy, which is subject only to direct negotiation with Arab states; the building of new settlements will not be halted unilaterally under pressure.
Put the Bush administration on notice that Israel is becoming skeptical of the US in its role as neutral mediator in the peace process and it may therefore be forced to take a new hard look at the whole peace process.
Take advantage of the dramatic developments in the Soviet Union. With the emergence of Russia as the central power, Israel feels less intimidated by the "Soviet Union" as the co-sponsor of the peace conference and may even look forward to a sympathetic hearing from Boris Yeltsin's government.
Alert the American Jewish community to the impending conflict so that they might lobby in support of the Israeli request. Should these efforts fail, Israel will at least have prepared the way for the mobilization of the Jewish community for major economic assistance. Indeed, the issue of immigration in Israel takes precedence even over peace with Arab states – especially when major territorial concessions will be expected and there is no national consensus to that effect.

As one Israeli official told me, "Israel will not be the sacrificial lamb on the altar of the peace conference. We need peace, but not at any price." It is a crisis of confidence that must be resolved immediately if the US is serious about peace in the Middle East.

At the least, President Bush must now declare the administration's willingness to guarantee the loan at a specific time in the future, regardless of when the peace conference may convene or what its outcome may be. By linking the loan guarantees to the peace conference and Israel's settlement policy, the Bush administration has not only played into Arab hands, but may have undermined rather than enhanced the prospect for a successful peace conference.