MEPP: CANADIAN VIEWS ON POST-IRAQ DYNAMIC,

C O N F I D E N T I A L OTTAWA 001164 SIPDIS E.O. 12958: DECL: 04/22/2013 TAGS: PREL PREF CA MEPP SUBJECT: MEPP: CANADIAN VIEWS ON POST-IRAQ DYNAMIC, CONFERENCE ON PALESTINIAN REFUGEES Classified By: Political Minister Counselor Brian Flora, Reasons 1.5 (b) and (d). ¶1. (C) SUMMARY: Michael Molloy, Canada's Special Coordinator for the Middle East Peace Process, believes the U.S. victory in Iraq will have the biggest impact on the region of any event since the 1967 War. How the U.S. handles the post-conflict phase, he told us, will set the tone for the West's relationship with the Islamic world. Molloy said that most Palestinians are fed up with the intifadah, and that Arab states are increasingly willing to compromise on refugees in exchange for a Palestinian state. Israel sees the war in Iraq as a reaffirmation of its muscular approach, Molloy argued, and the U.S. will have to force Israeli concessions on settlements in order to have a breakthrough in the MEPP. Molloy encouraged the USG to send observers to a conference Canada is hosting June 17-20 on Palestinian refugees (see para 6). END SUMMARY. ¶2. (C) We met with Molloy and his staff on April 16 to discuss the impact of the war in Iraq on the Middle East peace process. Molloy believes we are at a crossroads in the region, with the potential for catastrophe or exceptional progress. He feels the parameters of an Israeli-Palestinian agreement are pretty clear - a return to 1967 borders with adjustments/offsets, a divided Jerusalem, security provisions for Israel, and settlement of refugees. ¶3. (C) Molloy said that more and more Israelis see the West Bank as a liability. He feels that 13 settlements, with 11-12,000 Israelis, are key. If the U.S. was willing to take a tough approach with Israel on settlements, Molloy contended, it would pay huge dividends in the Arab world. ¶4. (C) Molloy believes the refugee issue can be resolved with very little return to Israel proper, and that Palestine needs to be made the destination of choice. Large-scale international funding will be needed, he continued, but money alone is not enough. The dignity of the refugees is also important. Molloy's Senior Advisor Jonathan Laine, who returned in 2002 from a posting in Ramallah, contended that the intifada had killed any chance of refugee return to Israel. ¶5. (C) Molloy said there were indications that Syria and other Arab countries would be flexible on refugee resettlement in exchange for an agreement on a Palestinian state. He said this subject was no longer taboo, as shown by the planned participation of Arab scholars at a July 11-13 refugee conference at the Max Planck Institute in Heidelberg. ¶6. (U) Laine noted that the International Development Research Centre (IDRC) of Canada will be hosting a conference on Palestinian refugees June 17-20 in Ottawa. This will be a stocktaking conference, where international experts will discuss existing research on the refugee issue and identify gaps where further study is needed. Confirmed U.S. participants include Michael Fischbach, Robert Malley, Martin Indyk, Geoffrey Aronson, and Susan Akram. The Canadian Government, which chairs the Refugee Working Group, has invited the USG (and other key countries/organizations) to send two observers to the conference. ¶7. (U) Molloy also mentioned that Canada had been asked to join a task force on Palestinian reform, and that he would want to discuss with State NEA how Canada could be most helpful. CELLUCCI