SHIMON PERES SAYS ECONOMIC AID NEEDED TO STABILIZE

1. (C) Summary: Labor Party Leader Shimon Peres told Codel
Lieberman and the Ambassador December 27 that the Palestinian
humanitarian situation is "quite serious," and acknowledged
that Israel has a "window of opportunity" to advance the
Israeli-Palestinian peace process. Calling the Palestinian
political system "broken," Peres said that internal divisions
among Palestinian leaders are complicating their efforts to
gain legitimacy and stabilize a new government. He told
Senator Lieberman that the U.S. should provide assistance to
the Palestinians through corporate investments and the World
Bank, rather than via direct aid. Senate staff members,
military escort and poloff also accompanied Senator
Lieberman. End Summary.



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PALESTINIAN ECONOMIC NEEDS/NEW LEADERSHIP


--------------------------





2. (C) Peres told Senator Lieberman that the humanitarian
situation in Gaza is "heartbreaking" and that Israel and the
U.S. should "act in a hurry." He praised Acting PLO
Chairman Abu Mazen as a well-intentioned, serious leader,
adding that Israel could not find a better partner.
Referring to Palestinian Prime Minister Abu Ala'a, Peres said
"we hope that we will work well together."



3. (C) Senator Lieberman told Peres that the Palestinian
Minister of Negotiation Affairs, Sa'eb Erekat said in an
earlier meeting (Congen Jerusalem septel) that he will be
very focused on economic changes within the Palestinian
territories, especially following the January 9 elections.
Peres replied that the Palestinians need "immediate economic
assistance" and that a concentrated effort by the U.S. and
European donors to mobilize the economy is necessary. He
suggested that instead of giving the Palestinians money
directly, the U.S. should encourage its 50 largest
corporations, each of which Peres described as having larger
budgets than most countries, to invest in the Palestinian
territories. He specifically noted that Motorola and
Hewlett-Packard had positively impacted Jordan's economy by
opening offices there. Peres said that the GOI will not
increase the number of Palestinians working in Israel in the
future. Peres opined that the World Bank could manage
economic development in the Palestinian territories and that
the U.S. should empower the World Bank to provide immediate
help to the Palestinians. He added, however, that the
Palestinians should not receive special treatment.



4. (C) Ambassador Kurtzer noted that the U.S. is currently
withholding some of its financial assistance to the
Palestinian Authority because of continuing safety concerns
in Gaza and the failure of the PA to undertake security
measures, as demonstrated by the lack of investigative
cooperation following the October 2003 attack on a U.S.
convoy in Gaza.



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GAZA DISENGAGEMENT


--------------------------





5. (C) Turning to the Gaza disengagement plan, Peres
predicted that Israeli troops will withdraw on time, in
mid-2005, and said that Israel will implement unspecified
"more permanent solutions" during and immediately following
this withdrawal. Peres also suggested an "interim solution,"
in which Israel would withdraw from the Philadelphi strip and
thus allow Palestinians to move to and from Egypt. Peres
suggested that a fleet of helicopters to patrol the area
could assuage Israeli security concerns. Peres also said
that the full impact of the Gaza disengagement would not be
known for at least one year after completion and told Senator
Lieberman that the 2006 Israeli general elections could
influence the Israeli political landscape and future
disengagement plans. Peres predicted that the pace of
negotiations with the Palestinians will increase following
Gaza disengagement in 2005.



6. (C) Commenting on former PA Gaza security chief Mohammad
Dahlan and former West Bank security chief Jibril Rijoub,
Peres said "we are trying to ensure that they are not accused
of being agents or semi-agents of Israel." He said that
Israel is considering another release of Palestinian
prisoners in the near future. Peres said "there is not much
Israel can do with or without Dahlan."



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THE U.S. ROLE


--------------------------





7. (C) Peres emphasized that any international financial
assistance to the Palestinians, especially by the U.S.,
should be contingent on the Palestinian Authority "putting
its house in order." Peres said that the Palestinians must
be helped and that Israel should begin dialogue with Hamas
and Islamic Jihad. He said that "Sharon is at the center" of
this process, but that any policy of not talking with the
Palestinians until Israel leaves Gaza is "too long a period
of time." Peres said that Abu Mazen cannot completely stop
the violence, but that he can "start fighting terror any
time." Peres concluded by saying that while he is "not blind
to the difficulties ahead" there is a window of opportunity
for peace and that Abu Mazen is a good choice of partners.



8. (U) Codel Lieberman did not clear this message.








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