SHIMON PERES TELLS CODEL REID TO LOOK AHEAD

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 001731

SIPDIS

E.O. 12958: DECL: 03/22/2015
TAGS: IR IS MNUC OREP PGOV PREF PTER SY GAZA DISENGAGEMENT ISRAELI PALESTINIAN AFFAIRS GOI INTERNAL ECONOMY AND FINANCE
SUBJECT: SHIMON PERES TELLS CODEL REID TO LOOK AHEAD

Classified By: Daniel C. Kurtzer for reasons 1.4 (b,d).


1. (C) Summary: In a meeting on March 20, Codel Reid and
Vice Prime Minister Shimon Peres discussed the economic
future of Israel and post-disengagement Gaza, the U.S.
position on Syria and Iran, the impact of the separation
barrier on the lives of Palestinians, the run-up to the
budget vote in the Knesset, and other issues. Peres
emphasized the importance of looking ahead to the day after
disengagement from Gaza and the crucial role private
investment by U.S. companies can play in supporting the
Palestinian economy. End Summary.


2. (U) The delegation, consisting of Senators Harry Reid,
Richard Durbin, Barbara Boxer, Patty Murray, Robert Bennett,
Lamar Alexander, and Ken Salazar, and Senate staff, was
accompanied by Ambassador Kurtzer and poloff notetaker.

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A Whole New World
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3. (C) Peres reflected that the Cold War divisions between
North and South, East and West have been replaced by a world
divided between states that fight terror and those that
support it, and in which there is no room for neutrality.
Economic development, he said, is the peace strategy of our
time as it fosters democracy and renders military control of
societies untenable. Asked how the U.S. can help facilitate
the peace process, Peres said there are two things the U.S.
can do: 1) keep a watchful eye on Palestinian security
developments and help enable the Palestinians to become
responsible for as much of their own land and security as
possible, and 2) look ahead to "the day after" disengagement
and encourage large-scale private U.S. investment in Gaza.
Using Jordan as an example, Peres referred to the QIZ concept
as "the greatest success in the Middle East" for fostering
the growth of Jordan's exports to the U.S. over the last six
years. He also noted the efforts of U.S. companies that have
modernized the educational system in Jordan through direct
investment. He said he hopes similar investment interests
will emerge in Gaza.


4. (C) Turning to the future of economic development in
Israel, Peres said that Israel's economic future depends on
developing new patents and focus areas for research and
development. Nanotechnology is a specific area of innovation
where Israel should focus its efforts. Tourism, which Peres
said comprises 12% of the economy, is now beginning to gain
strength again following years of decline during the
Intifada. In consultation with some U.S. companies, Israel
is attempting to revitalize tourism in the Galilee region.
Adding that some of the best beaches on the Mediterranean are
located in Gaza, Peres said that helping Gaza build a tourism
industry would not only be good for Gaza's economy, but would
provide an incentive to end terrorism.

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On Syria and Iran
--------------


5. (C) Asked for his views on U.S. policy toward Syria and
Iran, Peres said that because of U.S. involvement in Iraq,
Syria now likely believes that the U.S. will act on its
warnings. Although Syria is no longer a real military
presence in the region since its economy cannot support the
weapons it acquired from Russia during the Cold War, its
interests in Lebanon remain strong, he said. Some 20 percent
of the Syrian economy, he said, depends on the employment of
Syrian workers in Lebanon. Recent stirrings of independence
in Lebanon have revealed some of the economic and political
shortcomings of Syrian presence there.


6. (C) Turning to Iran, Peres said that the Iranian
government is "Machiavellian" in its belief that its goals
justify its means. Iran, Peres said, has oil, ambition, and
the most corrupt government. He said that internal change is
only a matter of time, since Iran's women are sick of
subjugation and its young people are looking for a better
future. Unfortunately, he continued, no one can guarantee
when this change will come. Peres laid out what he sees as
the three options for U.S. policy toward Iran: 1) use of
force, 2) political pressure, and 3) economic sanctions.
Peres said that if the U.S. opts to use political pressure or
economic sanctions against Iran, it will need to form a
coalition with Europe. The U.S. could go along with the
Europeans in using political and/or economic pressure, with
the understanding that if this approach doesn't work, Europe
will support the U.S. in exerting force.

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The Separation Barrier
--------------


7. (C) Asked how closely the separation barrier tracks with
prospects for ultimately allocating land to the Palestinians,
Peres mused that in politics, one has to jump to great
lengths, not heights. By jumping too high, one risks a
deadly fall. The mistake at Camp David, he continued, was
that the parties wanted to solve all the problems all at
once. Right now Israel is making a jump out of Gaza. Next
will come parts of the West Bank. Eventually, he said, the
time will come for discussions on land allocation. Peres
acknowledged that the barrier was conceived as a security
mechanism only, but political appetite for land led to a
placement that bred resentment against it. He noted that the
controversy over the barrier is more limited now that its
route has been changed by order of the Israeli Supreme Court.
The barrier now leaves only 5.5% of the West Bank on the
Israeli side, and the idea of an eventual land swap is on the
table. Peres reflected that once there is no terror, the
barrier will come down, but as long as terror remains, the
barrier is necessary.

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The Budget
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8. (C) Asked about the budget, Peres explained that the
presence of 12 parties in the Knesset makes it very hard to
get votes. Essentially, there is a different coalition for
every issue. Chances are that the budget will pass, he said,
although some of its supporters may end up not voting for it.
The Shinui party, for example, while in favor of the budget
and disengagement, will likely vote against the budget
because it opposes its allocation of money to religious
interests.

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The China Challenge
--------------


9. (C) Peres said he views China as the greatest future
challenge for the U.S. China's 50-year economic plan,
unexpected economic growth rate, and exponential consumption
of energy and oil will challenge U.S. economic strength.
Only if the U.S. stays at the forefront of technology, he
added, will it have a chance to maintain its first place
position in the global economy.


10. (U) Codel Reid cleared this cable.

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