VICE PRIME MINISTER SHIMON PERES CONSIDERS "THE

1. (C) Summary: In a meeting on March 23, Codel Pelosi and
Vice Prime Minister Shimon Peres discussed the political
atmosphere surrounding Israel's disengagement from Gaza; the
economic forecast for Gaza the "day after" disengagement; the
steps that the international community can take to ensure a
positive economic future for Gaza; the separation barrier and
settlements in the West Bank; and current political
developments in Lebanon and Syria. End Summary.



2. (U) The delegation consisted of Representatives Nancy
Pelosi, Henry Waxman, Darrell Issa, Linda Sanchez, Edward
Markey, George Miller, Anna Eshoo, James McGovern, and
congressional staff, and was accompanied by a poloff
notetaker.



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


The Day After


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





3. (C) Peres stated that the four-month period leading up to
and completing Israel's disengagement from Gaza represents a
unique political opportunity, but also brings to light the
weaknesses in Israel's political system. He noted that,
unlike the bipartisan United States Congress, the Knesset is
made up of members from 12 parties, many of which have split
into factions themselves. The parties that have supported
disengagement have chosen to create a de facto coalition
based on this one issue. For some, the costs of such a
coalition are high and the expectations low. Peres
emphasized that, faced with the threat of a referendum that
could slow down or stop the process of disengagement,
coalition members must mobilize their strength to get through
the next four months without breaking. He added that while
the primary focus of this coalition must be disengagement,
this is also a government of construction, building up the
Negev and Galilee regions of Israel as it pulls out from
Gaza.



4. (C) Peres stressed that, in the political struggles over
disengagement, we cannot ignore the "day after" and must work
to ensure the long-term success of the process. The two main
concerns remain how to achieve both security and a strong
economy in Gaza. According to Peres, Palestinian President
Mahmoud Abbas is faced with the challenge of confronting
groups such as Hamas and Islamic Jihad not only militarily
but also with ballots, and the possibility exists that Hamas
will score some victories in July's PLC elections. Peres
expressed Israel's surprise over the courage that Abbas has
shown since his election in January, though he noted that
Abbas still lacks the power and means to take all the actions
and decisions necessary to achieve full security in Gaza.



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


Gaza's Economic Prospects


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





5. (C) The security of Gaza and of Israel in the long run
depends also on improving what Peres termed the "terrible"
economic situation that exists in Gaza at present. Peres
noted that those Palestinians who still go hungry are not
impressed by peace conferences. The 1.5 million Palestinians
in Gaza face economic woes that are immediate, while many of
the solutions to these problems are slow to come. Peres said
he worries about the gap between the immediacy of the
problems and the pace of the solutions. In this gap, he said
the possibility exists of Hamas gaining support in Gaza
through its social and charitable services that deal with the
immediate economic obstacles facing individuals and families.



6. (C) Peres called for addressing Gaza's economic
afflictions up to and during disengagement as well as on "the
day after," and finding solutions for immediate as well as
long-term economic problems. He proposed speeding up the
movement of goods as one short-term solution, making the
passage of goods to and from Gaza as swift as possible. The
World Bank has pledged $70 million of the $140 million
required for this project, and Israel will provide the other
half.



7. (C) Peres also suggested the creation of a social
security program as another short-term economic boost for
Gaza. Such a program would provide $100 per month for
100,000 families in Gaza. The European Union, and Canada
have pledged most of the $120 million needed for one year of
such a program, which Peres contends will help alleviate
poverty among Gazans in a tangible way. Peres said he has
also had conversations with the Indian special envoy to the
region on further assistance. Working out a way for Gazans
to productively use the buildings in former Israeli
settlements after disengagement would also help increase
employment and economic opportunities in Gaza.



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


Gaza After Disengagement


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





8. (C) Peres pointed to three methods of improving Gaza's
economy after disengagement: the creation of industrial
parks, such as those in Jordan; privatization; and building a
tourist infrastructure. Peres noted that Qualified
Industrial Zones such as those built with the aid of Israel
and the United States now produce $1 billion in exports and
employ 40,000 people in Jordan, and he expressed hope that
QIZs might also be in the future for Gaza and the West Bank.
American companies have played an important role in Jordan,
helping to modernize the country's educational system. Peres
envisioned U.S. companies building branches in the West Bank
and Gaza and achieving similar "remarkable" results.
American companies could also become the backbone of Gaza's
tourism industry, and officials have already approached the
American hotel chains Radisson and Starwood with ideas for
creating tourism in Gaza.


9. (C) When asked whether unilateral withdrawal from Gaza is
helpful in achieving peace in the long term, Peres remarked
that unilateral disengagement was not his first choice. In a
perfect world, he said, it should have been a negotiated,
bilateral withdrawal. Highlighting the Labor party's
minority status in the Knesset, Peres said he preferred a
mediocre step in the right direction backed by a majority
over a grand idea with no support or hope of implementation.
Some of the great mistakes of the past, such as Israeli
settlement building and Palestinian terrorism, were
unilateral. Hopefully, Peres said, when these unilateral
mistakes are rectified unilaterally, the two sides can forget
the past and come together.



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


Settlements and the Security Barrier


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





10. (C) Addressing the question of whether Israeli
settlements and the security barrier make a Palestinian state
impossible, Peres stated that the security barrier was
originally intended as a method of ensuring security for
Israeli citizens. The process of building the barrier
whetted some political appetites for more land, but the
barrier has since moved closer and closer to the Green Line.
At present, the intended course of the barrier will leave
only 5.5 percent of the West Bank on the Israeli side, more
or less equivalent to the amount discussed in President
Clinton's proposal at Camp David in 2000. A Palestinian
state is not dependent on whether or not there is a wall,
Peres chided, but whether or not there is democracy.
Palestinians have never governed themselves, and the
Palestinian state will be their first experience in true
governance.



11. (C) As for the settlements, Peres dismissed estimates of
up to 200,000 Israeli settlers living in the West Bank,
stating that this number most likely includes Israelis in
Jerusalem and that, at most, there are 60,000 settlers in the
West Bank. Eventually, islands of Israeli settlements will
remain, taking only 3-4 percent of land in the West Bank.



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


Regional Security


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





12. (C) Asked about the sustainability of economic
relationships built within the region, Peres took the
opportunity to put the Israeli-Palestinian conflict within
the context of what he termed the larger conflict between
Islam and the West. While terrorists protest against
modernization, he said, they have no message of their own.
However, a wind of change can be seen in Muslim countries
such as Turkey that have embraced modernity, in Jordan and
Egypt, with their slow but sure political reforms, and in
Syria, which now faces powerful demonstrations in Lebanon and
warnings from the United States and other nations that Syria
understands are not empty threats.



13. (C) At this point, Peres stated, Syria is no longer a
military consideration because the Syrian economy does not
permit the country to buy modern weaponry, and the Lebanese
have begun to ask why Syria is still in Lebanon. Syria has
taken advantage of its military presence for the economic
exploitation of Lebanon. If Lebanon can rid itself of Syria
and Hezbollah, it can become an independent, tolerant
democracy and society. If not, it will become a Shiite
state.



14. (C) Codel Pelosi did not have an opportunity to clear
this cable.

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