UNCLAS SECTION 01 OF 04 TEL AVIV 003682

SIPDIS

STATE FOR NEA, NEA/IPA, NEA/PPD

WHITE HOUSE FOR PRESS OFFICE, SIT ROOM
NSC FOR NEA STAFF

JERUSALEM ALSO FOR ICD
LONDON ALSO FOR HKANONA AND POL
PARIS ALSO FOR POL
ROME FOR MFO
E.O. 12958: N/A
TAGS: IS KMDR MEDIA REACTION REPORT
SUBJECT: ISRAEL MEDIA REACTION


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SUBJECTS COVERED IN THIS REPORT:
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1. U.S. Israel Security Exports Crisis


2. Mideast

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Key stories in the media:
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Ha'aretz Sunday reported that the U.S.-Israeli security
exports crisis is deepening. The paper noted that
Washington has ordered Israel to increase its control
over its security exports. This crisis, which began
over the Israeli Harpe sale to China, resulted in harsh
U.S. sanctions on Israel according to the paper. The
U.S. has made three demands of Israel in order to
settle the crisis: 1. Israel shall provide information
about more then 60 deals it made with China in recent
years; 2. Israel should reevaluate its system for
supervising security exports and report to the U.S.; 3.
Formulation of a memo of understanding between the U.S.
and Israel about future arms sales. Schiff writes on
Monday that most of Israel's friends in the U.S.
Congress back the Pentagon's stance that Israel needs
to accept tighter monitoring of its security deals.
Maariv added on Monday that the U.S. also demands
details regarding weapon sales to India and Singapore
and that Minister of Defense Shaul Mofaz has nominated
Zvi Shtauber, former Israeli Ambassador to the U.K., to
lead negotiations of Israel's security exports sales.

Maariv reported that construction work on the fence
around the Etzion Bloc will begin in another two weeks.
According to the paper, the goal of the construction
work is to establish facts on the ground and to annex
the Etzion Bloc de facto by placing it on the Israeli
side of the separation fence-prior to the
implementation of the disengagement plan.

Ha'aretz and Kol Israel reported that the U.S. Federal
Court has made public the indictment of U.S. Defense
Department analyst Larry Franklin. Franklin is charged
with leaking classified military information to
employees of an unnamed lobby group, which according to
reports, is AIPAC.

Ha'aretz reported on Sunday that the final document
prepared by the PA's donor countries, the World Bank
and the International Monetary Fund concludes that

Israel must transfer control over the Rafah crossing to
the P.A. and allow regular passage of people and goods
between the Gaza Strip and the West Bank.

All media reported that Prime Minister Ariel Sharon
toured on Sunday the communities slated to absorb the
evacuees and expressed his satisfaction with the pace
of work on their housing.
Leading media reported that U.S. envoys Elliot Abrams
and David Welch are expected to arrive in Israel and
the P.A. on Monday in order to prepare Secretary of
State Condoleezza Rice's visit to the region. The
media also reported that Egypt envoys (Egyptian
intelligence chief Omar Suleiman and Foreign Minister
Abdul Gheit) are slated to visit Israel and the P.A. in
the upcoming days to make an effort to ensure the
success of next week's meeting between PM Sharon and
Palestinian Chairman Mahmoud Abbas.

All media reported on Israel's achievement in the UN as
its UN Ambassador, Dan Gillerman, was elected to be the
new vice president of the UN General Assembly.

All media reported that Justice Minister Tzipi Livni
and Attorney General Menachem Mazuz have announced that
the state will take all legal responsibility for
actions undertaken by security forces during the
disengagement.

All media reported that the P.A. has executed four
convicts in the Gaza Strip in an effort to reestablish
its deterrence capability.

According to the peace index published in Ha'aretz, 52
percent of Israelis believe the disengagement should be
coordinated with the Palestinians; 38 percent are
against. The index also publishes that 57.5 percent of
the Jewish public supports the disengagement plan; 35.5
percent oppose it; 7 percent are undecided.

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1. U.S. Israel Security Exports Crisis:
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Summary:
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Diplomatic correspondent Ben Caspit opined in popular,
pluralist Maariv: "What is infuriating about all this
is that it is not really a matter of America's national
security, and in cases where it is, the security
considerations are marginal.... It's all an issue of
money. Israel's arms industries, military and
aeronautical, infuriate the Americans. Israel earns
USD 4 billion per year in this area. Every last one of
these dollars comes here instead of going there."

Block Quotes:
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"An Issue of Money"

Diplomatic correspondent Ben Caspit opined in popular,
pluralist Maariv (June 14): "Perhaps the time has come
for somebody -- the prime minister for example -- to
put a stop to the groveling which has recently been
forced upon the Israeli defense establishment.... On
the other hand, we are talking about America. They are
not dependent on us. We are dependent on them. We do
not finance them. They finance us.... In the situation
in which Israel finds itself, it has to be smart....
What is infuriating about all this is that it is not
really a matter of America's national security, and in
cases where it is, the security considerations are
marginal.... It's all an issue of money. Israel's arms
industries, military and aeronautical, infuriate the
Americans. Israel earns USD 4 billion per year in this
area. Every last one of these dollars comes here
instead of going there.... The Pentagon is under
constant pressure from senators, members of congress
and industrialists, and every one of them is demanding
that Israel be circumscribed, cut down to size, that
the Pentagon make it difficult for Israel to win
contracts in Turkey, the Far East and eastern
Europe.... Some say the prime minister is faced with
something worse than the crisis itself, and that
Israel's sovereignty is at stake. It is an issue of
independence and pride. Sharon is now torn between his
head and his heart.... It is Sharon who will have to
decide whether to be right or smart."

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2. Mideast:
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Summary:
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Conservative, independent Jerusalem Post editorialized:
"The claim that Hamas would be worse cannot be allowed
to absolve Abbas's PA of its minimal requirements and
obligations.... Whether the goal is saving
disengagement or preparing for the day after, the time
to force the PA to confront terror is now."

Block Quotes:
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"The Gathering Storm"

Conservative, independent Jerusalem Post editorialized
(June 14): "There is the obligation of both Israel and
the international community to reexamine the decision
to place all its eggs in the basket of Mahmoud Abbas
and its notion of what it means to support Palestinian
moderation and reform. The hard fact is that Abbas is
not only failing, but also that most trends are in the
wrong direction.... Perhaps it is time to consider the
possibility that Abbas's rule has suffered not from too
little help but from too much. How surprising is it
that Abbas moves further and further away from the key
task demanded of him by the international community ...
when international assistance to him only increases as
the situation deteriorates? The claim that Hamas would
be worse cannot be allowed to absolve Abbas's PA of its
minimal requirements and obligations.... Whether the
goal is saving disengagement or preparing for the day
after, the time to force the PA to confront terror is
now."
CRETZ