JUSTICE MINISTRY DG PROVIDES DISENGAGEMENT UPDATE

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000430

SIPDIS

E.O. 12958: DECL: 01/24/2015
TAGS: PREL ECON KWBG IS GAZA DISENGAGEMENT ISRAELI PALESTINIAN AFFAIRS
SUBJECT: JUSTICE MINISTRY DG PROVIDES DISENGAGEMENT UPDATE


Classified By: DCM Gene A. Cretz for Reasons 1.4 (b,d)

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Summary
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1. (C) Looking visibly tired, Justice Ministry DG Aaron
Abramovich updated Economic Counselor and Deputy on the
"hectic" period ahead on disengagement. He said he and his
team were about to embark on a week of intensive
consultations with the Finance Committee Disengagement
Subcommittee prior to what he hoped would be an early
February Knesset vote on disengagement legislation.


2. (C) During the meeting, the DG noted that:

-- Negotiations with the Knesset were going well, but that a
large number of issues remained outstanding;
-- MoJ was currently estimating civilian costs of
disengagement at NIS 3 billion;
-- The settlers were pushing to triple this amount;
-- The GOI is aiming for disengagement to be completed by
July;
-- MoJ was working to provide settlers "choice" by offering a
number of compensation packages;
-- Time was running out to establish a marketplace to bring
sellers and Palestinian buyers of settlement assets together;
-- Settlers still believed something mystical would happen to
forestall disengagement. End Summary.

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Emotional Work with the Settlers/Knesset
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3. (C) Abramovich said the subcommittee, headed by Labor
Party MK and former Finance Minister Beiga Shochat, was
comprised of "very experienced professionals" with whom he
was having a "good ... dialogue." Abramovich said many of
the meetings included representatives of settler groups;
These meetings tended to be "very emotional." The settlers,
all of whom were strenuously opposed to disengagement, were
pressing for a massive increase ("a tripling") in
compensation amounts. At this point, the GOI was estimating
that the civilian component of disengagement totaled NIS 3
billion; the question now was how high the final figure would
go. Abramovich stressed the complexity of these
negotiations, involving as they do the GOI, settlers, settler
lawyers, and Knesset members, all with differing agendas.
Abramovich is working under a tight timeline: he wants to
move directly from a successful Knesset vote to the Cabinet,
and then to a five-month preparation period leading to a
completed disengagement process by the end of July.


4. (C) The Justice DG outlined just some of the legislative
details requiring final Knesset agreement. Who will actually
"do" disengagement? The police? The army? In what order
will the settlements be evacuated? Do you punish residents
who refuse to move? If so, in what way? The latter set of
questions was particularly sensitive; Abramovitch assumes
"many won't go -- people will be pulled out of their homes on
the last day..."

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Settlers' Choice
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5. (C) Abramovich outlined the biggest compensation
categories: dwellings, businesses, workers, cooperative
societies, and public institutions. Justice aimed to provide
the settlers with a set of standardized compensation
packages. There are two basic options on dwellings: the
first is completely standardized and based on the length of
time a dwelling was owned and how much its construction cost.
If the owner lived in the property herself no later than
June 6, 2004 she would also receive money for land on which
it sat, based on the value of a comparably sized land parcel
located in a non-central area of Green Line Israel. Under
what he called the "golden faucet" option, a homeowner could
argue that his home was in some way special and request a
formal assessment of its value. Business owners could decide
whether they wanted to base their compensation on the
property value of their business or on the revenue value.

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A Lost Opportunity
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6. (C) Abramovich expressed concern over the lack of
preparations for enabling the transfer of property and
businesses to Palestinians. The GOI had decided to offer the
same level of compensation to settlers regardless of whether
such a sale was made in order to encourage such transfers to
take place (Note: In other words, settlers had nothing to
lose by making a sale to Palestinians). The DG said that,
for these sales to become general practice, there would have
to be an efficient way to bring buyers and sellers together
through the establishment of a marketplace. As far as
Abramovich knew, no one had worked to establish such a
marketplace, including the World Bank. He felt such a
mechanism would be especially effective for businesses in
Erez, and admitted it probably would make little difference
for other businesses as "these decisions will be made on
ideological grounds, not profit-loss calculations."

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Tax-Evading Settlers Exposed
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7. (C) Abramovich noted a couple of the many details
involved in establishing compensation. Although Justice was
trying to give fair value by using an average of five years
of tax returns to establish a fair market value for a
business, the question arose of what to do with those
settlers who had not been declaring the entirety of their
revenues. Abramovich noted the calculation of home values
was also complicated by the fact that the official value had
to be based on legal construction permits alone.

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Waiting for God
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8. (C) Abramovich hoped rapid movement on the compensation
legislation would allow the GOI to begin compensation payouts
as early as mid-February. He said he did not expect many to
request such compensation: "The settlers are convinced
something will change -- God will intervene -- and
disengagement won't happen. Perhaps they'll change their
mind when the legislation passes, but I doubt it."

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Trade Issues: We're out of It ... for Now
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9. (C) At the end of the meeting, EconCouns raised a number
of trade issues, including data exclusivity and copyright
reform. Abramovich noted that action on these issues had
moved to the Trade Ministry (MOIT) approximately six months
ago but hinted the new Justice Minister wanted to get the
ministry involved again. "Check back with me in a couple of
weeks to see if I'm involved again..."




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