ASSISTANT SECRETARY BURNS MEETING WITH DEPUTY

S E C R E T SECTION 01 OF 02 TEL AVIV 000534

SIPDIS

E.O. 12958: DECL: 01/28/2015
TAGS: ECON PREL IS ECONOMY AND FINANCE ISRAELI PALESTINIAN AFFAIRS GAZA DISENGAGEMENT
SUBJECT: ASSISTANT SECRETARY BURNS MEETING WITH DEPUTY
PRIME MINISTER PERES


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


1. (S) Summary: In a January 25 meeting with NEA Assistant
Secretary Burns and the Ambassador, Deputy Prime Minister

SIPDIS
Peres outlined GOI efforts to revitalize the Palestinian
economy. Noting the unexpected success of PA Prime Minister
Abu Mazen's steps toward improving the security situation,
Peres predicted that a ceasefire was likely in the next few
weeks and that the concept of unilateral disengagement from
Gaza is "dying." The most immediate problem, according to
Peres, is the immediacy of the economic need and the lack of
resources and planning to address economic issues in the
short run. Among Peres's proposals were a joint project for
technological improvements at the border crossings, funding
for a Palestinian social welfare system and investment in the
Gaza agricultural sector. He plans to carry this message to
Davos and to the U.S. in hopes of eliciting international and
private sector support. He also proposed convening a core
group to coordinate assistance efforts. End Summary.

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P/A Progress on Security Exceeds Expectations
--------------


2. (S) NEA Assistant Secretary Burns met with Deputy Prime
Minister Shimon Peres on January 25 to review recent
improvements in the security situation and Peres' new role in
charge of West Bank and Gaza economic issues and Negev and
Galilee economic development. Also attending the meeting were
Ambassador Kurtzer, NSC staffer Ron Danin, and Econ
Counselor, notetaker. Peres was accompanied by several staff
including Avi Gil and Einat Wilf.


3. (S) Peres expressed great optimism over the PA's rapid
progress on security issues. In his view, both the GOI and
the PA are demonstrating "unexpected generosity," and PA
Prime Minister Abu Mazen is showing himself to be courageous,
wise and effective. Conceding that "we weren't ready for it",
Peres said the GOI had given Abu Mazen a limited chance to
succeed but he had exceeded expectations. This has changed
the GOI view, said Peres, who now believes it is possible for
PA security forces to deploy without political or geographic
discrimination throughout Gaza. He said he is also
optimistic that a cease-fire is within reach by next week,
noting that most points are already resolved. The concept of
unlilateral disengagement "is dying," Peres stated,
characterizing the present situation as that of "a man who
goes to sleep a bachelor and wakes up with a family."

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Need for Solutions on Passages, Roads, Jobs, Infrastructure:
-------------- --------------


4. (S) With security issues "in good shape", Peres said, he
is now concentrating on the economic aspects of
disengagement, where he sees a large gap between "the
immediacy of the problems and the lack of solutions." Peres
emphasized that there are now "clear needs but unclear
resources", adding that if there is no success on Palestinian
economic development it will create bitterness and exacerbate
the conflict. In his view, four key steps will be
"modernizing" the crossings and roadblock regime, opening
roads, providing jobs, and improving large-scale
infrastructure.


5. (S) On border crossings, Peres said the GOI recognizes the
need to modernize passages and has proposed a USD 140 million
technology improvement program to that end. PA Finance
Minister Fayyad has already agreed to the scheme, Peres said,
noting that earlier the same day he had concluded a deal with
the World Bank to raise the PA share of the needed funds.
(Note: World Bank Director Nigel Roberts told Post that no
firm agreement had been reached on this point, and that the
Bank still supports a step-by-step approach starting with
pilot projects at four border crossings. End note.) On
opening roads, Peres insisted that this step requires
movement towards a comprensive cease-fire covering Gaza and
the West Bank. On providing jobs, Peres believes it is
especially important to renew the agriculture sector, where
Palestinians already have the needed skills, and to invest in
construction and infrastructure projects. In this context, he
said, it is crucial to repair damaged Palestinian hothouses
and to hand over intact settlement agribusiness in tandem
with disengagement.


6. (S) On infrastructure development, Peres disclosed that
he has been in negotiations with Arab entrepreneurs who, in
his view, "have no inhibitions over investing in Gaza." He
also envisions U.S. and EU investment in industrial parks
inside the West Bank and Gaza Strip -- any U.S. assistance of
this nature could come primarialy from the private sector,
with USG "encouragement" in the form of loan guarantees or
tax breaks. European involvement could be more directed, he
suggested, with governments pooling money or selecting
companies to take the lead on investment. The QIZ model,
especially the success of the Israel-Jordan QIZ, could
provide a framework for future Palestinian economic
development, he added. Peres confirmed the GOI's interest in
a Gazan seaport, beginning with a ro-ro port and expanding in
stages to a full deep-water facility, and a railway link from
Gaza to the Israeli port of Ashdod.

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Social Welfare Fund to Bolster PA
--------------


7. (S) Peres also argued for the need to fund a Palestinian
social welfare system that could help the PA compete with the
popularity of Hamas social programs. Such a fund could cut
poverty for over 200,000 people, but would need donor
assistance to succeed. Peres proposed asking individual
countries to commit specified annual contributions, and asked
whether U.S. funding of this type could come out of the
anticipated USAID supplemental. Peres revealed plans to raise
this issue with U.S. Congressmen and to take this message to
Davos, where he said he will be meeting with Fayyad and
potential private sector contributors.


8. (S) Peres expressed interest in a late February visit to
Washington to meet with Secretary Rice and discuss
disengagement as well as the potential for Negev development
noted in the Bush-Sharon correspondence. Peres raised his
concern that the plethora of conferences could not deliver
aid quickly enough, and questioned why the upcoming London
conference must have limited participation. In order to take
immediate action, Peres stated, "economic groups" made up of
the US, Israel, the PA, EU and Japan, should be convened to
explore new ideas and coordinate the economic aspects of
disengagement.
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A/S Burns: Combine Funding Efforts to Create Momentum
-------------- --------------


9. (S) A/S Burns agreed that rebuilding the Palestinian
economy is essential to progress on security. Many different
efforts could be combined within the next two to three months
to create momentum on the economic side, he said. He briefed
Peres on current administration efforts to reprogram funds
for a short-term assistance program to support Abu Mazen's
efforts and a longer-term request for supplemental
assistance. In addition, he said that we would push the Arab
Gulf States to live up to their assistance commitments to the
Palestinians. In an earlier meeting, A/S Burns had noted that
the London conference could also be an opportunity to push
private sector contributions and link this to the donor
conference under the AHLC.


10. (S) Burns briefed Peres on his meetings with Egyptian PM
Mubarak and other Egyptian officials saying that they are
taking a positive, activist attitude toward improving the
security situation by providing increased deployment of
troops on the border with Gaza and a willingness to discuss
Philidelphi security concerns.

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KURTZER