OLMERT TELLS A/S BURNS TO TIE PALESTINIANS TO

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000535

SIPDIS

E.O. 12958: DECL: 01/27/2010
TAGS: PGOV PREL EAID ECON KWBG EG IS GAZA DISENGAGEMENT ISRAELI PALESTINIAN AFFAIRS GOI EXTERNAL
SUBJECT: OLMERT TELLS A/S BURNS TO TIE PALESTINIANS TO
ISRAEL WITH DISENGAGEMENT ASSISTANCE


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


1. (C) Summary: Deputy PM Ehud Olmert urged NEA A/S Burns and
the USG to use creative means of engagement such as
developing QIZs when assisting the Palestinians so as to tie
Palestinian economic fortunes to continued good relations
with Israel. Despite advocating such ties, Olmert rejected
any plan to again allow Palestinians laborers into Israel and
said that the disengagement plan must remain unilateral --
despite positive developments on security under Abu Mazen --
to protect the timetable for its implementation. Olmert
predicted that the GOI would hold elections in November 2005
and that Labor under Shimon Peres would become increasingly
eager to demonstrate its independence from the Sharon
government in an effort to woo voters. On Syria, Olmert
thought that Israel should have explored the seriousness of
Bashar al-Assad's intent to renew negotiations with Israel.
End Summary.


2. (U) Deputy PM Ehud Olmert met with Assistant Secretary
William Burns and the Ambassador January 27. NSC Director
Robert Danin and poloffs joined the meeting, as did several
members of Olmert's staff.

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QIZs a Good Deal
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3. (C) Olmert opened the meeting by noting that only now are
the Egyptians realizing that economic benefits will come
their way as a result of the Egyptian-Israel QIZ agreement
signed earlier this month in Cairo. A/S Burns said that he
had found President Mubarak upbeat during their January 26
meeting and had urged Mubarak to seize this time of
opportunity with the Palestinians. The U.S. will keep
encouraging the GOE to take an active approach, including
deploying Egyptian troops along the Rafah border.

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Help Tie Us Together
--------------


4. (C) Olmert urged the USG to assist the PA in such a way
as to encourage connectivity between Israel and the
Palestinians, leaving "no route the Palestinians can take
that does not reflect on their relations with Israel."
Stressing that he was not referring to, for example, renewal
of access for Palestinian workers to the Israeli labor
market, Olmert focused instead on developing mechanisms
similar to the QIZ with Egypt that directly tied USD one
billion in Egyptian exports to Israel -- a fact that had a
positive influence on Egyptian behavior, in Olmert's view,
including effecting a change in Egyptian public opinion. A/S
Burns agreed that creative approaches are important, and the
Ambassador added that there are a number of issues under GOI
control that will have a profound impact on Palestinians
society and economic life: such as extension of the customs
envelope and facilitation of the movement of goods.

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Building Momentum "Step by Step"
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5. (C) Olmert said that the most important thing now
vis-a-vis the Palestinians is "not to make mistakes."
Calling the January 9 presidential elections a success
regardless of what might happen in the future, Olmert added
that it is clear that Abu Mazen is capable of doing things on
the ground. What is less clear is exactly how much that
might actually be, adding that Abu Mazen had not yet made a
full assault on terrorism. Olmert stressed, however, that
Abu Mazen had to begin somewhere and that it was also
important to create an environment that encourages
Palestinian action. Taking note of the January 26 meeting
between PM advisor Dov Weissglas and PA negotiator Sa'eb
Erekat, Olmert said "we must build a sense of (positive)
momentum, step by step."

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No Changes to Disengagement Timetable
--------------


6. (C) While noting that it now appears possible to
coordinate security with the Palestinians, Olmert said that
he had nevertheless recommended that the GOI make no changes
to its disengagement time frame or criteria. Coordination
would remove the unilateral element from the plan and allow
other issues to influence the timetable, he said. The GOI
must ensure that adequate time is available for the settlers
to "prepare themselves" for the evacuation, as the government
hopes to avoid legal challenges if possible. The actual
evacuation itself should be carried out in "two to three
weeks," likely in July, rather than the 12 weeks being
discussed, according to Olmert. Although he did not dismiss
it altogether, Olmert predicted that the threat of civil
strife is smaller in scope than is feared. A "decisive and
rapid move" would contribute to a quieter-than-expected
evacuation. A/S Burns agreed that it is important to create
an environment where the GOI can again engage with the
Palestinians. Care must be taken to prepare each step.


7. (C) Momentum is building again in Israel for a referendum
on disengagement, Olmert said, adding that Foreign Minister
Shalom is a likely advocate of such a position. Oddly
enough, Olmert continued, disengagement is the only issue on
which the PM has a stable majority. In response to A/S Burns
question, Olmert said that the law for settler compensation
would be passed in "two to three weeks." Responding to the
Ambassador's question as to when Gaza will be declared a
closed military zone, Olmert said that it must be done in a
"reasonable" manner, close to the time of the actual
withdrawal itself. Life for the residents is ongoing up
until the time they actually leave, Olmert said, and they
will need supplies and contact with the outside world.

-------------- --------------
Present-Day Progress Does Not a Permanent Settlement Make
-------------- --------------


8. (C) Olmert said there was a good chance that the PA under
Abu Mazen will be capable of holding back the terror for "a
period of time," will hold reasonable elections for the
Legislative Council in July, and will improve their
performance on financial reform issues. Olmert strongly
cautioned, however, against counting this sort of progress as
paving the way to talks on a permanent settlement in the near
future. Just because Abu Mazen is savvier than Arafat,
Olmert warned, does not mean that his position on the core
issues of the 1967 borders and refugee return is any
different. Olmert predicted that the PA and the GOI will
likely "get stuck" on these issues despite, he said,
"(Shimon) Peres and (Sylvan) Shalom thinking they can
convince the Palestinians otherwise." Olmert advised the
U.S. not to be too ambitious and get drawn into a process not
yet ripe for resolution -- and perhaps will not be "in our
lifetime." Olmert speculated that the best that might be
achieved now are some steps to improve the Palestinian
economy, until attitudes and circumstances change enough "in
a few years" for the sides to begin talking seriously again.

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GOI Politics Still an Issue
--------------


9. (C) Olmert predicted that the GOI will call elections in
November 2005, adding that holding elections would likely
postpone further withdrawals or actions in the peace process
for "a few months or so." Labor is also very cognizant of
the fact they must build an independent political position
and engage the GOI in serious debate on policy prior to any
elections if Labor is to prevail in the elections, but cannot
do so effectively as long as they are working with the
government. "Just wait," Olmert said, "until Peres starts
meeting with Abu Ala'a and the accusations of who is saying
what to whom start flying."

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Missed Opportunity With Syria
--------------


10. (C) Olmert asserted that the GOI made a mistake by not
sending a secret emissary to Damascus to determine the
seriousness of Bashar al-Assad's intent to renew negotiations
with Israel. Admitting that Israel was not ready to conduct
negotiations on both the Palestinians and the Syrian track
simultaneously, Olmert also said that the lack of U.S.
enthusiasm for the idea contributed to the GOI holding back.
A/S Burns said that even the notion of Syrian-Israeli
negotiations could prove useful to sow doubt between Syria
and Iran. Even if al-Assad's overture was less than genuine,
calling Syria's bluff might help push Syria to use its
influence to rein in Hizballah as a measure of good faith.
Olmert also mused that some effort towards working on the
Syria track could pay dividends in Syria's relations with
Turkey, by demonstrating to the Turks that there are positive
regional developments.


11. (U) A/S Burns has cleared this cable.

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