PM OFFICE DG SAYS RETURN TO ROADMAP VITAL TO

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 006127

SIPDIS

E.O. 12958: DECL: 10/18/2015
TAGS: ECON IS PREL ISRAELI PALESTINIAN AFFAIRS GAZA DISENGAGEMENT
SUBJECT: PM OFFICE DG SAYS RETURN TO ROADMAP VITAL TO
STABILITY IN PA, ISRAEL


Classified By: Ambassador Richard H. Jones for reasons 1.4 (b,d)

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Summary
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1. (C) In an October 6 meeting with Ambassador Jones, Ilan
Cohen, the Director General of the PM,s Office, said that
Israeli society needed to heal the serious rifts that had
been opened by the disengagement from Gaza. On the peace
process, he said that there would be no West Bank
disengagement, but that it is vital to return to the roadmap.
He agreed with the Ambassador,s point that PA President
Abbas can succeed in the fight against Hamas only if the
Palestinians see economic improvement, but noted that Israel
is constrained in what it can do by security considerations.
On Israel,s domestic economy, Cohen noted improvement, but
said that its continuation depended on political stability
and a return to the roadmap. Regarding bilateral trade
issues, he said that there was some progress on standards,
and that he would look into the other bilateral trade
irritants. End Summary.

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Vital to Soothe Disengagement Tensions
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2. (C) Cohen began the meeting with Ambassador Jones by
stressing the trauma caused to Israeli society by the Gaza
Disengagement. He said that in addition to the bitterness
felt by the 8,000 settlers uprooted from Gaza, the entire
religious Zionist sector within Israeli society felt
alienated. He noted that soothing the tensions would be
difficult, but vital to the long-term health and stability of
the country.

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Defeating Hamas Key to PA Prosperity
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3. (C) Remarking that a West Bank Disengagement was not in
the cards, Cohen said that Israel, the U.S., and the EU need
to move fast to reach agreement on reinvigorating the
roadmap. The Ambassador noted that, in addition to carrying
out their roadmap obligations, the Palestinians also need to
see the benefits of disengagement, such as a West Bank )
Gaza transportation link. He said that only such progress
would provide President Abbas with the support he needs.
Cohen agreed with the need to support Abbas and to help him
fight Hamas by improving the Palestinian economy via large
scale internationally-funded projects. He said that it would
only take $120 million per year to set up a social security
system to compete with the social services provided by Hamas,
and that Deputy Premier Peres is looking into how to set up
such a mechanism. He asserted, however, that the PA
President was making a mistake in not dealing with the
terrorist organizations now, saying that compromising with
such groups never succeeds. He added that pleading
&weakness8 in the Middle East could be fatal.


4. (C) Cohen then said that, according to GOI estimates,
Palestinians living in third countries might be willing to
invest between $300 and $500 million in Gaza, but that no one
would put money at risk unless the PA ensured a stable
security situation. In addition, he noted that 300,000
Israeli Arabs used to vacation at Gaza,s beaches, saying
that they would likely do so again if there is a stable
security situation. Citing the case of the greenhouses as a
unique &win-win8 situation where both sides benefited,
Cohen indicated that Israel,s refusal to compromise on
security hampers its overall ability to help resolve Gaza,s
economic problems. He said that, as a neighbor, Israel wants
to have a good economic relationship with the Palestinians,
but that it is important for the PA to build trade ties with
the private sector in the outside world, and not depend on
exporting labor to Israel.

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Israel,s Prosperity Depends on Political Stability
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5. (C) On Israel,s internal economic situation, Cohen said
that over 5 percent growth is being predicted for 2006, along
with a reduction in the unemployment rate to 8.7 percent.
(Note: The unemployment rate is now 9 percent. End Note.) He
also noted that rate of incoming foreign direct investment is
now the highest on record. However, he stressed that
continued economic improvement depended on political
stability and a return to the roadmap.

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Some Progress on Bilateral Issues
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6. (C) The Ambassador raised several problematic bilateral
issues, including standards, procurement, and IPR. Cohen
responded that discussions on standards have been going well
and that Israel will import more products that meet only U.S.
standards. Remarking that IPR is a sensitive global issue,
he indicated that he will look into the other areas of U.S.
concern, including the proposed Patent Term Extension Law.

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