PERES: GAZA DISENGAGEMENT INCOMPLETE

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 006176

SIPDIS

E.O. 12958: DECL: 10/20/2015
TAGS: ECON KPAL KWBG PGOV PREL IS GAZA DISENGAGEMENT GOI INTERNAL ISRAELI PALESTINIAN AFFAIRS
SUBJECT: PERES: GAZA DISENGAGEMENT INCOMPLETE

Classified By: Ambassador Richard Jones for Reason 1.4 (b) and (d)


1. (C) Summary: In a recent meeting with the Ambassador,
Vice Premier Peres said that advancing the peace process and
combating poverty in Israel would be the most important
issues in the lead up to elections late next year. He stated
that the GOI's disengagement from the Gaza Strip would be
incomplete until agreements were reached on the passage of
people and goods. Until then Gaza would remain a prison.
While noting that the GOI had to clarify some of its own
positions, Peres described PA Chairman Mahmud Abbas as weak
and unwilling to confront an increasingly powerful Hamas.
Peres said he had recently discussed with UK PM Tony Blair
the possibility of UK funding for a West Bank-Gaza
transportation link, but noted that public assistance and
private investment would not be forthcoming in the absence of
stability. Peres suggested that, until the conflict between
traditionalists and modernizers in the Middle East is
resolved, few moderate voices would have the will or the
capability to openly espouse modernization and democratic
principles. He believed, nevertheless, that the PA, with
some assistance, could be democratic. He claimed that PM
Sharon was now inclined to help the PA achieve statehood.
End Summary.


2. (C) On October 3, the Ambassador made an introductory
call on VP Peres. ECON/C and POL/C accompanied. Peres began
by describing the political situation in Israel. While
asserting that the past year had gone "better than expected,"
particularly in regard to GOI's disengagement from Gaza,
Peres suggested that the focus on elections in October 2006
may detract from the "supreme effort" needed to advance the
peace process and improve the economic situation in Israel.
He declared that the Labor party had sacrificed everything
for the Gaza disengagement, adding that the government would
not have survived without Labor's support. Peres continued
that, while remaining in the ruling coalition, Labor would
seek agreement on erasing poverty in Israel and furthering
the peace process. As a member of the ruling coalition,
however, Labor has found it difficult to achieve its goals
and receive credit for any successes, according to Peres.
Under these circumstances, he added, the younger generation
within the Labor party is growing impatient.


3. (C) Although pleased with how the disengagement has gone
thus far, Peres said that the GOI would not truly be out of
Gaza until agreement on the passages was reached. Without
freedom of movement, Peres continued, Gaza was "still like a
prison." In reply to the Ambassador's question on how to
proceed with talks over the Rafah crossing, Peres said that
the GOI first needed to make its own internal decisions
related to control of Israel's borders with Gaza. He added
that talks about Kerem Shalom as an alternative crossing
point required more time. Egypt's role also needed to be
better defined. He asserted that the Rafah crossing
ultimately can open for two-way passage of people with a
third-party role.


4. (C) Peres expressed concern about the security situation
in Gaza and PA Chairman Abbas's reluctance to confront Hamas.
He said that Abbas claims to be too weak and also wishes to
avoid an internal confrontation potentially leading to a
civil war. Describing the current situation as a "test of
wills" between the PA and Hamas, Peres characterized Hamas as
the greatest threat to stability.


5. (C) In the absence of stability, no one will be inclined
to finance Gaza reconstruction, according to Peres. For
example, attracting private investment to fund a vital West
Bank-Gaza transportation link and other projects is extremely
difficult. Peres advised that on a recent trip to London he
had spoken to UK PM Tony Blair and asked that the British
provide $100 million for the project. He also requested that
private companies be encouraged to match this investment in
the West Bank and Gaza. To attract private investment, Peres
recommended to Blair expanded quotas for exports to the EU,
loan guarantees, and the establishment of industrial parks
geared to the EU market (EU QIZ). Peres remarked to the
Ambassador that outsourcing is better than charity and
economic aid is better than financial aid.


6. (C) Peres stated that violence and instability continue
to thwart economic growth and modernization, and not just in
Gaza, but in the region as a whole. He declared that a
contributing factor to the current situation was the "Middle
East's inability to come to terms with the modern world.
Confronted by terrorism and traditionalists, moderates cannot
promote modernization and openly embrace change. Peres cited
Saudi Arabia as an example of a society "out of kilter." He
said that in their effort to co-opt religious groups, Saudi
rulers had created distortions in the Saudi education system,
resulting in young people there who are less skilled and less
familiar with the West than their fathers. In fact, Peres
continued, this generation of Saudis shuns foreign influences.


7. (C) Peres asserted that the PA can be democratic, despite
its lack of experience in statehood, but it needs help. He
said the establishment of solid government institutions was a
priority and agreed with the Ambassador that it was in
Israel's interest to help the Palestinians. Peres said that
PM Sharon now recognizes the need to help the PA achieve
statehood. One impediment to such a goal, according to
Peres, is the lack of leadership in the PA, effectively
leaving the GOI without a partner to work with for now.


8. (C) Peres also raised the issue of economic development
for the Negev and the Galilee.
He advised that economic development in these regions was
essential in the context of the demographic challenge Israel
is facing. He cited the changed character of Lebanon as the
numbers of Christians dropped significantly while the Muslim
population grew rapidly. While the size of the Jewish
majority in the Negev and the Galilee may vary, Jewish
majorities in these regions must be maintained, he asserted.



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