Identifier
Created
Classification
Origin
05TELAVIV723
2005-02-07 08:07:00
SECRET
Embassy Tel Aviv
Cable title:  

PERES PURSUES DIRECT TALKS ON GAZA DISENGAGEMENT

This record is a partial extract of the original cable. The full text of the original cable is not available.
S E C R E T SECTION 01 OF 03 TEL AVIV 000723 

SIPDIS

E.O. 12958: DECL: 02/04/2015
TAGS: PREL ECON KWBG IS GAZA DISENGAGEMENT ECONOMY AND FINANCE ISRAELI PALESTINIAN AFFAIRS
SUBJECT: PERES PURSUES DIRECT TALKS ON GAZA DISENGAGEMENT
ECONOMIC ISSUES


Classified By: DCM Gene A. Cretz for reasons 1.4 (B) and (D)

S E C R E T SECTION 01 OF 03 TEL AVIV 000723

SIPDIS

E.O. 12958: DECL: 02/04/2015
TAGS: PREL ECON KWBG IS GAZA DISENGAGEMENT ECONOMY AND FINANCE ISRAELI PALESTINIAN AFFAIRS
SUBJECT: PERES PURSUES DIRECT TALKS ON GAZA DISENGAGEMENT
ECONOMIC ISSUES


Classified By: DCM Gene A. Cretz for reasons 1.4 (B) and (D)


1. (S) Summary: DPM Shimon Peres is moving quickly to
initiate direct negotiations with the PA on Gaza
Disengagement economic issues. Following the template
established by the World Bank process, Peres met February 2
with Mohammed Dahlan and Sa'eb Erekat to set a path toward
face to face negotiations on settler assets, border passages
and industrial zones according to his advisor Einat Wilf.
Wilf predicts that within the next two weeks the two sides
will split into three subject matter committees with the GOI
team relying on the NSC, COGAT and Ministry of Justice staff
who have been coordinating with the World Bank. During his
meeting with the PA and previous meetings held by Peres last
week in Davos, where he pitched for U.S. and European private
sector investment in the West Bank and Gaza and for support
for a plan to establish a PA social welfare program, there
were signs of renewed flexibility in GOI positions on Gaza
disengagement issues especially on the disposition of settler
assets and the preservation of hot houses and other settler
agricultural businesses. End Summary

-------------- --------------
Movement on Direct Talks on Disengagement Issues:
-------------- --------------


2. (S) In a February 2 meeting with Econ Counselor and
USAID Mission Director, Einat Wilf, special advisor to Deputy
Prime Minster Peres, disclosed the discussions between Peres
and the PA leading to movement towards direct negotiations on
Gaza disengagement economic issues with the PA. In meetings
with PA Finance Minister Fayyad at Davos and with Palestinian
negotiator Saab Erekat and Mohammed Dahlan on February 2 in
Jerusalem, Peres has begun a push toward direct negotiations
and to interest both foreign country and private sector
investment in the future of the post-disengagement Gaza
economy. The result of the meetings with the PA includes
plans for several more meetings to define terms of reference
and then a split into working groups covering settler assets,
passages and industrial estates. The GOI will be represented
at the working group level by NSC, MOJ and COGAT staffs who

have been working with the World Bank. (Comment: Ministry of
Finance officials that had been working on passages and
industrial estates seem to have been left out of this
process, in part we surmise, because of Peres' cool
relationship with Minister Netanyahu. End Comment) Ministry
of Finance officials we have talked to have brushed off
Peres' efforts, indicating the MOF along with the PM's office
would ultimately play the more influential role. Wilf said
that the GOI would seek assistance in the direct talks from
the U.S. and the World Bank as circumstances dictate.

--------------
With Fayyad in Davos:
Transport Links and a Social Security Net
--------------


3. (S) In Davos, Peres met with PA Minister of Finance
Fayyad and discussed the possible railroad link from Gaza to
the port of Ashdod, but not curiously the link with the West
Bank. According to Wilf, Fayyad endorsed the railroad link
but only if the PA was assured that a seaport would also be
built. On the issue of assets, Fayyad reportedly agreed to
Peres' proposal that settlement homes be kept intact and that
agricultural assets need to be maintained and transferred in
whole to the PA. (Note: PA officials have told ConGen
Jerusalem Offs that the PA's preference is for settlement
homes to be removed by the GOI, including the rubble, before
the assets are handed over. End note.) They also discussed
the establishment of a Palestinian social safety net to help
the PA compete with Hamas' successful social programs. Wilf
said that Peres had also raised the idea of a social
insurance plan in talks with the Norwegian Prime Minister who
said Norway would take this under consideration. According to
MOF's Rani Lobenstein, Fayyad has begun talks regarding the
social insurance program with the resident IMF
representative. While the issue has yet to be raised with
USAID, Fayyad did discuss it with A/S Burns in their January
26 meeting (Jerusalem 332). Also at Davos, Peres met with a
series of international company CEOs including HP, Radisson
Hotels, Starwood Hotels and Cisco systems to encourage
investment in a post-disengagement Gaza. Among the ideas he
fielded were turning evacuated settler housing into tourist
resorts and replicating the successful WEF sponsored Jordan
Education Initiative to raise the level of high-tech
infrastructure. (Note: The PA has told ConGen Jerusalem Offs
that its still-in-draft medium-term development plan includes
a special focus on Gaza and the settlement assets. They say
they are looking holistically at all of the assets to see how
they can best be used to serve, over the long-term, the
growing needs of the Gaza population. End note.)

--------------
Evolving GOI positions:
--------------

4. (S) Settler Assets:

Wilf said that there is a growing consensus among the GOI
ministries to preserve settler housing. Earlier in the week,
NSC advisor Gaby Blum told EconCouns that the NSC now
believed that tearing down evacuated settler housing and
carting away the rubble could not be accomplished within an
accelerated timeframe for disengagement and that the cost
would be prohibitive. Adoption of an idea to have a third
party take possession of the houses and sell or to donate
them to the PA has been under consideration. Wilf said that
Peres was considering a plan that alters the original terms
proposed for settler compensation of Gaza businesses. In the
present plan, the GOI would pay compensation for only forty
percent of the value of the businesses, that is for land and
buildings only, leaving the owners with the right to sell
machinery, infrastructure and goodwill and pocket the
profits. Peres now believes that the GOI should buy these
businesses outright so that the government takes on the
responsibility for protecting the assets during the
evacuation and in the hope that they could then sell them to
the PA. (Note: This is an interesting proposal but one which
would leave the PA with increased leverage and a possible
windfall as the only possible buyer of the assets. End note)
A separate proposal by the Aspen Institute, to buy the
housing from the settlers and then donate it to the PA after
disengagement, has been making the rounds according to Blum.
USAID Mission Director has raised this issue with the PA
underlining the importance of making decisions on the assets
before the envelope for preserving them closes.


5. (S) Passages:

Clearly the issue of the border passages is utmost on the
minds of the GOI, and Wilf and Blum confirmed that the
agreement to purchase two Chinese scanners and upgrade the
Karni crossing is underway. (Note: WB Country Director Nigel
Roberts questioned the Chinese scanner Karni deal saying that
the PA is likely paying too high a price for dubious quality
and wondered why there would be an 18 month lag between
placing the order and installing the scanners. End note.)
Plans for a USD 140 million upgrade of five WB/Gaza passages
has been agreed to with Fayyad according to Wilf, with the
World Bank committing to help raise the PA half of the
funding. (Note: While Nigel Roberts says that in his meeting
with Peres he spoke in positive terms about the effort, no
commitments to raise the funds for the PA were made. Roberts
told USAID Director and ConGen EconChief February 4 that he
would like to work with USAID on upgrading one passage in
Gaza and one passage on the Green Line in the West Bank as
part of a pilot program first. End note.) The present
Israeli proposals separate the funding for the passages into
two USD 70 million portions, half for technological
improvements and an equal amount for infrastructure upgrades.
However, Wilf agreed with the World Bank argument that
managerial systems and standards of practice are of equal
importance with hardware fixes, and need to be addressed in
order to solve the present logjam of humanitarian and
commercial goods into Gaza. Wilf indicated a significant
change in the Israeli position on customs and security at the
borders saying that the GOI would now seriously entertain the
use of third parties to provide these functions. When the
EconCouns and USAID Mission Director raised the problems
encountered by PA officials, average Gazans and members of
international humanitarian organizations passing through the
Gaza crossings Wilf, though not fully briefed on the subject,
said she would raise this as a priority issue to be addressed.


6. (S) Industrial Estates/Labor:

In his discussions in Davos, Peres has been urging a plan for
individual countries to establish their own industrial parks
in the WB/Gaza, and has urged the Wallenburg family to pursue
a Swedish park. According to Blum, the East West Institute
has approached the GOI with a plan to invest in the
resuscitation of the Erez Industrial Estate. The NSC has told
the Institute that the GOI will not supply funding for this
purpose and urged them to go to the private sector for
possible support. However, there is still no flexibility on
the GOI position to ban Israelis from entry into Gaza after
disengagement or on the limitations for Gazan laborers
entering Israel, putting a significant obstacle to Industrial
Estate development.


7. (S) Customs envelope and Rafah/Philadelphi:

According to Rani Lobenstein, he has raised the issue of the
perpetuation of the customs envelope under the Paris Accords
with Fayyad, who agreed that post-disengagement, the PA
preferred to have the Israelis maintain the customs envelope
due to a lack of technical expertise on the part of the PA.
Lobenstein says he has consensus in the GOI for maintaining
the customs envelope after an evacuation of the Philadelphi
Strip if the Rafah crossing can be moved to Keren Shalom, at
the point where the borders of Israel, Egypt and Gaza meet.
This proposal has not been broached with the PA and in the
past we have heard of objections to this plan from the
Egyptians, who have invested significant funds to upgrade
their side of the Rafah crossing.

--------------
Comment
--------------


8. (S) According to the NSC, Peres has the "green light"
from the Prime Minister to pursue direct talks with the PA on
the economic aspects of the disengagement. Blum commented
that it is unlikely that Peres' discussions will avoid
security issues. There are now signs of a new flexibility and
a general re-thinking of GOI positions toward the
disengagement issues laid out in the World Bank report.
However, some of the relevance of proposed follow on steps
proposed by the World Bank -- pilot programs for the
passages, benchmarks and monitoring -- could soon be
overtaken by events.

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