2006-05-17 16:49:00
Embassy Tel Aviv
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C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 001932 



E.O. 12958: DECL: 05/16/2016

Classified By: Ambassador Richard H. Jones; Reasons 1.4 (B and D).

C O N F I D E N T I A L SECTION 01 OF 03 TEL AVIV 001932



E.O. 12958: DECL: 05/16/2016

Classified By: Ambassador Richard H. Jones; Reasons 1.4 (B and D).

1. (C) Summary: Ehud Olmert's main public goal for his first
trip to Washington as prime minister is to win U.S. support
for what he calls the "convergence plan," which will relocate
60,000 - 80,000 settlers from isolated areas in the West Bank
to other settlement blocs west of the separation barrier
(septel). Despite this focus, Olmert has other important
issues on his plate as well. According to his advisers,
Olmert also plans to discuss the Iranian nuclear threat,
humanitarian assistance for the Palestinians, contacts with
the Palestinians, the isolation of Hamas, and Lebanon/Syria
when he sees the President on May 23. As appropriate, we
recommend that the U.S. side in Olmert's meetings raise
trafficking in persons, efforts to win Israeli membership in
the Red Cross/Red Crescent movement, and
settlements/outposts. Olmert's domestic position has been
bolstered recently by the strength of Israel's 6.6 percent
first-quarter 2006 growth report and the USD 4 billion cash
purchase of an Israeli company by super-investor Warren
Buffet. End summary.

Ending Iran's Nuclear Weapons Program

2. (C) Israelis believe that the Iranian nuclear weapons
program threatens their very existence. Olmert will want to
discuss the United States strategy to ensure that the
international community takes the necessary steps to prevent
Iran from developing nuclear weapons. Israelis
enthusiastically welcomed the President's statement at the
American Jewish Committee affirming America's strong,
enduring, and unshakeable commitment to Israel's security.
Israeli intelligence services, under standing instructions to
present only worse-case scenarios, predict that Iran will
reach the "point of no return" soon. These estimates are
more alarmist than those prepared by the rest of the
international community, including the United States. Israel
has maintained what it considers to be a low-key posture in

the realization that its open involvement in the dispute
would likely be counterproductive. Nonetheless, Iranian
President Ahmadinejad's inflammatory rhetoric has inevitably
goaded Israeli officials to respond sharply on occasion.

Palestinian Issues: Aid, Contacts, and Hamas

3. (C) Olmert wants to work closely with the United States on
continued assistance to the Palestinians. He will want to
know U.S. views regarding which types of projects should
continue. Israeli officials say that Olmert will likely seek
the removal of the hold placed on USAID's Palestinian
Integrated Trade Arrangements (PITA) projects, which, i.e.,
provide USD 50 million for scanners for border crossings.
While the Israelis want maximum pressure on Hamas, they
realize that it is not in their interest to have a
humanitarian crisis in the Palestinian territories. Their
goal is to ensure that assistance to the Palestinian people
does not benefit Hamas. They fear that the mechanism the EU
is developing for providing assistance will be used to pay
salaries or lead to contacts with Palestinian ministries.
Nonetheless, current Israeli thinking on which projects
should be supported on humanitarian grounds may be more
flexible than that of the United States. The GOI supports
maintaining many private-sector development and
infrastructure projects, such as the Hebron sewage treatment
plant, agribusiness partnerships, small business assistance,
and micro-loans, all of which arguably also benefit Israel.
In addition to paying Palestinian bills for electricity and
water, FM Livni has expressed a willingness to consider using
collected Palestinian Authority tax revenues for humanitarian
assistance, most notably medical equipment, but the Israelis
must first develop a system, including the legal means, of
doing so. At this point, they may work through NGOs,
international organizations, or directly with hospitals,
including those in East Jerusalem. Livni has been unwilling
to consider paying Palestinian fuel bills, but did not rule
out the possibility of supporting a humanitarian fuel reserve.

4. (C) Although the Israelis say they are willing to give
negotiations with the Palestinians a chance prior to
unilateral moves, Olmert has told many U.S. visitors that
there is no Palestinian partner. The Hamas government has
declined to accept the three U.S./Israeli conditions for
dialogue, and Olmert views President Mahmud Abbas (Abu Mazen)
as well meaning but ineffective. The Israeli Government
would have preferred to boycott any foreign official who
meets with any Palestinian Authority official, including
Abbas, but instead developed a more nuanced policy once it
became clear that the United States would continue to deal
with the Palestinian President. Olmert's advisers justify
their disdain for engaging with Abbas by insisting that Hamas
is using the office of the president to gain international
legitimacy. The Labor Party and parts of Olmert's own Kadima
Party favor renewing negotiations with Abbas. Olmert's
advisers have hinted that he may do so sometime in June.
Peretz stated this as fact to the Ambassador on May 17.

5. (C) Olmert and his staff remain concerned that the UN,
Russians, and European Union will gradually break ranks with
the international community's insistence that Hamas recognize
Israel, renounce violence, and accept previous agreements
such as the Roadmap and the Agreement on Movement and Access.
He will want reassurances that the United States will not
only maintain its current policy, but also continue efforts
to keep others on board.


6. (C) Although casualties along Israel's northern border
have decreased since 2000 when Israel withdrew its forces
from southern Lebanon and adjusted its "blue line" (de facto
border) under UN supervision, Israel continues to face
Hizballah attacks and to conduct reconnaissance overflights
of Lebanese airspace. The Israelis are privately supportive
of U.S. policy on Lebanon, particularly Franco-American
initiatives at the UN calling for the disarmament of armed
militias (UNSCR 1559) and investigation of responsibility for
the murder of former Lebanese PM Hariri. At our urging, they
have maintained a low public profile on these issues, despite
their frustration with the failure of the Lebanese Armed
Forces to displace terrorist militias in the border region.
The exceptions to this low-profile approach are frequent
Israeli violations of Lebanese airspace, often to remind the
Lebanese of Israeli military dominance. Olmert and his
advisers strongly support the U.S. policy of isolating the
Asad regime in Damascus, but have expressed concern that
regime change could result in a less stable and more
dangerous Syrian government.

Trafficking in Persons

7. (C) The Government of Israel has made appreciable progress
in fighting trafficking in women. Problems remain, however,
in Israeli efforts to combat labor trafficking, and these
problems may lead the U.S. Government to downgrade Israel's
status in the annual trafficking report, due out in June.
Such a downgrading will be an embarrassment to the GOI, which
was originally categorized as a Tier 3 country, the lowest
ranking, but advanced to Tier 2 status by virtue of its
active and largely successful efforts in recent years to
combat sex trafficking. Olmert reportedly raised with
Foreign Minister Livni at a May 14 Cabinet meeting the need
for further GOI action to combat labor trafficking. The
Ambassador has pressed Livni, Justice Minister Ramon, Defense
Minister Peretz (in his capacity as head of the Labor Party),
and other senior officials to take expeditious action. Given
the President's stated personal determination to combat
trafficking in all forms, and the seriousness of a partial
downgrading of Israel's ranking, USG officials should use the
visit to press Olmert for action. If the issue is discussed
in Washington, Olmert may press for U.S. assistance in
securing Israel's border with Egypt, which Israeli officials
claim is a prime conduit for sex trafficking victims, but
which contributes only little to the overall trafficking
problem. FM Livni made such a pitch in April, maintaining
that an increase in border security would improve Israeli
security against infiltration by terrorists, criminals, and
traffickers from the Sinai. Israel does not, however, want
to see an enhanced Egyptian troop presence along the border.

Israeli Membership in the Red Cross Movement

8. (C) The United States and Israel have worked for decades
to obtain admission of the Magen David Adom (MDA) first aid
society into the International Red Cross/Red Crescent
Movement. That effort cleared a major hurdle in December,
when the member countries approved in principle the use of a
new "red crystal" protective emblem for those countries that
prefer not to use a cross or crescent. As the critical
element of this development, Israel committed to taking
several actions to bring itself and the MDA into compliance
with the Movement's provisions. International delegates will
convene on June 20-21 in Geneva to vote on amending the ICRC
statutes and admitting MDA into the movement. Prior to that
vote, it is key that -- by May 31, when a compliance visit is
to be conducted -- the GOI agree to amend the MDA's own
statutes and to implement an agreement signed in December
between MDA and the Palestinian Red Crescent Society.
Failure to do so by that date would be a serious setback in
our decades-long mutual effort, which we have reinvigorated
recently through intensive efforts with the highest levels of
the new GOI (including Livni, Ramon, and Peretz). While
Olmert is unlikely to be aware of the details of the
technical changes, he will certainly understand the
importance of not missing this opportunity.

Settlements and Outposts

9. (C) Officials of the new GOI have given assurances that
Israel plans to carry out its now years-long commitment to
remove all illegal outposts within one year. As recent
violent clashes during the evacuation of Amona outpost
illustrate, moving settlers from the 22 illegal outposts
identified by Israel will be quite difficult. (Note: We
count 44 illegal outposts established since 2002. End note.)
Justice Minister Ramon stated recently that the separation
barrier should be completed by the end of 2006. This
timetable could be met practically, but litigation before the
Israeli Supreme Court challenging the barrier's route could
slow implementation. Once the barrier is completed, Olmert
plans to provide compensation to settlers who voluntarily
leave both illegal and legal outposts and settlements lying
east of the barrier. Although he is committed to closing
illegal outposts as part of his convergence plan, the issue
still represents a political minefield for him, one he will
have to tread carefully. Coalition members such as the
religious Shas Party and other groups, although not
representing a majority of the population, remain opposed to
additional evacuations.

Israeli Economy Flourishing

10. (C) Olmert's domestic position has been bolstered
recently by good news on the strength of the Israeli economy,
which grew at the rate of 6.6 percent for the first quarter
of 2006, compared to an already impressive 5.2 percent rate
for all of 2005. This growth report came on top of the news
of the USD 4 billion cash purchase by Warren Buffet 80
percent of the Israeli firm, Iscar, which specializes in the
production of specialized blades and cutting tools.
Furthermore, several investment and rating firms have come
out recently with positive reviews of the economy, including
Morgan Stanley, which called Israel's economic situation
"almost perfect." The formation of the governing coalition
has, however, been expensive, and it is not yet clear how
strictly the government will adhere to the idea of fiscal
restraint. Although there have been press reports indicating
that the GOI will increase year-to-year expenditures by the
rate of growth of the population -- 1.7 percent -- instead of
the one percent to which it is limited by the 2003
U.S.-Israel Loan Guarantee Agreement, Finance Minister
Hirchson assured the Ambassador on May 16 that the government
remains strongly committed to the one-percent figure and to
careful fiscal restraint. He noted that as chairman of the
Knesset's Finance Committee, he had partnered with then
Finance Minister Netanyahu in securing passage of the
previous GOI's economic reform package. There would be no
roll back of reform on his watch.

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