AMBASSADOR'S MEETING WITH BIBI NETANYAHU

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 003843

SIPDIS

E.O. 12958: DECL: 09/27/2016
TAGS: PREL PGOV ECON IS IR XF
SUBJECT: AMBASSADOR'S MEETING WITH BIBI NETANYAHU

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


1. (C) Summary: In a meeting with Likud Party leader Bibi
Netanyahu September 26, Netanyahu told the Ambassador he was
pleased with his recent visits to Washington and London, and
appeared confident that he and his party would make a
political comeback as a result of the Israeli public's swing
to the right, in the wake of its summer conflicts. He did
not point to a specific mechanism or timetable for Prime
Minister Olmert's coalition to collapse, but he asserted that
Olmert and Peretz had exhausted their reserves of popular
good will and would therefore not be able to recover from the
criticism of their performance in the Lebanon war. Netanyahu
said he was rethinking his attitude toward moderate Arab
regimes, noting that he sensed a positive shift in the Gulf
as a result of the Lebanon war and Iran's nuclear program.
Netanyahu praised President Bush for saying that a nuclear
armed Iran was unacceptable, and urged U.S. action to prevent
Iran from developing nuclear weapons. "We do not want to
find out whether a nuclear Iran is ready to sacrifice
millions in order to destroy Israel," he said. The
Ambassador briefed Netanyahu on three pieces of legislation
in the Knesset: to criminalize labor trafficking, improve
export controls, and modernize Israel's copyright law. He
asked for Likud's support on the first two, noted U.S.
concerns about the third. Netanyahu offered his support on
labor trafficking and the copyright legislation, but said he
would like to see the standards the U.S. was proposing Israel
meet on export controls, especially for transfer of dual-use
technology. End Summary.

Iranian Threat Creating New Opportunities
--------------


2. (C) The Ambassador, accompanied by Political Counselor,
called on Likud leader Bibi Netanyahu September 26.
Netanyahu was accompanied by Likud Knesset member Gilad
Erdad, a member of the Knesset's Economic Affairs committee.
In response to a query from Netanyahu the Ambassador began by
noting that the Gulf states were alarmed by the growing
threat from Iran, and this could be good news for Israel.
Netanyahu agreed, saying there was now room for Israel to
create new alliances, including with Saudi Arabia. Although
he had often criticized the Arab governments for failing to
think strategically, Netanyahu said they were waking up to
the threat that an Iranian nuclear capability would
constitute. The Ambassador noted that Arab states were also
concerned by Ahmadinejad's attempts to play the Arab street
and to assert leadership of the Muslim world. Netanyahu said
he was changing his view of the moderate Arabs; there was an
opportunity now for Israel to establish real alliances. The
Ambassador commented that the Arabs also appeared more
willing to facilitate progress with the Palestinians.
Netanyahu replied that the Hamas government must be brought
down, but if Iran developed a nuclear bomb it would not
matter what Israel did with the Palestinians since the
moderate Arab regimes would be swept away.


3. (C) Netanyahu stated that militant Islam, in both its
Sunni and Shia forms, was the "third ism" to threaten the
West after Nazism and Communism. Sunni and Shia militants
fought each other for dominance, but they also would join
together to fight the West. Americans should remember that
Israel was only the "little Satan" while the U.S. was the
"great Satan." The Iranians were smarter than Hitler, he
said, because they were developing their nuclear bomb before
starting a war. The key question was whether the U.S. would
act to prevent Iran from getting a bomb. Israel could not
afford to wait to find out whether a nuclear Iran was
suicidal. He quoted Rafsanjani as once saying that Iran
could destroy Zionism with a single bomb. Ahmadinejad, who
was more of a religious fanatic than Rafsanjani, might be
willing to sacrifice millions of Iranians in order to wipe
out Israel. Israel could not take that risk.


4. (C) Netanyahu said that in his meetings in Washington
with Vice President Cheney and several Senators, he had found
complete comprehension of the seriousness of the Iranian
threat. European views are also evolving, he said,
especially when Europeans consider the effect on their own
Muslim minorities of a nuclear-armed Iran. The "pathology of
terrorism" is getting the Europeans' attention. The
Ambassador noted that Islamic militants tried to instill fear
of the West, but we should not forget that they only
represent a small percentage of Muslims. Netanyahu said the
question was how to offer an attractive alternative for
hundreds of millions of Muslims. He and the Ambassador
agreed that democratic reform was part of the answer, but
Netanyahu stressed that democratization was a complicated
process that required a comprehensive approach and took time.

Olmert's Government Weak
--------------


5. (C) Commenting on Israel's internal political situation,
Netanyahu observed that politicians can survive political
mistakes if they have deep reserves of trust. In the case of
Olmert and Peretz, however, they had no such reserves. The
government could have gained the public's trust if it had run
the Lebanon war differently, for example by implementing a
more daring plan developed by Shaul Mofaz when he was Defense
Minister. Now Olmert was in trouble, but it was unclear what
would happen next. He could muddle through for some time, or
the coalition could collapse if one party bolted, or there
could be a leadership challenge within either Kadima or
Labor. Olmert could also try to broaden his coalition by
bringing in Avigdor Lieberman, but he did not have much to
offer.


6. (C) Exuding confidence, Netanyahu said Likud was not
trying to undermine the government but was working on
offering a credible alternative. He argued that Israeli
public recognized that Israel could not allow "a third
Islamic base" to be created in the West Bank now that the
results of its withdrawals from Gaza and southern Lebanon had
become clear. He criticized the way Israel had withdrawn
from southern Lebanon in 2000, noting that if Barak had first
struck a strong blow against Hizballah and then withdrawn in
an orderly manner, he would not have created the impression
of Israeli weakness that built up Nasrallah and also
encouraged the Second Intifada. Israelis now see Likud as
having the "more realistic" message. Also on the economy,
Kadima and Labor had no vision. Netanyahu said the
government would probably not fall over the budget, but he
insisted Israel still needed to cut taxes and remove barriers
to competition.

Looking to U.S.
--------------


7. (C) Returning to Iran, Netanyahu said Israel was looking
to the U.S. to prevent an Iranian bomb. If the Iranians are
not stopped, there will be a whole array of problems to
consider. Netanyahu praised President Bush's comment that
the "free world" would not allow Iran to develop nuclear
weapons, noting that this appeared to emphasize a coalition
outside the UN framework. He recommended that the U.S.
invest greater effort in convincing Russia of the threat. In
addition, the Iranian program was pushing Egypt and possibly
Saudi Arabia toward developing their own nuclear programs.
Saying that the world was approaching a pivotal point,
Netanyahu said President Bush would do the whole world a
favor if he acted against Iran's nuclear program. Noting
that the military option might not be feasible, the
Ambassador suggested Netanyahu might wish to discuss these
issues with U/S Burns when he visited Israel for the next
session of the bilateral Strategic Dialogue.

Support on Legislation
--------------


8. (C) Ambassador raised three pieces of legislation pending
in the Knesset. First, a bill criminalizing trafficking in
labor had passed the first reading and was being prepared for
the second reading. Netanyahu agreed the Likud would support
it, noting that in addition to humanitarian concerns, he was
for putting more Israelis to work. Second, there was a bill
to tighten Israel's controls on exports of sensitive
technology, including dual use. The Ambassador stressed that
this legislation would bring Israel up to international
standards. Netanyahu said he would consider the request and
asked that the Embassy provide him with information on
international standards. Third, Ambassador asked that Likud
not support the current draft copyright law which appeared to
legalize violations of IPR standards. Netanyahu commented
that Likud controlled the Knesset's Economic Committee and he
would look into opposing this legislation. He said his only
question was whether the U.S. was making the same demarche in
China since Israel was only a "minor violator" of IPR
compared to China. Ambassador assured him this issue was
very much on our agenda with China, but added that these
issues were problem areas in U.S.-Israeli bilateral
relations, and we would appreciate Likud's support in
addressing them.



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