WILL OLMERT AND PERETZ WEATHER THE STORM NOW THAT

C O N F I D E N T I A L TEL AVIV 000224 SIPDIS SIPDIS E.O. 12958: DECL: 01/19/2012 TAGS: PGOV PINR IS SUBJECT: WILL OLMERT AND PERETZ WEATHER THE STORM NOW THAT HALUTZ IS GONE? REF: TEL AVIV 25 CLASSIFIED BY: AMBASSADOR RICHARD H. JONES. REASON 1.4 (B/D) ¶1. (C) SUMMARY: THE RESIGNATION OF THE IDF CHIEF OF GENERAL STAFF (COS) HAS PROMPTED INCREASED MEDIA SPECULATION THAT OLMERT MAY RESHUFFLE HIS CABINET BEFORE THE PUBLICATION NEXT MONTH OF THE INTERIM WINOGRAD COMMITTEE REPORT ON THE LEBANON WAR, A REPORT THAT IS LIKELY TO FURTHER WEAKEN HIS PUBLIC STANDING. NONE OF THE MAJOR POLITICAL PARTIES IN THE GOVERNING COALITION ARE EAGER FOR EARLY ELECTIONS: SEVERAL OF KADIMA'S TOP LEADERS ARE UNDER CRIMINAL INVESTIGATIONS (OLMERT, HIRCHSON, HANEGBI, RAMON); THE LABOR PARTY IS CONSUMED IN INTRA-PARTY POSTURING IN ADVANCE OF MAY 28 PRIMARIES; AND YISRAEL BEITEINU HAS YET TO PROVE TO ITS SUPPORTERS THE WISDOM OF JOINING THE KADIMA-LABOR COALITION. AGREEMENT BETWEEN PERETZ AND OLMERT ON A NEW IDF CHIEF OF STAFF COULD PROVIDE AN OPPORTUNITY FOR RAPPROCHEMENT, BUT MOST BETS ARE THAT EHUD BARAK WILL REPLACE AMIR PERETZ AS DEFENSE MINISTER BEFORE TOO LONG. END SUMMARY. -------------- HALUTZ IS OUT; WHO'S NEXT TO GO? -------------- ¶2. (C) THE RESIGNATION OF DAN HALUTZ AS IDF CHIEF OF STAFF -- MORE THAN A MONTH AHEAD OF THE WINOGRAD COMMITTEE'S MUCH-ANTICIPATED REPORT ON THE LEBANON WAR AND JUST A WEEK BEFORE HALUTZ IS DUE TO TESTIFY TO THE COMMITTEE -- REMOVES THE ONE PERSON THAT THE UPPER POLITICAL ECHELON, PARTICULARLY PM EHUD OLMERT AND DEFMIN AMIR PERETZ, HAD HOPED WOULD BE THE SCAPEGOAT FOR THEIR PERCEIVED FAILURE TO ACHIEVE ISRAELS WAR AIMS LAST SUMMER. CORRUPTION INVESTIGATIONS AND SEXUAL HARASSMENT SCANDALS HAVE FURTHER SOURED THE PUBLIC MOOD ON THE COUNTRYS POLITICAL LEADERSHIP. NEARLY 85 PERCENT OF THE ISRAELI PUBLIC THINKS THAT ALL OF THE CURRENT POLITICAL LEADERSHIP IS CORRUPT, ACCORDING TO A JANUARY 10 DAHAF POLL PRODUCED FOR THE KNESSET CHANNEL, AND ANOTHER RECENT POLL INDICATED THAT THE PUBLIC WANTS BOTH OLMERT AND PERETZ TO RESIGN. IN THE WORDS OF ONE KNESSET AIDE IN THE YISRAEL BEITEINU PARTY: "HALUTZ WAS THE BUFFER ZONE -- AS FAR AS ACCOUNTABILITY GOES -- BETWEEN OLMERT, PERETZ AND THE ARMY. HE WAS GOING TO BE THE SCAPEGOAT. NOW THE WINOGRAD COMMITTEE CAN'T PUNISH HIM AS HE IS ALREADY OUT. SOMEONE ELSE HAS TO GO." -------------- OLMERT AND PERETZ - WAITING FOR WINOGRAD -------------- ¶3. (C) THE VERDICT IN THE SEXUAL HARASSMENT TRIAL OF FORMER JUSTICE MINISTER HAIM RAMON (KADIMA) IS EXPECTED TO BE ANNOUNCED BY THE END OF JANUARY; HIS LIKELY ACQUITTAL WILL PROVIDE OLMERT WITH AN OPPORTUNITY TO REINTEGRATE RAMON IN THE GOVERNMENT AND RESHUFFLE PORTFOLIOS IN THE PROCESS. EARLIER THIS MONTH, OLMERT FLOATED A TRIAL BALLOON REGARDING THE POSSIBILITY OF FIRING PERETZ AS DEFENSE MINISTER AND REPLACING HIM WITH FORMER PM EHUD BARAK (REFTEL). INTERNAL KADIMA POLLING SUGGESTS SUCH A MOVE WOULD IMPROVE OLMERT'S POLITICAL STANDING, ACCORDING TO A COALITION CONTACT, BUT IT MAY NOT OFFER HIS SALVATION. THE ATTORNEY GENERAL'S DECISION TO OPEN A CRIMINAL INVESTIGATION OF OLMERT'S HANDLING OF THE PRIVATIZATION OF BANK LEUMI COMBINED WITH ONGOING INVESTIGATIONS OF THE ISRAEL TAX AUTHORITY AND AS-YET UNPROVEN ALLEGATIONS OF EMBEZZLEMENT AGAINST OLMERT'S CLOSE ASSOCIATE, FINANCE MINISTER HIRCHSON, COULD RESULT IN PARALYSIS AT THE TOP OF THE KADIMA PARTY, A SITUATION THAT ANY ONE OF OLMERTS RIVALS COULD SEIZE ON. BUT THIS SORT OF MELT-DOWN HAS YET TO PLAY OUT, AND OLMERT HAS REPUTABLE ALLIES, SUCH AS BANK OF ISRAEL GOVERNOR STANLEY FISCHER AND THE FORMER DIRECTOR-GENERAL OF THE MINISTRY OF FINANCE, WHO SUPPORT HIS ASSERTION THAT HE DID NOTHING WRONG IN THE LEUMI AFFAIR. ¶4. (C) DEFMIN PERETZ FACES INTERNAL PARTY PROBLEMS RATHER THAN CORRUPTION SCANDALS. HE IS FIGHTING TO RETAIN CHAIRMANSHIP OF THE LABOR PARTY, IN THE FACE OF CHALLENGES FROM FORMER PM EHUD BARAK, WHO HAS ACTIVELY STARTED HIS CAMPAIGN TO BECOME DEFENSE MINISTER; MK AMI AYALON; AND MK OFIR PINES-PAZ, WHO QUIT THE LABOR PARTY OVER ITS ACQUIESCENCE TO THE INCLUSION OF THE FAR-RIGHT YISRAEL BEITEINU PARTY IN THE GOVERNING COALITION. ON JANUARY 18, PERETZ FORCED THE LABOR PARTY CENTRAL COMMITTEE TO APPROVE THE FIRST-EVER NOMINATION OF AN ISRAELI ARAB MUSLIM, MK GHALEB MAJADLE, TO A MINISTERIAL POST (SCIENCE/CULTURE/SPORT) IN HOPES OF SECURING BADLY-NEEDED ARAB VOTES IN ADVANCE OF LABOR PRIMARIES ON MAY 28. PERETZ'S INTRA-PARTY GAMBIT MAY BE FRUSTRATED, HOWEVER, BY OLMERT'S DESIRE FOR A BROADER RESHUFFLE. THUS-FAR, OLMERT HAS REFUSED TO SUBMIT MAJADLE'S PRECEDENT-SETTING APPOINTMENT TO HIS CABINET FOR APPROVAL. ¶5. (C) COMMENT: DESPITE THE UNPOPULARITY OF OLMERT AND PERETZ, THE MAJOR POLITICAL PARTIES ARE IN NO MOOD FOR ELECTIONS. BOTH LEADERS HOPE TO USE CABINET APPOINTMENTS AS THE MEANS TO PRESERVE THEIR POLITICAL LEADERSHIP. HOWEVER, IF THEY DECIDE TO WORK AT CROSS-PURPOSES, IT IS STILL POSSIBLE THAT THE CURRENT COALITION MAY, IN THE WORDS OF ONE KNESSET AIDE, "COME APART AT THE SEAMS." THE CURRENT DELIBERATIONS CONCERNING THE APPOINTMENT OF A NEW IDF CHIEF OF GENERAL STAFF WILL BE INDICATIVE OF WHETHER A COLLABORATIVE OLMERT-PERETZ APPROACH TO DECISION-MAKING IN THE ISRAELI GOVERNMENT REMAINS POSSIBLE. IF THEY ACHIEVE A CONSENSUS, THEY MAY YET WEATHER THE IMPENDING STORM THAT THE WINOGRAD REPORT WILL LIKELY UNLEASH IN SEVERAL WEEKS TIME. END COMMENT. ********************************************* ******************** VISIT EMBASSY TEL AVIV'S CLASSIFIED WEBSITE: HTTP://WWW.STATE.SGOV.GOV/P/NEA/TELAVIV YOU CAN ALSO ACCESS THIS SITE THROUGH THE STATE DEPARTMENT'S CLASSIFIED SIPRNET WEBSITE. ********************************************* ******************** JONES