ISRAEL MEDIA REACTION

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SUBJECT: ISRAEL MEDIA REACTION

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SUBJECTS COVERED IN THIS REPORT:
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Mideast

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Key stories in the media:
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All media led with the "return home" from Lebanon of the two
abducted IDF soldiers after two years and four days in captivity.
Yesterday, the Israeli cabinet voted 22-3 to proceed with the
prisoner exchange. The electronic media reported that this morning
the caskets of Ehud Goldwasser and Eldad Regev were transferred at
the border crossing of Rosh Hanikra. Major media quoted Mossad
Director Meir Dagan as saying that HizbullahQs report on MIA Ron
Arad was deceptive and that it was only meant to clean Hizbullah and
Iran of responsibility. Transportation Minister Shaul Mofaz was
quoted as saying in an interview with The Jerusalem Post that
Hizbullah leader Sheikh Hassan Nasrallah knows more about Arad than
was written in the report.

Ha'aretz reported that in May police investigators asked PM Ehud
Olmert about a $75,000 loan from Joe Elmaleh, a wealthy Israeli who
now lives in Vermont. The loan was never repaid. Yediot and The
Jerusalem Post quoted New York Magazine as saying, based on
audiotapes, that 15 to 20 years ago Morris Talansky made serious
threats on businesspeople in America. The media reported that
Olmert's defense lawyers would try to undermine Talansky's
credibility during his cross-examination tomorrow.

Ha'aretz reported that Hamas representatives postponed negotiations
with Israel yesterday over Gilad Shalit. They were expected to
begin this week in Cairo. Israel believes Hamas is trying to force
Egypt to open the Rafah crossing before beginning talks. In another
development, Ha'aretz cited AP quoting Nablus residents as saying
that IDF troops arrested seven Hamas activists yesterday, including
two municipal council members, in a widening crackdown on Hamas
operations in the city.

Leading media quoted senior security officials as saying yesterday
that Sinai-based gangs have immediate plans to kidnap Israelis and
transfer them to terrorist organizations. The Israeli National
Security Council's Counter Terrorism Bureau reissued its warning
advisory for Sinai.

Israel Radio reported that today in Washington the Palestinian
negotiating team will meet with Secretary of State Condoleezza
Rice.

Various media reported that Iran warned Syria against making peace
with Israel.

The Jerusalem Post and Israel Hayom reported that it was Defense
Minister Ehud Barak who warned Tony Blair against visiting Gaza.

Ha'aretz and The Jerusalem Post reported that yesterday a PA
security court in Jenin sentenced two Palestinians to death for
"collaboration with the Israeli enemy."

Ha'aretz reported that the current drought is creating tension
between Israel and Jordan along both banks of the Jordan River. The
Jerusalem Post reported that Mekorot, the government water supply
company that provides 80 percent of Israel's water, is hoping to
solve Jerusalem's water shortage by building a fifth pipeline to the
city.

The Jerusalem Post reported that National Infrastructure Minister
Benjamin Ben-Eliezer will propose at the next cabinet meeting
earmarking 3.5 billion shekels (around $1.06 billion) toward
reinforcing buildings against a major earthquake along the Dead Sea
fault, deemed inevitable by many experts.





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Mideast:
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Summary:
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Senior Middle East affairs analyst Zvi Bar'el wrote on page one of
the independent, left-leaning Ha'aretz: "Hizbullah has been touting
the prisoner exchange deal with Israel as confirmation that the
Shi'ite militant group ultimately defeated Israel in the Second
Lebanon War, but the swap is at least as much of a Hizbullah victory
within Lebanon."
Ha'aretz editorialized: "We must act to free [Gilad] Shalit
immediately. The ongoing war on terror must not be fought on his
back."

Arab affairs correspondent Jacky Hoogie wrote in the popular,
pluralist Maariv: "Israel should learn the lesson carefully and make
use of it: From the day [Hizbullah] was founded in 1982, all the
military confrontations with it only strengthened it."

Uri Elitzur, who was director of former prime minister Benjamin
Netanyahu's bureau, wrote in the editorial of the nationalist,
Orthodox Makor Rishon-Hatzofe: "[Israel] is the only [country] that
surrendered and gave up the basic principle recognized all over the
world: one doesn't start any debate over a price without clear
evidence and guarantees by a neutral source that its people are
alive."

The ultra-Orthodox Yated Ne'eman editorialized: "Today, with the
conclusion of the prisoner swap, both sides are returning to the
starting-point, as the murderous Shi'ite organization, supported by
Syria and Iran, will try to improve its achievements in the next
round."

The conservative, independent Jerusalem Post editorialized: "Today
will bring difficult images of a Hizbullah-dominated Lebanon
celebrating a slaughterer of innocents, and of an Israel mourning
its fallen. That disparity of images reflects the yawning gulf of
values between Israel and too many of its neighbors."




Block Quotes:
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I. "A Hizbullah Victory"

Senior Middle East affairs analyst Zvi Bar'el wrote on page one of
the independent, left-leaning Ha'aretz (7/16): "Hizbullah has been
touting the prisoner exchange deal with Israel as confirmation that
the Shi'ite militant group ultimately defeated Israel in the Second
Lebanon War, but the swap is at least as much of a Hizbullah victory
within Lebanon.... Hizbullah, which presents itself as a national
resistance organization working for the interests of Lebanon, must
still produce one more achievement: Israel's withdrawal from the
Sheba Farms area. The Sheba Farms function as Hizbullah's
justification for the claim that Israel did not fully withdraw from
Lebanon, requiring Hizbullah to be armed so it can complete this
mission too. Hizbullah is not opposed to negotiations aimed at
giving Lebanon control over the Sheba Farms; it simply does not
believe in the Lebanese government's ability to achieve anything
through talks with Israel. The prisoner swap will serve Nasrallah
as a banner to wave before the Lebanese government to prove the
justness of Hizbullah's path."

II. "Gilad Shalit Now"

Ha'aretz editorialized (7/16): "The cabinet's approval of the
prisoner swap with Hizbullah, despite the 'blatantly unsatisfactory'
report the organization delivered on the fate of Ron Arad, requires
the cabinet to now act urgently to free Gilad Shalit.... We know for
sure that one Israeli soldier, Gilad Shalit, is still alive, in the
hands of Hamas. No one can imagine what he is going through in
captivity or how much he has suffered since he was abducted two
years ago.... Can those opposed to the swap assure the public that
in another five or 10 years, Shalit's case will not be where [MIA
Ron] Arad's case is today? Will we then demand that Hamas, too,
supply 'only' a report on Shalit's fate? Will anyone remember then
that there was a real chance to release him in exchange for a few
hundred prisoners? We must act to free Shalit immediately. The
ongoing war on terror must not be fought on his back."

III. "Nasrallah's Coupon"

Arab affairs correspondent Jacky Hoogie wrote in the popular,
pluralist Maariv (7/16): "We should make no mistake: The sense of
victory that will arise from [Hizbullah's celebrations] is not a
lie. It is true that in order to reach this deal, Hizbullah had to
sacrifice 250 of its members, paid with the destruction of large
parts of Lebanon and lost full control over southern Lebanon. The
deal is a limited achievement, for which a disproportionate price
was paid. But in terms of a battle over consciousness, Nasrallah
will clip the coupon he wanted today, and will add another victory
to his list. The Hizbullah leader will entrench his image as the
only Arab leader who fought against Israel and defeated it.... It
is true that not everyone in Lebanon shares in this celebration....
[HizbullahQs rivals] despise the path of violence chosen by
Hizbullah, and fear the influence that it gives Syria and Iran in
their homeland. In their heart of hearts, they would like to make
peace with Israel. They are not a minority in Lebanon, they are at
least half the population. They are adherents of the diplomatic
path, but unfortunately they are politically weak, and they are not
the ones who have shown results on the ground.... Israel should
learn the lesson carefully and make use of it: From the day the
organization was founded in 1982, all the military confrontations
with it only strengthened it. This was the case after the Lebanon
War, and after Operation Accountability in 1993 and Operation Grapes
of Wrath in 1996. After the Second Lebanon War as well, the
organization did not collapse, it survived and demonstrated to
everyone who is the boss in Lebanon. As an organization that fights
for its life every day anew, this prisoner exchange deal arrived
just in time for Nasrallah."

IV. "A Grave Failure of Principles"

Uri Elitzur, who was director of former prime minister Benjamin
Netanyahu's bureau, wrote in the editorial of the nationalist,
Orthodox Makor Rishon-Hatzofe (7/16): "The prisoner swap that is
taking place between Israel and Hizbullah today will be recorded in
history as one of Israel's blatant failures and a purulent symptom
of the leadership crisis it is going through.... We haven't invented
the wheel. Israel isn't the first country holding such negotiations
with an enemy; neither is it the only one that was forced to haggle
with a savage, cruel enemy that is not a state but a terrorist
organization. However, [Israel] is the only one that surrendered
and gave up the basic principle recognized all over the world: one
doesn't start any debate over a price without clear evidence and
guarantees by a neutral source that its people are alive."




V. "Back to the Starting-Point"

The ultra-Orthodox Yated Ne'eman editorialized (7/16): "As the
current round of fighting between Israel and Hizbullah is coming to
an end, both sides will find a new starting-point. Hizbullah will
try to heat up the northern front and provoke Israel, as it did
before the war. It is still owed an unpaid 'debt,' in the form of
avenging the elimination of its operations officer, Imad Mughniyah.
It might try to act abroad or again kidnap soldiers. Israel will
think twice about the way to respond to Hizbullah's provocations; it
is doubtful whether such a hasty decision to go to war will be made.
Today, with the conclusion of the prisoner swap, both sides are
returning to the starting-point, as the murderous Shi'ite
organization, supported by Syria and Iran, will try to improve its
achievements in the next round."

VI. "A Disparity of Images"

The conservative, independent Jerusalem Post editorialized (7/16):
"Israelis are steeling themselves today for the painful images that
will doubtless accompany the anticipated exchange of unrepentant
terrorist Samir Kuntar for IDF reserves Eldad Regev and Ehud
Goldwasser.... There is no surefire way to calibrate the right
combination of image and substance that might pave the way to
Arab-Israel peace.... Plainly, though, Assad avoiding Olmert, Assad
opting not to replicate Sadat by coming to the podium of the
Knesset, tells us much about his intentions. Today will bring
difficult images of a Hizbullah-dominated Lebanon celebrating a
slaughterer of innocents, and of an Israel mourning its fallen.
That disparity of images reflects the yawning gulf of values between
Israel and too many of its neighbors."

MORENO