DEPUTY PM SILVAN SHALOM MEETS TREASURY ACTING A/S

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 002809

SIPDIS

DEPT FOR NEA/IPA FRELICH, GOLDBERGER; TREASURY FOR BALIN

E.O. 12958: DECL: 12/17/2019
TAGS: EAID ECON KWBG
SUBJECT: DEPUTY PM SILVAN SHALOM MEETS TREASURY ACTING A/S
BAUKOL

Classified By: Economic Counselor David R. Burnett for reasons 1.4 (b)
and (d).


1. (U) Summary: Treasury Acting Assistant Secretary for
International Affairs Andy Baukol met with Deputy Prime
Minister and Minister for Regional Cooperation Silvan Shalom
in his Knesset office on December 14 to discuss GoI efforts
to assist the development and growth of the Palestinian
economy. Shalom encouraged the U.S. to have a more active
role in supporting the economic initiatives that his Ministry
promotes, and bemoaned the fact that direct Ministerial
meetings between the GoI and the PA have ceased due to
political pressures.


2. (SBU) Following meetings with senior PA officials and
business representatives, and an address at the Israeli
Business Conference sponsored by Globes publications,
Treasury Acting A/S Baukol met with Minister of Regional
Cooperation Silvan Shalom to get his views on the economic
progress in the West Bank. Shalom had recently met with
Office of the Quartet Representative (OQR) staff and told
Baukol that he was trying to give positive responses to the
Palestinian requests brought by OQR but expected the PA to
make this easier by acting against extremists and continuing
the progress on security. He said he was impressed by the
West Bank's economic growth -- in the double digits, he said
-- and noted that Israel has helped by easing access
restrictions which allows for increased trade. He cited the
500-700 vehicles per day that cross at Jalameh and the 7,000
people that enter Nablus to shop each Saturday. OQR
representatives had recently requested openings of road
obstacles into and around Tulkarem and Ramallah.


3. (C) Shalom lamented the criticism that former PA Minister
of National Economy Bassam Khoury received for meeting with
him at the Joint Economic Committee meeting in September, and
said that this was part of the reason Khoury was forced to
resign. He was not sure that the new Minister, Hassan Abu
Libdeh, would be willing to hold discussions at the
Ministerial level, but OQR representatives had indicated that
another JEC meeting might soon be possible. Despite the
high-level cessation, working groups continue to meet and
Shalom praised the efforts of the tourism subcommittee, which
he said would be meeting on Dec. 15, to discuss a
GOI-proposed package for holy land tourists to travel to the
Jordan River, Jerusalem, Bethlehem and Nazareth. Regarding
the paucity of high-level meetings between PA and GoI
officials, Shalom said that PA Prime Minister Fayyad's
political ambitions were part of the problem. He said Fayyad
is attempting to build political and nationalist stature,
moving away from his technocrat roots, in order to secure the
Presidency, and this forced him to avoid engaging with
Israelis. (Note: Shalom's assessment of Palestinian Prime
Minister Fayyad's political ambitions strike us as
interesting but uncorrborated. End Note)


4. (SBU) Baukol asked Shalom's assessment of the economic
growth in the PA, and cited donor money, improved law and
order, and GoI's loosening of restrictions as the key
factors. Shalom agreed that the PA's success in securing law
and order was a necessary ingredient for business confidence
and he praised General Dayton's team for the assistance they
provide to the PA security forces. On the GoI side, he noted
that the simple fact that the Ministry of Regional
Cooperation now exists is an indication of the new
government's desire to provide new avenues of assistance.
Before, he noted, the Ministry of Defense had the final word
but now there are more options. He cautioned, however, that
one terrorist entering from an area where a roadblock had
been removed could roll back all the progress that has been
made.


5. (SBU) Shalom noted his regular contact with
representatives from OQR and said that OQR helps the PA more
than the PA helps themselves. While OQR is very active, they
don't have the funds to support all the projects they would
like. For instance, Shalom said that OQR had requested that
the Tarqumia crossing (near Hebron) open two hours earlier (5
a.m. rather than 7 a.m.) to facilitate greater trade traffic
to the Ashdod port. He estimated the cost at about $1.5-2
million per year and invited the U.S. to consider funding
this. While noting that the U.S. had funded much of the
crossing at Jalameh, (his staff reminded him of the U.S.
funds used to purchase scanners at Jalameh, Kerem Shalom and
Tulkarem) Shalom said that it appeared to him that the U.S.
was not as involved as it had been, ceding a more active role
to the Europeans. Hedging a bit, he said there were many
more actors on the scene now, but U.S. leadership was
critical and most welcome from the Israeli perspective.

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6. (SBU) Baukol told Shalom and his staff that Treasury was
following banking issues in the West Bank and Gaza with some
concern. Shalom noted the BoI's involvement to insure the
transfer of excess shekels from Arab Bank to Discount Bank
would be successfully concluded in the coming weeks. Adi
Ashkenazi, the Ministry's Director of Economic Affairs,
responded that the Palestinian banks must provide
documentation required under Israeli law to prove that money
does not go to terrorist causes. Baukol noted that most
assessments he has heard indicate that the PA has a solid
anti-money laundering regime.


7. (SBU) Shalom told Baukol that he would welcome increased
USG engagement with his staff at the Ministry to discuss
these matters in depth. Baukol asked if it would be useful
for the three sides (U.S., PA and Israel) to meet; Shalom
agreed that it would be useful either at the Ministerial
level or at the professional level. He emphasized that
issues of cooperation with the PA are marginal for other
Ministries but are the prime concern for him. He said that
the new head of COGAT, General Dangot, seemed to be very
cooperative, but cautioned that the situation with Hamas and
the continued captivity of Gilad Schalit makes it very
difficult to be flexible.


8. (C) Comment: Adi Ashkenazi and Yishay Sorek of the
Ministry of Regional Cooperation attended the meeting and
afterward appeared frustrated that the Minister had not
followed his talking points. They underscored the USG's
regular consultation and involvement, and encouraged Emboffs
to meet soon to discuss the projects that were not mentioned
by the Minister, in particular SPROUT (a spin-off of BIRD
that would focus industrial research cooperation between
Israel, the U.S. and the PA) and the Jordan Palestine Israel
Center for applied agricultural research training and
clean-tech. Emboffs will schedule a meeting soon.
CUNNINGHAM