CONSTRUCTION MORATORIUM: COMPENSATION UPDATE

UNCLAS TEL AVIV 000080

SIPDIS

NEA FOR FRONT OFFICE. NSC FOR SHAPIRO/KUMAR. JOINT STAFF
FOR LTGEN SELVA, JERUSALEM PASS AMB. HALE

E.O. 12958: N/A
TAGS: PREL KWBG IS
SUBJECT: CONSTRUCTION MORATORIUM: COMPENSATION UPDATE


1. (U) On January 11, the Finance Ministry announced that it
had earmarked an initial NIS 30 million to compensate those
who invested in residential building projects in the West
Bank and are now facing financial losses due to the GOI's
moratorium order. This sum is expected to rise as homebuyers
and contractors, who are prevented from starting or
continuing construction, begin to file claims with the MOD's
compensation committee. Last month, discussions in the
Knesset's finance subcommittee suggested that financial
damages likely could reach NIS 500 million, and potentially
as high NIS 1 billion. Settlers and would-be-settlers who
took out mortgages to purchase land and finance construction
were initially slow to seek compensation, preferring first to
challenge the legality of the moratorium in the hopes of
overturning the order. However, as they continue to make
mortgage payments without construction progress, calls for
compensation have intensified.


2. (U) Central Bureau of Statistics data reveals that the
number of new housing starts in the West Bank, particularly
private starts, spiked considerably in the third quarter of
2009, as settlers sensed the impending moratorium and rushed
to begin construction so as to be grandfathered into any
agreement. (Note: CBS data shows that overall, new starts in
the west Bank fell 27.6 percent in the first 9 months of

2009. End note.) However, the GOI's stipulation that only
projects with a poured concrete foundation could continue
left many with significant sunken costs. In an early December
meeting with Congen Poloff and Embassy Econoff, Rabbi Meir
Rubinstein, mayor of the Beitar Ilit settlement, estimated
that as much as 30 percent of construction costs are incurred
preparing the rocky West Bank ground prior to pouring a
foundation.


3. (U) Since the implementation of the moratorium in late
November 2010, the GOI has faced significant internal
criticism in the Knesset, the courts, and in public forums,
for failing to devise an accompanying compensation mechanism
or to secure a compensation budget. In Knesset meetings on
the subject, MKs from all parties have heatedly chastised the
GOI. In a 21 December Finance Committee meeting, MKs Uri
Ariel (National Union) and Moshe Gafni (United Torah Judaism)
froze the transfer of NIS 500 million to the MOD, vowing not
to release the funds until the MOD created a Compensation
Committee, as required by the original moratorium order. Two
days later, Israel's High Court of Justice lambasted the
GOI's handling of the situation, and ordered State's
attorneys to provide clarification on the compensation issue
within 30 days. The MOD has since established the
compensation committee, but has yet to publish the procedural
rules and eligibility criteria for filing claims.
CUNNINGHAM