A Marriage On The Rocks

George Bush has made only four Oval Office addresses to the nation, two of them to rally the people against Saddam Hussein. Last week he was contemplating a fifth TV appeal, this time to take on an old ally: Israel. Washington and Jerusalem have been at odds ever since Bush's angry demand that Israel postpone its request for $10 billion in U.S. loan guarantees to resettle Soviet Jews in Israel. The president sees Israel's settlements on its occupied territories as a major obstacle to Arab-Israeli peace, and fears the loan guarantees will indirectly finance more of them. And he smells political victory: an ABC News poll showed that 86 percent of the American people support his stance, while Israel's supporters on Capitol Hill seemed short of a vetoproof two-thirds majority in the Senate. "The Israelis and [the Israel lobby] have put their heads into the noose," says a Democratic House aide. "The president has the upper hand."

Everybody seemed to sense that except Israeli Prime Minister Yitzhak Shamir, who refused to give an inch. Secretary of State James Baker went to Shamir with a pledge from Bush that the White House wouldn't try to delay the loan guarantees further once Bush's proposed 120-day hiatus was up. But Shamir demanded that the aid not be conditional on a freeze on settlements. Baker refused. "Israel and her supporters in the United States risk the peace process," a "senior official," later acknowledged to be Baker, said, adding that the administration might well seek tough restrictions on settlements. Defense Minister Moshe Arens countered that Israel would never submit to that. Israel promptly announced a new settlement in an Arab part of East Jerusalem.

How have U.S.-Israeli relations, once so close, come to such a nasty pass? The current crisis goes far beyond the well-known coolness between Bush and Shamir. Bush's outburst on the loan guarantees was a sign of a painful re-examination by the two countries of the very underpinnings of their "special relationship." Both countries are being forced to face some hard realities they sidestepped over the years:

There was always an inherent tension between U.S. support for the Jewish state and its ties with conservative Arab states such as Saudi Arabia. But in an unstable region where Moscow was arming radical regimes from Baghdad to Tripoli, democratic Israel was considered Washington's most reliable "strategic partner." Now the collapse of the Soviet Union and the gulf war have paved the way for a stronger U.S. tilt in the direction of the oil sheiks, Arab states expected a more sympathetic hearing from Washington after cooperating in the war on Saddam. Now they are getting it, along with access to the latest American military hardware.

Shamir said last week that "the American people will return to their true nature. I hope all this will fade like a bad dream." Shamir may be the one who's dreaming. Israel captured American hearts as the underdog that emerged from the Nazi Holocaust, carved out a democracy in hostile territory and defeated the Arabs' armies in just six days. But that was a long time ago. Thanks to Israel's 1982 invasion of Lebanon and its quashing of the Palestinian intifada, television now depicts Israel as a regional power using U.S. weapons to shoot Arabs. The American people still support a strong, secure Israel but increasingly distinguish that from the agenda of nationalists like Shamir. At a time when Bush is under fire for neglecting domestic needs, bashing Israel's aid request-and the "powerful political forces" behind it-plays in Peoria. For Bush, that outweighs any risk his remarks might tap a vein of bigotry, even though they were "never meant to be pejorative," as he assured nervous Jewish groups last week.

Israel probably could have thumbed its nose at Bush with impunity if it had made better use of its own resources over the last two decades. Israel has received $46 billion in American military and economic aid since 1973, yet during that time growth has slowed from the 1948-1973 average of more than 9 percent per year to a post-1973 average of about 3 percent. The state owns 160 mostly inefficient companies; a host of goods and services are subject to price controls. Rather than reform this quasi-socialist economy, Shamir has counted on money from Congress to prop it up. He had already factored the first allotment of $2 billion in U.S.guaranteed loans into his national budget for 1992-roughly the amount budgeted for new settlements on the West Bank and Gaza. Now, even a four-month delay in the guarantees will leave the Israeli government with a sizable budget gap.

This is a basic question with which Israel has never really reckoned. Yet the choice Israel eventually makes could determine whether it remains a democracy with an essentially Jewish population, or whether, by absorbing the West Bank and its 1.2 million Arabs, it will become a binational state forever battling a disfranchised mass of non-Jews. The United States would probably support the former-and distance itself from the latter. Most Israelis oppose a Palestinian state and want some form of permanent security presence on the West Bank. Beyond that, consensus breaks down. Shamir has tried to have it both ways, proclaiming his ideological belief in Israel's right to the territories and encouraging Jewish settlement in them, while postponing an explicit decision on either annexing them or negotiating their status.

Freezing settlements is not so unpopular with Israelis as a whole: a poll last week in the Jerusalem Post showed 57 percent would trade a delay in settlements for the loan guarantees. But in addition to his own ideological opposition to such a compromise, Shamir must pander to small ultranationalist groups whose influence in Parliament is magnified by Israel's system of proportional representation. If the far right abandoned him, his government would either fall or be forced into a coalition with the more moderate Labor Party.

These issues, the settlements included, would have to be dealt with sooner or later. But the final irony is that Bush has forced them to the fore in pursuit of a goal that itself may prove frustrating: a Middle East peace conference. Pressuring Israel to stop settlements may or may not make a conference more likely. But Arab states had not made an unusual fuss in public about the loan guarantees until Bush sounded off. Baker now says granting them before a conference would make it politically impossible for some Arab states to attend.

Nor is it clear that a conference itself will bring peace any closer. Bush and Baker insist the gulf war transformed the political balance in the region and the mind-sets of its major players. But among the gulf Arabs, not even Kuwait has shown its gratitude to the United States by recognizing Israel. A Palestinian official at the United Nations said last week that Arab states would likely oppose Bush if he calls upon the U.N. General Assembly to rescind its 1975 resolution equating Zionism with racism. The Palestine Liberation Organization has so far withheld its approval for a Palestinian delegation to the conference, despite appeals from Baker and Jordan's King Hussein. Syria's Hafez Assad astutely said he would attend the peace conference even if the loan guarantees go through. But if the PLO bows out, and the talks fall apart, his new, peaceful image will never be tested. In the end, the Bush-Shamir struggle could help the PLO escape the blame if it refuses to compromise.

If a peace conference does take place, and serious negotiations ensue, then Bush's arm-twisting of the Israelis will have been worth the political heat. If it doesn't, the only clear result of his post-gulf-war diplomacy will have been to cast the U.S.-Israeli relationship into limbo.

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