The dispute is over the president’s wish to delay the loan guarantees for four months and then to attach restrictions on using them to build settlements in the occupied territories. President Bush, hoping to convene a Middle East peace conference in October, says he wants to avoid jeopardizing the peace process by a “contentious debate that would raise a host of controversial issues.” He has threatened to veto a bill that goes against his wishes. The president’s position is related to his dissatisfaction with Prime Minister Yitzhak Shamir’s intent to continue building Jewish settlements, subsidized by U.S. foreign aid, on Arab‐owned land in the occupied territories.
The United States has long held that the settlements are in violation of the Fourth Geneva Convention and United Nations resolutions, and the Bush administration has characterized them as the chief obstacle to peace in the region. Bush is said to be particularly angry that the Shamir government accelerated its settlement program just as Bush was trying to arrange a regional peace conference and that Shamir reneged on his promise not to use previous loan guarantees in the territories. The president undoubtedly fears that the United States cannot be regarded as an honest broker if it is subsidizing the de facto annexation of Palestinian land.
The administration, however, has muddied its position with conflicting statements, reportedly made by Secretary of State James A. Baker III, about requiring a freeze on the settlements. An initial demand for a freeze was softened the following day to say that the administration wanted to attach unspecified conditions, perhaps that the money not be used in the territories. The problem with that “restriction,” as many have pointed out, is that since money is fungible, the loans would free other money for use in the territories. The United States would still be subsidizing the settlement program, albeit indirectly. It is not clear how President Bush could solve that problem without demanding a commitment from Israel that no money be spent on new development in the territories, that is, a freeze. Even reducing American aid by the amount spent in the territories would constitute a de facto freeze. As Israeli political scientist Ehud Sprinzak wrote recently, “American approval of the loan guarantees without linkage to the settlement issue would make it financially possible to settle the occupied territories simultaneously with the absorption of the Soviet Jews.”
It is hard to understand what Baker meant when he said, “We have asked for a delay, because we want to avoid the question of linkage, not promote it.” The question of linkage cannot be avoided. The settlement of Soviet Jews even in Israel proper creates incentives (such as higher rents) for other Israelis to opt for the subsidized accommodations on the West Bank. Moreover, one wonders how the administration could have thought that its decision to delay the guarantees would deemphasize the link to the settlements in the territories when the link is what motivated the decision in the first place.