US-Israeli Bond Remains Firm

IN theory, the tiny nation that commands nearly a quarter of the United States's $18 billion annual foreign aid budget should be worried. During the past three years, the pillars undergirding US relations with Israel have been shaken by momentous events:

Item. The end of the cold war has reduced the threat of Soviet expansionism in the Middle East, arguably diminishing Israel's strategic value to the US.

Item. The Gulf war all but eliminated Iraqi military power, reducing Israel's need for massive US security assistance, say some diplomatic observers.

Item. The 42-month Palestinian uprising has exposed the dark side of Israel's 24-year occupation of the West Bank and Gaza Strip, putting a strain on the strong sense of shared values that has long cemented US public support for the Jewish state. Americans have reacted to the harsh treatment of Palestinians, confiscation of Arab lands, and the continuing growth of officially sanctioned Jewish settlements in the territories.

Item. The failure of US efforts to broker a Middle East peace has illuminated Israeli and Syrian intransigence, leaving US policymakers frustrated and angry.

Despite these sea-changes in global and regional politics, the US-Israeli aid relationship appears as durable as ever, with the prospect that US assistance - already flowing at more than $10 million per day - may be increased further.

Moreover, despite growing impatience with Israel over the peace process and settlements, an impending Israeli request for US loan guarantees to help settle Soviet immigrants seems likely to be approved, though not without a lively debate in Congress. At $10 billion over five years, the guarantee would be much larger than any the US ever has approved for a foreign country.

"Relations with Israel are strong, durable, and secure," says United State Rep. Lee Hamilton (D) of Indiana, chairman of the Middle East subcommittee of the House Foreign Affairs Committee. "I don't expect aid levels to Israel to be reduced under any foreseeable circumstances."

Spokesmen for the pro-Israeli lobby in the US take spirited exception to the notion that Israel's vulnerability or value to the US has been reduced by the historic events of the past few years.

"Israel is the most threatened country in the world," says a senior official of one US Jewish organization. "Israel does not get enough assistance to pay for the military preparedness it needs."

Convinced of the argument, lawmakers have not only voted to sustain Israel's $3 billion annual allotment of economic and military aid - virtually all of it in the form of grants - but to load the aid package with extras that could increase its value to well over $4 billion, a level unprecedented in the history of bilateral aid relationships.

"There isn't any doubt that we tilt toward Israel, but it's not a phenomenon confined to Congress," says Mr. Hamilton. "We don't increase the levels of aid over the President's request, we accept them."

The Gulf war, meanwhile, has provided ammunition to critics who say the Jewish state should no longer receive such massive amounts of US aid. They argue that Israel was an obstacle rather than an asset to the US during the crisis, while Turkey, which receives far less US aid, played the crucial strategic role in the eastern Mediterranean.

"If you look at events in the Middle East since Aug. 2 [the day Iraq invaded Kuwait], you see that Israel has been a strategic liability," one US official comments.

Even some of Israel's staunchest supporters have been angered by its refusal to halt construction of Jewish settlements that five US presidents have deemed illegal, detrimental to peace, or both.

Meanwhile, various congressional sources indicate that increasing aid to Israel at a time when Congress is forced to cut domestic health, education, and housing programs has generated complaints from constituents.

But against such concerns lies a deep reservoir of congressional support for Israel that, most analysts agree, will insulate the Jewish state against pressures for aid cuts for the foreseeable future.

With a powerful US lobby pushing hard for Israel and with public opinion offering no resistance, lawmakers have rarely been forced to scrutinize the aid relationship, even in the face of violations or actions by Israel - such as secretly shipping US arms to Iran - that have complicated US interests in the Middle East.

In defense of massive aid, Israeli sources say that after 40 years the Jewish state remains a tiny island in a hostile Arab sea, its only guarantee of survival the kind of qualitative arms edge that only the US can provide.

Unlike other strategically important US allies like Turkey, they point out, Israel is not covered by a regional security umbrella, such as NATO. It faces the world with only one staunch ally and friend.

Moreover the huge amounts of US assistance that go to Israel and Egypt, the US's second largest aid recipient, have helped anchor a peace agreement - the 1979 Camp David treaty - that is regarded as a linchpin of the political stability ardently sought by the US in the Middle East.

But to understand why US-Israeli relations have proved largely impervious to changing circumstances, it is necessary to look beyond Israel's absolute needs, beyond its contributions to US security in the Middle East, even beyond its powerful Washington lobby. High levels of public and congressional support for Israel also stem from a deep sense of regret over the Holocaust and from a cultural and historical affinity toward the embattled Jewish state that grew out of it.

Millions of Americans have been moved by Anne Frank's diary of a life in hiding in Nazi-controlled Amsterdam and Leon Uris's fictional account of the postwar "Exodus" to Israel. The image of the gritty, determined state that made the desert boom was enhanced by Israel's rout of Syria, Egypt, and Jordan during the 1967 Arab-Israeli war, even as the image of Arabs was darkened by isolated acts of terrorism and hostage-taking.

As the cradle of Christian history, Israel has even won the support of the US's politically powerful fundamentalist Christian community.

Public opinion factor

Fundamentalist Christians are now among Israel's strongest supporters.

"In short," says a State Department official, "public opinion bolsters a bias that already exists. That makes it easier for a lot of congressmen to do what they want to do."

The next big test will come after Labor Day, when Israel is expected to ask Congress to guarantee $10 billion in loans to pay the costs of absorbing up to 1 million Soviet Jews over the next five years. The guarantee will enable Israel to borrow money from commercial banks at lower interest rates over a longer period.

An earlier request for $400 million in loan guarantees was held up for nearly a year as the Bush administration sought assurances from Israel that none of the money would be used to build Jewish settlements beyond Israel's pre-1967 border.

The funds were finally released last March. The same month, Israel's housing ministry detailed plans for the construction of 8,000 housing units in the territories during 1991.

Secretary of State James Baker III later called the policy the biggest impediment to Middle East peacemaking. Many administration officials and lawmakers also believe that it violates the spirit, if not the strict letter, of an October 1990 pledge by Israeli Foreign Minister David Levy "not to direct or settle Soviet Jews beyond the green line [that separates Israel from the occupied territories]."

Both the administration and Congress have been reluctant to discuss any form of linkage. But that may be changing. Angered by the settlements policy and Israel's refusal to go along with a US plan for an Arab-Israeli peace conference, President Bush told Jewish leaders recently that the issues could not be divorced from the issue of new loan guarantees.

"There is linkage, in the administration's view, between settlement activity and our readiness to assist financially with housing for Soviet immigrants," says one Bush administration official.

Proposal defeated

This week, the House was expected to defeat a proposal that would have placed a portion of Israel's annual economic aid in escrow until settlement-building is halted. But if Congress, like the administration, is uninterested in cutting existing aid, it is also uneasy about underwriting new, perhaps risky loans in the face of the continuing recalcitrance of Israel's Likud government.

"There's an enormous inconsistency between the Levy letter and what's actually going on," says one highly placed congressional source. "When it's time for more loan guarantees, there will be a lot of questions."

"We have to deal with the issue in a manner consistent with the needs of the peace process," says US Rep. David Obey (D) of Wisconsin, chairman of the House subcommittee responsible for foreign aid. "That requires putting some kind of pressure on Israel."

On rare occasions the US has used aid as leverage, as when President Carter, in 1977, threatened to halt all military assistance unless Israel terminated military operations in south Lebanon. Israel did. Predicts one prominent Jewish activist: "The loan guarantees are going to pass but it's not going to be an easy matter."

First of six parts. Next: the debate over aid.