For the past three months, President Bush has held a $10 billion ax over Israel's head. Now the ax may be about to fall.

Sometime this month, Bush has to decide his policy on Israel's request for loan guarantees to help it absorb hundreds of thousands of Soviet immigrants.

Not even the most optimistic pro-Israel lobbyist, Jewish leader, or Israeli diplomat believes Israel will get the money without stringent conditions attached, and many believe the Israelis will get nothing.

The guarantees would allow Israel to raise lower-interest, longer-term commercial loans than it otherwise could get. These would be in addition to the regular $3 billion in aid that Israel gets from the United States every year.

Israel first asked for the guarantees, to be paid over five years, last September.

But many things have changed since then.

The United States has sunk deeper into recession. Anti-foreign aid sentiment has grown dramatically in Congress and throughout the country. And Bush faces a stern political fight in the New Hampshire Republican primary against candidates running on "America First" anti-aid platforms.

Meanwhile, Israel has pushed ahead with its controversial policy of building Jewish settlements on occupied Arab land.

Diplomats and Jewish leaders believe that Bush has two realistic options.

He could link the loan guarantees to a settlement freeze, a request that could bring down the Israeli government and provoke new elections, which are due by next November at the latest in any case.

Or Bush could decide to deduct every dollar that Israel spends on settlements from the amount of the loan guarantee.

"It's a nest of vipers for Israel either way," said one Jewish leader.

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