- The Washington Times - Tuesday, November 25, 2003

The Bush administration yesterday cut U.S. loan guarantees to Israel by nearly $300 million as punishment for its continued settlement activities in Palestinian areas, but Arabs called the move little more than a slap on the wrist.

In negotiations this week, Israel agreed to a deduction of $289.5 million from American loan guarantees totaling more than $9 billion. The agreement came after months of talks between U.S. National Security Adviser Condoleezza Rice and Dov Weisglass, Israeli Prime Minister Ariel Sharon’s chief of staff, who met yesterday at the White House.

While the sum to be deducted is small compared to the total, under the U.S. loan-guarantee package Israel is allowed to use $3 billion a year in 2003, 2004, 2005 and can extend it to 2006. That means the deduction will amount to about 10 percent of the next installment to Israel.

The administration also signaled that more deductions could be in the offing if Israel continues activities inconsistent with the provisions laid out by President Bush in the “road map” toward peace in the Middle East and the creation of a Palestinian state.

It was unclear last night whether the loan-guarantee deduction was targeted at money Israel plans to spend to complete a 200-mile security barrier through the West Bank, but the Ha’aretz newspaper in Israel recently reported that a deduction would be based on what Israel would spend building the barrier east of the Green Line in Palestinian territory.

Mr. Bush has called the barrier — which Palestinians call a “wall” and Israelis call a “fence” — a “problem,” and has asked Mr. Sharon to halt work on it. Mr. Sharon shrugged off the request and vowed the work will continue.

Bush administration and Israeli officials had no immediate comment yesterday.

The deduction was expected after the State Department last month notified Congress that the guarantees would be reduced “for activities which the president determines are inconsistent with the objectives and understandings reached between the United States and the government of Israel,” but no amount was set.

Some Bush officials argued that even small deductions from the huge outlay of loan guarantees to Israel would send a stern message that the administration is not standing idly by as Mr. Sharon flouts the U.S. peace plan. But Arab supporters said the reduction is simply too little to have any real impact.

“Israel is getting away with murder, and this is not going to be an effective restraint,” said James J. Zogby, president of the Arab American Institute in Washington. “It’s a welcome message, but the net impact is not as one might hope … not as significant as is needed to deal with what I think is a deteriorating situation right now in the West Bank.”

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