A Principled, if Painful, Stand : Flap over loan guarantees for Israel goes public

The Bush Administration, by going public with its position on American loan guarantees to help Israel settle new immigrants, has served notice that it will not compromise on this contentious issue.

As Secretary of State James A. Baker III told a House subcommittee Monday, from here on “the choice . . . is Israel’s.”

The unpalatability of that choice to Prime Minister Yitzhak Shamir’s government, which wants the largest possible increase of the Israeli population in the disputed territories, is clear to everyone. So is the possible effect of the U.S. decision on Israel’s national elections June 23.

INTERFERENCE? This last point has already produced accusations that the Administration is crudely seeking to interfere in Israel’s electoral process, to the advantage of the opposition Labor Party. That allegation, however, too easily overlooks the coincidence of timing. The decision on the loan guarantees, postponed from last fall, could not be postponed any longer. Almost certainly it would have been made about now even if parliamentary defections had not forced Shamir to call earlier-than-planned elections.

Could Washington’s tough conditions on the loan guarantees cost Shamir’s Likud Party some votes? It could, just as a decision to support the loan guarantees on the favorable political terms that Shamir wanted would have been seen as a big boost for Likud.

It’s important not to let the rhetoric of disappointed Israeli officials confuse or obscure the deep humanitarian significance of the offer that has now been made.

With broad support in Congress, the Administration is willing to support up to $2 billion a year in loan guarantees over five years to build housing in Israel for immigrants who are fleeing turmoil in the former Soviet Union and Ethiopia. That guarantee would allow Israel to borrow in the money markets at favorable commercial rates.

CONDITIONS: But the Administration--again, with apparently broad congressional backing--is not prepared to let the housing loans be used directly or indirectly to support Israeli expansionism in the disputed territories. So Baker has set two conditions: If Israel wants the whole $10-billion package it must agree to halt all building in the West Bank and Gaza, except security-related construction; if it chooses to complete construction that is already under way, the loan guarantees would be reduced by an amount equal to those completion costs.

The last five U.S. administrations have regarded Israeli settlements as an obstacle to peace. Now Arab-Israeli talks that could one day lead to peace are under way, making the settlements issue no longer just a theoretical impediment but a practical one. This left the Bush Administration with a clear choice: Either it could give tangible meaning to the principle of American opposition to further settlement activity or it could accept a compromise that would let the Shamir government pursue its settlement policies, if on a reduced basis. The Administration decided on principle, and it deserves solid support from Congress.