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Democrats Differ Over Loan Guarantees

WASHINGTON — The Bush administration’s decision this week to deduct funds that Israel spends on West Bank construction from American loan guarantees pointed up the cleavages in the foreign policy stances of the top Democratic presidential candidates.

Connecticut Senator Joseph Lieberman and Missouri Rep. Richard Gephardt chose to attack Bush from the right on the tactical matter of the timing of the move, while Massachusetts Senator John Kerry and former Vermont governor Howard Dean agreed with Bush’s position. Interestingly, it is Dean and Kerry who during the campaign have sought to portray themselves as most at odds with Bush’s foreign policy.

“The President is wrong to cut loan guarantees to Israel at this time,” Lieberman said in an e-mail statement to the Forward. “Such heavy-handed pressure tactics do nothing to advance the peace process, and only add to the anxieties of the Israeli people. Israel’s economy is reeling from the death and destruction caused by Palestinian terrorism; now is not the time to add to their economic anxieties. The United States should focus on supporting — not punishing — our democratic ally Israel as it fights terrorism.”

A spokeswoman for Gephardt, Kim Molstre, wrote in an e-mail, “While Dick has concerns about the policy of increasing settlements, now is not the time to reduce our financial commitment to Israel.”

Kerry spokesman Robert Gibb wrote in an e-mail: “Senator Kerry would continue the policy of George H.W. Bush and Bill Clinton. Phase I of the road map not only requires the Palestinian Authority to rein in militant groups but also requires Israel to stop settlement building. Kerry supports this policy because both sides will have to meet these requirements to have any prospect for moving forward on the peace process.”

Dean said in an e-mail statement, “I have always supported providing assistance and loan guarantees to Israel to provide for its security and defense. I have also supported the 1992 language that money spent on new settlements should reduce the level of loan guarantees provided. Without having read the specific language of the Bush administration’s decision, it seems in keeping with my view on conditioning the amount of our loan guarantees.”

Administration spokesmen confirmed Tuesday what so far had been communicated privately to Israel by administration officials: The administration will deduct funds that Israel is spending on settlement activity in the West Bank from the $9 billion in loan guarantees that the United States agreed to grant Israel before the war in Iraq. The administration also reserves the right to apply such deductions to funds Israel spends on its security fence, if that fence cuts deep into Palestinian land.

Spokesmen for the White House and the State Department told reporters that a decision regarding the fence has not been made yet and that the sum to be deducted for settlement activity is being negotiated between Washington and Jerusalem.

The administration clarified, however, that the first disbursement of guarantees for $1.6 billion in low-interest bonds that Israel is now issuing will not be subject to such deductions. That caused satisfaction in the pro-Israel community. A lobbyist for Israel in Washington, accentuating the positive, said: “This is actually great news. It means that the first battle has been won.”

Israeli diplomats and pro-Israel lobbyists in Washington interpreted the administration’s move as a bid for leverage over Israeli policies further down the road.

“Everything the administration’s spokesmen said was in the future tense,” said an Israeli diplomat. “What they are saying is that they are unhappy with settlement activity — which is not new to us — and that they expect the fence to remain on the Green Line and veer away from the West Bank; we know that too.”

The White House is applying the same criteria and the same law this time as it did 10 years ago when the first Bush administration approved $10 billion in loan guarantees for Israel but deducted tens of millions of dollars that Jerusalem spent on settlement construction.

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