US embassy cable - 05TELAVIV85

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000085 
 
SIPDIS 
 
E.O. 12958: DECL: 01/05/2014 
TAGS: ECON, PREL, KWBG, IS, ECONOMY AND FINANCE, SETTLEMENTS, ISRAELI-PALESTINIAN AFFAIRS 
SUBJECT: YOSSI GAL AND ILAN BARUCH DISCUSS AHLC, WORLD BANK 
MONITORING, AND SETTLEMENT ASSETS WITH AMBASSADOR 
 
Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4 (b) and (d) 
 
1.  (C) Summary: The Ambassador met with Yossi Gal and Ilan 
Baruch of the MFA's Economic Affairs division Wednesday, 
December 28 to discuss Israeli follow-up from the Oslo AHLC, 
World Bank-proposed monitoring and benchmarks, and GOI and 
Israeli private-sector contact with the Palestinians on 
settlement assets and agribusiness post-disengagement. 
 
--On the AHLC Gal was extremely positive, noting that the 
chair had recognized Israel's legitimate security needs, and 
that all parties had been complimentary on GOI steps like 
proposed facilitation of PA elections. 
 
--On benchmarks and monitoring, both Gal and Baruch took 
exception to the language of the World Bank proposals.  They 
argued that it is inappropriate for the donor community to 
tie PA-bound aid to Israeli actions.  The Ambassador 
responded that the donors must have a way to determine their 
money will be effective, and that both Israeli and PA actions 
are therefore relevant. 
 
--Gal said that the GOI supports pilot projects at Karni 
terminal and other border crossings in principal, but has yet 
to formulate a position on many details. 
 
--On the handover of settlement assets and the continuation 
of Israeli-Gazan agribusiness cooperation post-disengagement, 
Baruch said that while the GOI has a plan for transferring 
assets and know-how, there is "nobody to talk to" on the 
Palestinian side. 
 
--The Ambassador noted that it would be difficult for the GOI 
and the PA to talk directly with each other on disengagement 
issues immediately following PA elections.  A several-week 
period of political and symbolic "catharsis" would have to 
take place on both sides before dialogue could begin, he 
said.  End summary. 
 
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Oslo AHLC: Appreciation for Israel's Efforts 
-------------------------------------------- 
 
2.  (C) The Ambassador met with Yossi Gal, MFA deputy 
director general for Economic Affairs, and Ilan Baruch, chief 
of the Middle East economic affairs bureau, on Wednesday, 
December 28.  Gal discussed the Oslo AHLC meeting at length, 
praising it as "unlike any AHLC I remember" in terms of 
atmosphere.  All parties "behaved," he noted.  In his view, 
the Palestinians made it clear they were impatient for more 
pledges and commitments from the donors right away, yet they 
contributed in spite of this to the overall positive 
atmosphere.  Salam Fayyad even told the delegations that 
Israel is currently doing more than any other donor for PA 
finances, Gal said, attesting that Fayyad announced that in 
November and December 2004 GOI-released revenue attachments 
were the PA's only source of outside income. 
 
3.  (C) There was "wall to wall acceptance of the importance 
of disengagement" at the meeting, continued Gal.  Moreover, 
all parties from the Norwegian chair to the World Bank 
acknowledged Israel's legitimate security needs, expressed 
appreciation for the GOI's proposed facilitation of the 
upcoming PA elections and support for monitoring delegations, 
and called on the Arab states to provide greater assistance 
to their Palestinian "brothers."  While the Israeli 
delegation had misgivings over aspects of the four technical 
reports the bank presented, he added, they expressed their 
concerns only to the U.S. delegation, in an effort to keep 
wider discussions cordial and positive. 
 
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"Benchmarks and Monitoring" Objectionable Terminology 
--------------------------------------------- --------- 
 
4.  (C) Both Gal and Baruch objected to the language of the 
World Bank's proposal for benchmarking and monitoring of GOI 
steps to facilitate economic growth in the territories.  Gal 
argued that the reports unfairly suggest donors should tie 
PA-bound assistance to Israeli actions.  There are "dozens" 
of specific GOI steps prescribed in the borders and trade 
facilitation report, Baruch said, as opposed to a small 
handful of vague "suggested" PA actions.  He proposed that it 
would make more sense to regard planned events, like Gaza 
pullout and the PA elections, as benchmarks in and of 
themselves.  Alternatively, the U.S. could apply more 
discrete "pressure" on the GOI to follow through with key 
steps, the way it did on the revenue transfer issue in 2003. 
On the bank's proposed pilot programs at select border 
crossings, Gal said the GOI supports them in principle but 
has yet to formulate an official position on specifics. 
 
5.  (C) The Ambassador explained that the bank's proposed 
benchmarks and monitoring are focused on "sequencing" of 
GOI-PA actions rather than conditionality, and are primarily 
a mechanism by which the donor community can ensure their 
money is not misspent.  As such, he said, they cannot simply 
be set aside.  It is crucial to donors that the PA not argue 
they are unable to make certain reforms or invest in private 
enterprise because of steps the GOI has or has not taken. 
"Israel will get blamed if the donors believe the GOI is 
impeding" Palestinian economic growth, he explained, adding 
that if access to Gaza for relief workers was still 
problematic in one month's time, it would be clear Israel was 
in fact the impediment on that issue. 
 
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Settlement Assets, Agribusiness: "No-one to Talk To" 
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6.  (C) Gal and Baruch said they had tried to talk to the 
Palestinians at the AHLC about why the PA had so far "refused 
to engage with the World Bank or Israel" on the issue of 
handover of settlement assets, but that the PA delegation had 
not seemed to take it seriously.  "Give us an inventory of 
the settlements," they reportedly told Gal.  Baruch assured 
the Ambassador that the GOI has a plan for the transfer of 
agribusiness infrastructure and know-how, including 
settlement greenhouses, but there is "no-one to talk to" on 
the Palestinian side. 
 
7.  (C) The Ambassador emphasized the importance of 
Israeli-Palestinian cooperation in expanding the Gazan 
agriculture sector.  While industries like construction can 
flourish independently of Israel, he said, agriculture 
depends on a stable export regime.  The two men responded 
that Israel would "of course" help facilitate exports of 
Gazan agricultural produce like flowers and strawberries, and 
noted that sector experts had predicted major increases in 
Gazan exports during 2005 "regardless of disengagement." 
With robust Palestinian investment, said Baruch, the 
agriculture sector could double in size within three years, 
increasing the number of Gazans it employs from some 90,000 
to 180,000.  (Note: Baruch added that Nabil Sharif put the 
number of Gazans currently employed in agriculture at closer 
to 60,000.  End note.) 
 
8.  (C) Gazans will not be starting from scratch in terms of 
agribusiness, said Gal.  Gazan growers own thousands of 
dunams of greenhouses, and Gazan laborers have worked in the 
settlement greenhouses since their inception -- they already 
have know-how.  The Ambassador suggested that USAID 
facilitate a multilateral agriculture conference in order to 
link Gazans with Israeli, Egyptian, and Jordanian 
counterparts.  Gal and Baruch agreed this would be 
beneficial. 
 
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GOI-PA Dialogue on Disengagement Post-Elections 
--------------------------------------------- -- 
 
9.  (C) Gal and Baruch explained that the disengagement plan 
had been "born under a different reality", and now the GOI 
had to decide whether to engage directly with new Palestinian 
leadership or work through the U.S. as a third party in order 
to move forward.  The Ambassador said that Israel should not 
expect PA elections to effect an immediate "magic change" in 
terms of enabling GOI-PA dialogue.  A several-week period of 
"catharsis," in which both the GOI and the PA engaged in 
political and symbolic demonstrations of strength, would be 
in order before real bilateral work could begin on 
disengagement's economic aspects.  "The relationship can go 
off track" very easily during this time, said the Ambassador 
-- the U.S. would have to manage it carefully. 
 
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