US embassy cable - 05TELAVIV534

S E C R E T SECTION 01 OF 02 TEL AVIV 000534 
 
SIPDIS 
 
E.O. 12958: DECL: 01/28/2015 
TAGS: ECON, PREL, IS, ECONOMY AND FINANCE, ISRAELI-PALESTINIAN AFFAIRS, GAZA DISENGAGEMENT 
SUBJECT: ASSISTANT SECRETARY BURNS MEETING WITH DEPUTY 
PRIME MINISTER PERES 
 
 
Classified By: Ambassador Daniel C.  Kurtzer for reasons 1.4 (b) and (d 
). 
 
 1. (S) Summary: In a January 25 meeting with NEA Assistant 
Secretary Burns and the Ambassador, Deputy Prime Minister 
 
SIPDIS 
Peres outlined GOI efforts to revitalize the Palestinian 
economy.  Noting the unexpected success of PA Prime Minister 
Abu Mazen's steps toward improving the security situation, 
Peres predicted that a ceasefire was likely in the next few 
weeks and that the concept of unilateral disengagement from 
Gaza is "dying."  The most immediate problem, according to 
Peres, is the immediacy of the economic need and the lack of 
resources and planning to address economic issues in the 
short run.  Among Peres's proposals were  a joint project for 
technological improvements at the border crossings, funding 
for a Palestinian social welfare system and investment in the 
Gaza agricultural sector.  He plans to carry this message to 
Davos and to the U.S. in hopes of eliciting international and 
private sector support.  He also proposed convening a core 
group to coordinate assistance efforts.  End Summary. 
 
--------------------------------------------- 
P/A Progress on Security Exceeds Expectations 
--------------------------------------------- 
 
2.  (S) NEA Assistant Secretary Burns met with Deputy Prime 
Minister Shimon Peres on January 25 to review recent 
improvements in the security situation and Peres' new role in 
charge of West Bank and Gaza economic issues and Negev and 
Galilee economic development. Also attending the meeting were 
Ambassador Kurtzer, NSC staffer Ron Danin, and Econ 
Counselor, notetaker. Peres was accompanied by several staff 
including Avi Gil and Einat Wilf. 
 
3.  (S) Peres expressed great optimism over the PA's rapid 
progress on security issues. In his view, both the GOI and 
the PA are demonstrating "unexpected generosity," and PA 
Prime Minister Abu Mazen is showing himself to be courageous, 
wise and effective. Conceding that "we weren't ready for it", 
Peres said the GOI had given Abu Mazen a limited chance to 
succeed but he had exceeded expectations. This has changed 
the GOI view, said Peres, who now believes it is possible for 
PA security forces to deploy without political or geographic 
discrimination throughout Gaza.  He said he is also 
optimistic that a cease-fire is within reach by next week, 
noting that most points are already resolved. The concept of 
unlilateral disengagement "is dying," Peres stated, 
characterizing the present situation as that of "a man who 
goes to sleep a bachelor and wakes up with a family." 
 
--------------------------------------------- --------------- 
Need for Solutions on Passages, Roads, Jobs, Infrastructure: 
--------------------------------------------- --------------- 
 
4.  (S) With security issues "in good shape", Peres said, he 
is now concentrating on the economic aspects of 
disengagement, where he sees a large gap between "the 
immediacy of the problems and the lack of solutions."  Peres 
emphasized that there are now "clear needs but unclear 
resources", adding that if there is no success on Palestinian 
economic development it will create bitterness and exacerbate 
the conflict.  In his view, four key steps will be 
"modernizing" the crossings and roadblock regime, opening 
roads, providing jobs, and improving large-scale 
infrastructure. 
 
5. (S) On border crossings, Peres said the GOI recognizes the 
need to modernize passages and has proposed a USD 140 million 
technology improvement program to that end.  PA Finance 
Minister Fayyad has already agreed to the scheme, Peres said, 
noting that earlier the same day he had concluded a deal with 
the World Bank to raise the PA share of the needed funds. 
(Note: World Bank Director Nigel Roberts told Post that no 
firm agreement had been reached on this point, and that the 
Bank still supports a step-by-step approach starting with 
pilot projects at four border crossings. End note.)  On 
opening roads, Peres insisted that this step requires 
movement towards a comprensive cease-fire covering Gaza and 
the West Bank.  On providing jobs, Peres believes it is 
especially important to renew the agriculture sector, where 
Palestinians already have the needed skills, and to invest in 
construction and infrastructure projects. In this context, he 
said, it is crucial to repair damaged Palestinian hothouses 
and to hand over intact settlement agribusiness in tandem 
with disengagement. 
 
6.  (S) On infrastructure development, Peres disclosed that 
he has been in negotiations with Arab entrepreneurs who, in 
his view, "have no inhibitions over investing in Gaza."  He 
also envisions U.S. and EU investment in industrial parks 
inside the West Bank and Gaza Strip -- any U.S. assistance of 
this nature could come primarialy from the private sector, 
with USG "encouragement" in the form of loan guarantees or 
tax breaks.  European involvement could be more directed, he 
suggested, with governments pooling money or selecting 
companies to take the lead on investment.  The QIZ model, 
especially the success of the Israel-Jordan QIZ, could 
provide a framework for future Palestinian economic 
development, he added.  Peres confirmed the GOI's interest in 
a Gazan seaport, beginning with a ro-ro port and expanding in 
stages to a full deep-water facility, and a railway link from 
Gaza to the Israeli port of Ashdod. 
 
--------------------------------- 
Social Welfare Fund to Bolster PA 
--------------------------------- 
 
7.  (S) Peres also argued for the need to fund a Palestinian 
social welfare system that could help the PA compete with the 
popularity of Hamas social programs.  Such a fund could cut 
poverty for over 200,000 people, but would need donor 
assistance to succeed. Peres proposed asking individual 
countries to commit specified annual contributions, and asked 
whether U.S. funding of this type could come out of the 
anticipated USAID supplemental. Peres revealed plans to raise 
this issue with U.S. Congressmen and to take this message to 
Davos, where he said he will be meeting with Fayyad and 
potential private sector contributors. 
 
8.  (S) Peres expressed interest in a late February visit to 
Washington to meet with Secretary Rice and discuss 
disengagement as well as the potential for Negev development 
noted in the Bush-Sharon correspondence.  Peres raised his 
concern that the plethora of conferences could not deliver 
aid quickly enough, and questioned why the upcoming London 
conference must have limited participation. In order to take 
immediate action, Peres stated, "economic groups" made up of 
the US, Israel, the PA, EU and Japan, should be convened to 
explore new ideas and coordinate the economic aspects of 
disengagement. 
--------------------------------------------- -------- 
A/S Burns: Combine Funding Efforts to Create Momentum 
--------------------------------------------- -------- 
 
9.  (S) A/S Burns agreed that rebuilding the Palestinian 
economy is essential to progress on security. Many different 
efforts could be combined within the next two to three months 
to create momentum on the economic side, he said.  He briefed 
Peres on current administration efforts to reprogram funds 
for a short-term assistance program to support Abu Mazen's 
efforts and a longer-term request for supplemental 
assistance. In addition, he said that we would push the Arab 
Gulf States to live up to their assistance commitments to the 
Palestinians. In an earlier meeting, A/S Burns had noted that 
the London conference could also be an opportunity to push 
private sector contributions and link this to the donor 
conference under the AHLC. 
 
10.  (S) Burns briefed Peres on his meetings with Egyptian PM 
Mubarak and other Egyptian officials saying that they are 
taking a positive, activist attitude toward improving the 
security situation by providing increased deployment of 
troops on the border with Gaza and a willingness to discuss 
Philidelphi security concerns. 
 
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KURTZER