US embassy cable - 05TELAVIV535

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 000535 
 
SIPDIS 
 
E.O. 12958: DECL: 01/27/2010 
TAGS: PGOV, PREL, EAID, ECON, KWBG, EG, IS, GAZA DISENGAGEMENT, ISRAELI-PALESTINIAN AFFAIRS, GOI EXTERNAL 
SUBJECT: OLMERT TELLS A/S BURNS TO TIE PALESTINIANS TO 
ISRAEL WITH DISENGAGEMENT ASSISTANCE 
 
 
Classified By: Ambassador Daniel C. Kurtzer for reasons 1.4(b) and (d). 
 
1. (C) Summary: Deputy PM Ehud Olmert urged NEA A/S Burns and 
the USG to use creative means of engagement such as 
developing QIZs when assisting the Palestinians so as to tie 
Palestinian economic fortunes to continued good relations 
with Israel.  Despite advocating such ties, Olmert rejected 
any plan to again allow Palestinians laborers into Israel and 
said that the disengagement plan must remain unilateral -- 
despite positive developments on security under Abu Mazen -- 
to protect the timetable for its implementation.  Olmert 
predicted that the GOI would hold elections in November 2005 
and that Labor under Shimon Peres would become increasingly 
eager to demonstrate its independence from the Sharon 
government in an effort to woo voters.  On Syria, Olmert 
thought that Israel should have explored the seriousness of 
Bashar al-Assad's intent to renew negotiations with Israel. 
End Summary. 
 
2.  (U) Deputy PM Ehud Olmert met with Assistant Secretary 
William Burns and the Ambassador January 27.  NSC Director 
Robert Danin and poloffs joined the meeting, as did several 
members of Olmert's staff. 
 
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QIZs a Good Deal 
----------------- 
 
3.  (C) Olmert opened the meeting by noting that only now are 
the Egyptians realizing that economic benefits will come 
their way as a result of the Egyptian-Israel QIZ agreement 
signed earlier this month in Cairo.  A/S Burns said that he 
had found President Mubarak upbeat during their January 26 
meeting and  had urged Mubarak to seize this time of 
opportunity with the Palestinians.  The U.S. will keep 
encouraging the GOE to take an active approach, including 
deploying Egyptian troops along the Rafah border. 
 
-------------------- 
Help Tie Us Together 
-------------------- 
 
4.  (C) Olmert urged the USG to assist the PA in such a way 
as to encourage connectivity between Israel and the 
Palestinians, leaving "no route the Palestinians can take 
that does not reflect on their relations with Israel." 
Stressing that he was not referring to, for example, renewal 
of access for Palestinian workers to the Israeli labor 
market, Olmert focused instead on developing mechanisms 
similar to the QIZ with Egypt that directly tied USD one 
billion in Egyptian exports to Israel -- a fact that had a 
positive influence on Egyptian behavior, in Olmert's view, 
including effecting a change in Egyptian public opinion.  A/S 
Burns agreed that creative approaches are important, and the 
Ambassador added that there are a number of issues under GOI 
control that will have a profound impact on Palestinians 
society and economic life: such as extension of the customs 
envelope and facilitation of the movement of goods. 
 
-------------------------------- 
Building Momentum "Step by Step" 
-------------------------------- 
 
5.  (C) Olmert said that the most important thing now 
vis-a-vis the Palestinians is "not to make mistakes." 
Calling the January 9 presidential elections a success 
regardless of what might happen in the future, Olmert added 
that it is clear that Abu Mazen is capable of doing things on 
the ground.  What is less clear is exactly how much that 
might actually be, adding that Abu Mazen had not yet made a 
full assault on terrorism.  Olmert stressed, however, that 
Abu Mazen had to begin somewhere and that it was also 
important to create an environment that encourages 
Palestinian action.  Taking note of the January 26 meeting 
between PM advisor Dov Weissglas and PA negotiator Sa'eb 
Erekat, Olmert said "we must build a sense of (positive) 
momentum, step by step." 
 
------------------------------------- 
No Changes to Disengagement Timetable 
------------------------------------- 
 
6.  (C) While noting that it now appears possible to 
coordinate security with the Palestinians, Olmert said that 
he had nevertheless recommended that the GOI make no changes 
to its disengagement time frame or criteria.  Coordination 
would remove the unilateral element from the plan and allow 
other issues to influence the timetable, he said.  The GOI 
must ensure that adequate time is available for the settlers 
to "prepare themselves" for the evacuation, as the government 
hopes to avoid legal challenges if possible.  The actual 
evacuation itself should be carried out in "two to three 
weeks," likely in July, rather than the 12 weeks being 
discussed, according to Olmert.  Although he did not dismiss 
it altogether, Olmert predicted that the threat of civil 
strife is smaller in scope than is feared.  A "decisive and 
rapid move" would contribute to a quieter-than-expected 
evacuation.  A/S Burns agreed that it is important to create 
an environment where the GOI can again engage with the 
Palestinians.  Care must be taken to prepare each step. 
 
7.  (C) Momentum is building again in Israel for a referendum 
on disengagement, Olmert said, adding that Foreign Minister 
Shalom is a likely advocate of such a position.  Oddly 
enough, Olmert continued, disengagement is the only issue on 
which the PM has a stable majority.  In response to A/S Burns 
question, Olmert said that the law for settler compensation 
would be passed in "two to three weeks."  Responding to the 
Ambassador's question as to when Gaza will be declared a 
closed military zone, Olmert said that it must be done in a 
"reasonable" manner, close to the time of the actual 
withdrawal itself.  Life for the residents is ongoing up 
until the time they actually leave, Olmert said, and they 
will need supplies and contact with the outside world. 
 
--------------------------------------------- ------------ 
Present-Day Progress Does Not a Permanent Settlement Make 
--------------------------------------------- ------------ 
 
8.  (C) Olmert said there was a good chance that the PA under 
Abu Mazen will be capable of holding back the terror for "a 
period of time," will hold reasonable elections for the 
Legislative Council in July, and will improve their 
performance on financial reform issues.  Olmert strongly 
cautioned, however, against counting this sort of progress as 
paving the way to talks on a permanent settlement in the near 
future.  Just because Abu Mazen is savvier than Arafat, 
Olmert warned, does not mean that his position on the core 
issues of the 1967 borders and refugee return is any 
different.  Olmert predicted that the PA and the GOI will 
likely "get stuck" on these issues despite, he said, 
"(Shimon) Peres and (Sylvan) Shalom thinking they can 
convince the Palestinians otherwise."  Olmert advised the 
U.S. not to be too ambitious and get drawn into a process not 
yet ripe for resolution -- and perhaps will not be "in our 
lifetime."  Olmert speculated that the best that might be 
achieved now are some steps to improve the Palestinian 
economy, until attitudes and circumstances change enough "in 
a few years" for the sides to begin talking seriously again. 
 
--------------------------- 
GOI Politics Still an Issue 
--------------------------- 
 
9.  (C) Olmert predicted that the GOI will call elections in 
November 2005, adding that holding elections would likely 
postpone further withdrawals or actions in the peace process 
for "a few months or so."  Labor is also very cognizant of 
the fact they must build an independent political position 
and engage the GOI in serious debate on policy prior to any 
elections if Labor is to prevail in the elections, but cannot 
do so effectively as long as they are working with the 
government.  "Just wait," Olmert said, "until Peres starts 
meeting with Abu Ala'a and the accusations of who is saying 
what to whom start flying." 
 
----------------------------- 
Missed Opportunity With Syria 
----------------------------- 
 
10.  (C) Olmert asserted that the GOI made a mistake by not 
sending a secret emissary to Damascus to determine the 
seriousness of Bashar al-Assad's intent to renew negotiations 
with Israel.  Admitting that Israel was not ready to conduct 
negotiations on both the Palestinians and the Syrian track 
simultaneously, Olmert also said that the lack of U.S. 
enthusiasm for the idea contributed to the GOI holding back. 
A/S Burns said that even the notion of Syrian-Israeli 
negotiations could prove useful to sow doubt between Syria 
and Iran.  Even if al-Assad's overture was less than genuine, 
calling Syria's bluff might help push Syria to use its 
influence to rein in Hizballah as a measure of good faith. 
Olmert also mused that some effort towards working on the 
Syria track could pay dividends in Syria's relations with 
Turkey, by demonstrating to the Turks that there are positive 
regional developments. 
 
11.  (U) A/S Burns has cleared this cable. 
 
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