US embassy cable - 05TELAVIV6127

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 006127 
 
SIPDIS 
 
E.O. 12958: DECL: 10/18/2015 
TAGS: ECON, IS, PREL, ISRAELI-PALESTINIAN AFFAIRS, GAZA DISENGAGEMENT 
SUBJECT: PM OFFICE DG SAYS RETURN TO ROADMAP VITAL TO 
STABILITY IN PA, ISRAEL 
 
 
Classified By: Ambassador Richard H. Jones for reasons 1.4 (b,d) 
 
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Summary 
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1.  (C)  In an October 6 meeting with Ambassador Jones, Ilan 
Cohen, the Director General of the PM,s Office, said that 
Israeli society needed to heal the serious rifts that had 
been opened by the disengagement from Gaza.  On the peace 
process, he said that there would be no West Bank 
disengagement, but that it is vital to return to the roadmap. 
 He agreed with the Ambassador,s point that PA President 
Abbas can succeed in the fight against Hamas only if the 
Palestinians see economic improvement, but noted that Israel 
is constrained in what it can do by security considerations. 
On Israel,s domestic economy, Cohen noted improvement, but 
said that its continuation depended on political stability 
and a return to the roadmap.  Regarding bilateral trade 
issues, he said that there was some progress on standards, 
and that he would look into the other bilateral trade 
irritants.  End Summary. 
 
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Vital to Soothe Disengagement Tensions 
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2.  (C) Cohen began the meeting with Ambassador Jones by 
stressing the trauma caused to Israeli society by the Gaza 
Disengagement.  He said that in addition to the bitterness 
felt by the 8,000 settlers uprooted from Gaza, the entire 
religious Zionist sector within Israeli society felt 
alienated.  He noted that soothing the tensions would be 
difficult, but vital to the long-term health and stability of 
the country. 
 
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Defeating Hamas Key to PA Prosperity 
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3.  (C) Remarking that a West Bank Disengagement was not in 
the cards, Cohen said that Israel, the U.S., and the EU need 
to move fast to reach agreement on reinvigorating the 
roadmap.  The Ambassador noted that, in addition to carrying 
out their roadmap obligations, the Palestinians also need to 
see the benefits of disengagement, such as a West Bank ) 
Gaza transportation link.  He said that only such progress 
would provide President Abbas with the support he needs. 
Cohen agreed with the need to support Abbas and to help him 
fight Hamas by improving the Palestinian economy via large 
scale internationally-funded projects.  He said that it would 
only take $120 million per year to set up a social security 
system to compete with the social services provided by Hamas, 
and that Deputy Premier Peres is looking into how to set up 
such a mechanism.  He asserted, however, that the PA 
President was making a mistake in not dealing with the 
terrorist organizations now, saying that compromising with 
such groups never succeeds.  He added that pleading 
&weakness8 in the Middle East could be fatal. 
 
4.  (C) Cohen then said that, according to GOI estimates, 
Palestinians living in third countries might be willing to 
invest between $300 and $500 million in Gaza, but that no one 
would put money at risk unless the PA ensured a stable 
security situation.  In addition, he noted that 300,000 
Israeli Arabs used to vacation at Gaza,s beaches, saying 
that they would likely do so again if there is a stable 
security situation.  Citing the case of the greenhouses as a 
unique &win-win8 situation where both sides benefited, 
Cohen indicated that Israel,s refusal to compromise on 
security hampers its overall ability to help resolve Gaza,s 
economic problems.  He said that, as a neighbor, Israel wants 
to have a good economic relationship with the Palestinians, 
but that it is important for the PA to build trade ties with 
the private sector in the outside world, and not depend on 
exporting labor to Israel. 
 
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Israel,s Prosperity Depends on Political Stability 
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5.  (C) On Israel,s internal economic situation, Cohen said 
that over 5 percent growth is being predicted for 2006, along 
with a reduction in the unemployment rate to 8.7 percent. 
(Note: The unemployment rate is now 9 percent. End Note.)  He 
also noted that rate of incoming foreign direct investment is 
now the highest on record.  However, he stressed that 
continued economic improvement depended on political 
stability and a return to the roadmap. 
 
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Some Progress on Bilateral Issues 
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6.  (C) The Ambassador raised several problematic bilateral 
issues, including standards, procurement, and IPR.  Cohen 
responded that discussions on standards have been going well 
and that Israel will import more products that meet only U.S. 
standards.  Remarking that IPR is a sensitive global issue, 
he indicated that he will look into the other areas of U.S. 
concern, including the proposed Patent Term Extension Law. 
 
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JONES