US embassy cable - 05TELAVIV6176

C O N F I D E N T I A L SECTION 01 OF 02 TEL AVIV 006176 
 
SIPDIS 
 
E.O. 12958: DECL: 10/20/2015 
TAGS: ECON, KPAL, KWBG, PGOV, PREL, IS, GAZA DISENGAGEMENT, GOI INTERNAL, ISRAELI-PALESTINIAN AFFAIRS 
SUBJECT: PERES:  GAZA DISENGAGEMENT INCOMPLETE 
 
Classified By: Ambassador Richard Jones for Reason 1.4 (b) and (d) 
 
 1.  (C) Summary:  In a recent meeting with the Ambassador, 
Vice Premier Peres said that advancing the peace process and 
combating poverty in Israel would be the most important 
issues in the lead up to elections late next year.  He stated 
that the GOI's disengagement from the Gaza Strip would be 
incomplete until agreements were reached on the passage of 
people and goods.  Until then Gaza would remain a prison. 
While noting that the GOI had to clarify some of its own 
positions, Peres described PA Chairman Mahmud Abbas as weak 
and unwilling to confront an increasingly powerful Hamas. 
Peres said he had recently discussed with UK PM Tony Blair 
the possibility of UK funding for a West Bank-Gaza 
transportation link, but noted that public assistance and 
private investment would not be forthcoming in the absence of 
stability.  Peres suggested that, until the conflict between 
traditionalists and modernizers in the Middle East is 
resolved, few moderate voices would have the will or the 
capability to openly espouse modernization and democratic 
principles.  He believed, nevertheless, that the PA, with 
some assistance, could be democratic.  He claimed that PM 
Sharon was now inclined to help the PA achieve statehood. 
End Summary. 
 
2.  (C) On October 3, the Ambassador made an introductory 
call on VP Peres.  ECON/C and POL/C accompanied.  Peres began 
by describing the political situation in Israel.  While 
asserting that the past year had gone "better than expected," 
particularly in regard to GOI's disengagement from Gaza, 
Peres suggested that the focus on elections in October 2006 
may detract from the "supreme effort" needed to advance the 
peace process and improve the economic situation in Israel. 
He declared that the Labor party had sacrificed everything 
for the Gaza disengagement, adding that the government would 
not have survived without Labor's support.  Peres continued 
that, while remaining in the ruling coalition, Labor would 
seek agreement on erasing poverty in Israel and furthering 
the peace process.  As a member of the ruling coalition, 
however, Labor has found it difficult to achieve its goals 
and receive credit for any successes, according to Peres. 
Under these circumstances, he added, the younger generation 
within the Labor party is growing impatient. 
 
3.  (C) Although pleased with how the disengagement has gone 
thus far, Peres said that the GOI would not truly be out of 
Gaza until agreement on the passages was reached.  Without 
freedom of movement, Peres continued, Gaza was "still like a 
prison."  In reply to the Ambassador's question on how to 
proceed with talks over the Rafah crossing, Peres said that 
the GOI first needed to make its own internal decisions 
related to control of Israel's borders with Gaza.  He added 
that talks about Kerem Shalom as an alternative crossing 
point required more time.  Egypt's role also needed to be 
better defined.  He asserted that the Rafah crossing 
ultimately can open for two-way passage of people with a 
third-party role. 
 
4.  (C) Peres expressed concern about the security situation 
in Gaza and PA Chairman Abbas's reluctance to confront Hamas. 
 He said that Abbas claims to be too weak and also wishes to 
avoid an internal confrontation potentially leading to a 
civil war.  Describing the current situation as a "test of 
wills" between the PA and Hamas, Peres characterized Hamas as 
the greatest threat to stability. 
 
5.  (C) In the absence of stability, no one will be inclined 
to finance Gaza reconstruction, according to Peres.  For 
example, attracting private investment to fund a vital West 
Bank-Gaza transportation link and other projects is extremely 
difficult.  Peres advised that on a recent trip to London he 
had spoken to UK PM Tony Blair and asked that the British 
provide $100 million for the project.  He also requested that 
private companies be encouraged to match this investment in 
the West Bank and Gaza.  To attract private investment, Peres 
recommended to Blair expanded quotas for exports to the EU, 
loan guarantees, and the establishment of industrial parks 
geared to the EU market (EU QIZ).  Peres remarked to the 
Ambassador that outsourcing is better than charity and 
economic aid is better than financial aid. 
 
6.  (C) Peres stated that violence and instability continue 
to thwart economic growth and modernization, and not just in 
Gaza, but in the region as a whole.  He declared that a 
contributing factor to the current situation was the "Middle 
East's inability to come to terms with the modern world. 
Confronted by terrorism and traditionalists, moderates cannot 
promote modernization and openly embrace change.  Peres cited 
Saudi Arabia as an example of a society "out of kilter."  He 
said that in their effort to co-opt religious groups, Saudi 
rulers had created distortions in the Saudi education system, 
resulting in young people there who are less skilled and less 
familiar with the West than their fathers.  In fact, Peres 
continued, this generation of Saudis shuns foreign influences. 
 
7.  (C) Peres asserted that the PA can be democratic, despite 
its lack of experience in statehood, but it needs help.  He 
said the establishment of solid government institutions was a 
priority and agreed with the Ambassador that it was in 
Israel's interest to help the Palestinians.  Peres said that 
PM Sharon now recognizes the need to help the PA achieve 
statehood.  One impediment to such a goal, according to 
Peres, is the lack of leadership in the PA, effectively 
leaving the GOI without a partner to work with for now. 
 
8.  (C) Peres also raised the issue of economic development 
for the Negev and the Galilee. 
He advised that economic development in these regions was 
essential in the context of the demographic challenge Israel 
is facing.  He cited the changed character of Lebanon as the 
numbers of Christians dropped significantly while the Muslim 
population grew rapidly.  While the size of the Jewish 
majority in the Negev and the Galilee may vary, Jewish 
majorities in these regions must be maintained, he asserted. 
 
 
 
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JONES