US embassy cable - 03OTTAWA1164

C O N F I D E N T I A L OTTAWA 001164 
 
SIPDIS 
 
E.O. 12958: DECL: 04/22/2013 
TAGS: PREL, PREF, CA, MEPP, Iraq 
SUBJECT: MEPP: CANADIAN VIEWS ON POST-IRAQ DYNAMIC, 
CONFERENCE ON PALESTINIAN REFUGEES 
 
 
Classified By: Political Minister Counselor Brian Flora, 
Reasons 1.5 (b) and (d). 
 
1. (C) SUMMARY: Michael Molloy, Canada's Special Coordinator 
for the Middle East Peace Process, believes the U.S. victory 
in Iraq will have the biggest impact on the region of any 
event since the 1967 War.  How the U.S. handles the 
post-conflict phase, he told us, will set the tone for the 
West's relationship with the Islamic world.  Molloy said that 
most Palestinians are fed up with the intifadah, and that 
Arab states are increasingly willing to compromise on 
refugees in exchange for a Palestinian state.  Israel sees 
the war in Iraq as a reaffirmation of its muscular approach, 
Molloy argued, and the U.S. will have to force Israeli 
concessions on settlements in order to have a breakthrough in 
the MEPP.  Molloy encouraged the USG to send observers to a 
conference Canada is hosting June 17-20 on Palestinian 
refugees (see para 6).  END SUMMARY. 
 
2. (C) We met with Molloy and his staff on April 16 to 
discuss the impact of the war in Iraq on the Middle East 
peace process.  Molloy believes we are at a crossroads in the 
region, with the potential for catastrophe or exceptional 
progress.  He feels the parameters of an Israeli-Palestinian 
agreement are pretty clear - a return to 1967 borders with 
adjustments/offsets, a divided Jerusalem, security provisions 
for Israel, and settlement of refugees. 
 
3. (C) Molloy said that more and more Israelis see the West 
Bank as a liability.  He feels that 13 settlements, with 
11-12,000 Israelis, are key.  If the U.S. was willing to take 
a tough approach with Israel on settlements, Molloy 
contended, it would pay huge dividends in the Arab world. 
 
4. (C) Molloy believes the refugee issue can be resolved with 
very little return to Israel proper, and that Palestine needs 
to be made the destination of choice.  Large-scale 
international funding will be needed, he continued, but money 
alone is not enough.  The dignity of the refugees is also 
important.  Molloy's Senior Advisor Jonathan Laine, who 
returned in 2002 from a posting in Ramallah, contended that 
the intifada had killed any chance of refugee return to 
Israel. 
 
5. (C) Molloy said there were indications that Syria and 
other Arab countries would be flexible on refugee 
resettlement in exchange for an agreement on a Palestinian 
state.  He said this subject was no longer taboo, as shown by 
the planned participation of Arab scholars at a July 11-13 
refugee conference at the Max Planck Institute in Heidelberg. 
 
 
6. (U) Laine noted that the International Development 
Research Centre (IDRC) of Canada will be hosting a conference 
on Palestinian refugees June 17-20 in Ottawa.  This will be a 
stocktaking conference, where international experts will 
discuss existing research on the refugee issue and identify 
gaps where further study is needed.  Confirmed U.S. 
participants include Michael Fischbach, Robert Malley, Martin 
Indyk, Geoffrey Aronson, and Susan Akram.  The Canadian 
Government, which chairs the Refugee Working Group, has 
invited the USG (and other key countries/organizations) to 
send two observers to the conference. 
 
7. (U) Molloy also mentioned that Canada had been asked to 
join a task force on Palestinian reform, and that he would 
want to discuss with State NEA how Canada could be most 
helpful. 
CELLUCCI