Cablegate: Scenesetter for the Visit of Deputy Secretary

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S E C R E T SECTION 01 OF 04 TEL AVIV 002473

SIPDIS

DEPARTMENT FOR DEPUTY SECRETARY STEINBERG

E.O. 12958: DECL: 11/12/2019
TAGS: PREL PGOV PTER MOPS KWBG IS IR
SUBJECT: SCENESETTER FOR THE VISIT OF DEPUTY SECRETARY
JAMES STEINBERG

Classified By: Deputy Chief of Mission Luis G. Moreno, Reason 1.4 (b) (
d)

1. (S) Summary. Israel is deceptively calm and prosperous.
The security situation inside Israel is the best since the
outbreak of the Second Intifada, the economy has weathered
the storms of the international economic crisis, and
Netanyahu's governing coalition is stable, for the time being
at least. Yet outside the storm is gathering and Israelis of
many different political outlooks agree on the need to seize
the initiative, even while they disagree about what exactly
should be done. Israelis see Iran as the primary regional
threat, both due to its nuclear program and its projection of
power directly into Gaza and southern Lebanon. The Israeli
navy's seizure of a ship loaded with a huge shipment of
Iranian arms November 3 has provided tangible proof of
Iran's involvement in arming Hamas and Hizballah. Syrian
intentions are also a source of concern, as Israeli analysts
see Asad moving closer to Iran and Hizballah even as Syria
improves its relations with the West. The sharp decline in
Israel's long-
standing strategic relationship with Turkey is adding a new
element of instability into the picture. Prime Minister
Erdogan's rhetorical support for Ahmedinejad and his
dismissal of the threat posed by Iran's nuclear program is
feeding the sense here of impending crisis, although the
robust U.S.-Israeli security relationship is profoundly
reassuring to Israeli security officials and the general
public alike. Finally, the failure to re-launch
Israeli-Palestinian negotiations and the political crisis in
the Palestinian Authority is deeply disturbing to Israelis
who still believe in a two-state solution. Even GOI skeptics
are worried that the lack of a political dialogue and talk of
a collapse of the PA are undermining the bottom-up approach
they advocate as the alternative to a final-status agreement.
Netanyahu insists that he is ready to start negotiations
immediately without preconditions, but he will not negotiate
on the basis of former PM Olmert's offer of a year ago. The
opposition Kadima Party's number two, former IDF Chief of
Staff and former Minister of Defense Shaul Mofaz, has
generated considerable attention with a new peace plan that
is based on offering the Palestinians a state with temporary
borders in the next year or two, to be followed by intensive
final status negotiations. Few here believe the Palestinians
will accept this idea, but it may serve to push Netanyahu
toward offering a peace initiative of his own. End Summary.

Calm Before the Storm?
----------------------

2. (S) Israel in the fall of 2009 is deceptively calm on the
surface. Israelis are enjoying the best security situation
since the outbreak of the Second Intifada, the result of
Israeli intelligence successes in destroying the suicide
bombing network in the West Bank as well as good security
cooperation with the Palestinian Authority's security forces.
The Israeli economy has successfully weathered the world
economic crisis, with only a slight uptick in unemployment
and no major impact on the financial system. PM Netanyahu's
center-right coalition is stable, and faces no significant
challenge from the opposition Kadima Party. Netanyahu
personally enjoys approval ratings over sixty percent, and
appears to have benefited politically from the media
obsession with reports of frictions with the U.S.
Administration. Netanyahu so far has managed the more right
wing elements of Likud and other rightist elements in the
coalition, although tensions with the far right are likely to
reemerge over peace process issues, including a temporary
settlement freeze or a decision to make good on Barak's
pledges to evacuate illegal outposts. There are signs of a
growing split within the Labor Party, and Foreign Minister
Lieberman continues to face the strong possibility of several
criminal indictments for money laundering and obstruction of
justice, but none of this threatens the stability of the
coalition, at least not yet. The latest polls indicate that
Likud would gain three seats if elections were held now.

And Looming Threats
-------------------

3. (S) Despite this good news for the government, Israelis
are even more anxious than normal these days. Sixty-one
years after the establishment of the State of Israel,
Israelis sense a growing tide in the world challenging not
just the occupation of territory seized in 1967, but even
against the existence of the Jewish state within any borders.
The GOI's alarm and outrage over the Goldstone Report was
based on their view that the report represented an attempt to
deny Israel the right to react military to terrorist threats.

TEL AVIV 00002473 002 OF 004

Security is indeed good and Israel's borders are generally
the quietest they have been in years, but it is common
knowledge that Hamas in Gaza and Hizballah in Lebanon both
now possess rockets capable of hitting the greater Tel Aviv
area, Israel's main population and economic center. When
discussing Iran's nuclear program, sophisticated Israeli
interlocutors note that the issue is not just whether a
nuclear-armed Iran would launch nuclear-tipped missiles at
Israel - although that possibility cannot be dismissed - but
rather the regional nuclear arms race that would ensue and
the impact of the resulting uncertainty on Israeli elites and
foreign investors alike. Israel's remarkable high-tech
economy is a great achievement, but it also makes Israel
exceptionally vulnerable to a host of private decisions to
live and invest elsewhere. Growing alienation among Israel's
twenty-percent Arab minority and the increasing domination of
Israeli Arab politics by an elite that identifies with
Palestinian nationalism further complicates Israel's internal
scene.

4. (S) Painstakingly constructed relations with Israel's
neighbors are also fraying. Even optimists about relations
with Egypt and Jordan admit that Israel enjoys peace with
both regimes, but not with their people. The transformation
of Michel Aoun into Hizballah's primary Lebanese ally may be
the final nail in the coffin of Israel's decades-old
relations with Lebanon's Maronite Christians. Finally,
Israelis are deeply alarmed by the direction of Turkish
foreign policy, and see Erdogan and Davutoglu as punishing
Israel for the EU's rejection of Turkey while driving
Israel's erstwhile strategic ally into an alternative
strategic partnership with Syria and Iran.

Gaza Dilemmas
-------------

5. (S) Gaza poses its own set of dilemmas. The IDF general
responsible for Gaza and southern Israel, Major General Yoav
Galant, recently commented to us that Israel's political
leadership has not yet made the necessary policy choices
among competing priorities: a short-term priority of wanting
Hamas to be strong enough to enforce the de facto ceasefire
and prevent the firing of rockets and mortars into Israel; a
medium-priority of preventing Hamas from consolidating its
hold on Gaza; and a longer-term priority of avoiding a return
of Israeli control of Gaza and full responsibility for the
well-being of Gaza's civilian population. Israel appears
determined to maintain its current policy of allowing only
humanitarian supplies and limited commercial goods into Gaza,
while sealing the borders into Israel. There are indications
of progress in the indirect negotiations with Hamas over the
release of Gilad Shalit in return for the release of hundreds
of Palestinian prisoners, many of them hardened
terrorists,but it is difficult to predict the timing of such
a deal. Shalit's release would likely result in a more
lenient Israeli policy toward the Gaza crossings, but a large
prisoner exchange would be played by Hamas as a major
political achievement and thus further damage the standing of
Abu Mazen among Palestinians.

Security Cooperation with the U.S. Reassuring
---------------------------------------------

6. (S) Especially given the sense of growing threats from
all directions, Israelis from the Prime Minister on down to
the average citizen are deeply appreciative of the strong
security and mil-mil cooperation with the U.S. The
U.S.-Israeli security relationship remains strong, as
indicated by the joint U.S.-Israeli missile defense exercise
Juniper Cobra 10 in which over 1,400 American personnel
tested Israel's defense - and U.S. support thereof - against
ballistic missile threats in the region . The United States
remains committed to Israel's Qualitative Military Edge
(QME), and has taken a number of steps to alleviate Israeli
concerns over some potential U.S arms sales to the region,
including the creation of four new QME working groups to
further discuss these arms transfers. These working groups
will soon begin deliberations, focusing on previous arms
transfer agreements, mitigation measures for the planned U.S.
F-15 sale to Saudi Arabia, technical mitigation issues, and
intelligence policy.

7. (S) While the United States and Israel may not agree on
some U.S. arms transfers to the region, these QME working
groups will ensure a transparent process so that Israel is
not surprised by any U.S. potential transfer. As it does in
assessing all threats, Israel approaches potential U.S. arms
sales from a "worst case scenario" perspective in which
current moderate Arab nations (Egypt, Saudi Arabia, and

TEL AVIV 00002473 003 OF 004

Jordan) in the region could potentially fall victim to regime
change and resume hostilities against Israel. It is
primarily for this reason that Israel continues to raise
concerns regarding the F-15 sale to Saudi Arabia, especially
if the aircraft are based at Tabuk airfield near the Israeli
border. We have deflected Israeli requests for additional
information regarding the F-15 sale until we receive an
official Letter of Request (LOR) from Saudi Arabia.

8. (S) Finally, an argument can be made that Israel has
continued to raise concerns over the F-15 sale as leverage in
its attempts to modify its purchase of the F-35 Joint Strike
Fighter (JSF). Israel remains highly committed to the JSF as
a successor to its aging F-16 fleet, although budgetary
considerations have raised some doubts how Israel will be
able to afford it. Nevertheless, Israel continues to press
for the inclusion of an Israeli-made electronic warfare (EW)
suite, indigenous maintenance capacity, and a lower cost per
aircraft into its JSF purchase plans, and has repeatedly
raised these issues with SecDef.

Impasse with the Palestinians
-----------------------------

9. (C) Polls show that close to seventy percent of Israeli
Jews support a two-state solution, but a similar percentage
do not believe that a final status agreement can be reached
with the Palestinian leadership. Expressed another way,
Israelis of varying political views tell us that after Abu
Mazen spurned Ehud Olmert's peace offer one year ago, it
became clearer than ever that there is too wide a gap between
the maximum offer any Israeli prime minister could make and
the minimum terms any Palestinian leader could accept and
survive. Sixteen years after Oslo and the Declaration of
Principles, there is a widespread conviction here that
neither final status negotiations nor unilateral
disengagements have worked. While some on the left conclude
that the only hope is a U.S.-imposed settlement, a more
widely held narrative holds that the Oslo arrangements
collapsed in the violence of the Second Intifada after Arafat
rejected Barak's offer at Camp David, while Sharon's
unilateral disengagement from Gaza resulted in the Hamas
takeover and a rain of rockets on southern Israel. Netanyahu
effectively captured the public mood with his Bar Ilan
University speech last June, in which he expressed support
for a two-state solution, but only if the Plestinian
leadership would accept Israel as the ation-state of the
Jewish people and the Palestiian state would be
demilitarized (and subject toa number of other
security-related restrictions o its sovereignty that he did
not spell out in deail in the speech but which are well
known in Wahington). Palestinian PM Fayyad has recently
temed Netanyahu's goal a "Mickey Mouse state" due to all the
limitations on Palestinian sovereignty that it would appear
to entail.

10. (S) Abu Mazen's stated intent not to seek another term is
widely seen here as an effort to put pressure on Washington
to put pressure on Israel to meet Palestinian terms for
starting negotiations. Abu Mazen's statements have likely
reinforced his image among Israelis as a decent man, and
certainly a different breed from Arafat, but a weak and
unreliable leader. Yet even some of the Israeli officials,
including Avigdor Lieberman and Sylvan Shalom, who have been
most skeptical about the prospects for a final status
agreement in the near term, are now expressing concern at the
lack of engagement with the PA and the prospects of the PA
collapsing. Advocates of a bottom-up approach are finally
realizing that without a political process, the security
cooperation and economic development approach will become
unsustainable. Netanyahu has told us that he considers Abu
Mazen to be his negotiating partner, and in his latest public
statements has stressed that he is not interested in
negotiations for their own sake, but rather seeks a
far-reaching agreement with the Palestinians, but it remains
unclear to us how far Netanyahu is prepared to go. Netanyahu
is interested in taking steps to strengthen Abu Mazen, but he
will not agree to the total freeze on Israeli construction in
the West Bank and East Jerusalem that Abu Mazen insists is a
requirement for engaging with Netanyahu.

Israeli Choices
---------------

11. (C) Former Defense Minister and former IDF Chief of Staff
Shaul Mofaz generated a lot of media attention this week when
he announced a peace plan that calls for establishing a
Palestinian state with temporary borders on sixty percent of
the West Bank, then entering final status negotiations.

TEL AVIV 00002473 004 OF 004

Mofaz' approach is similar to ideas that have been floated
quietly over the past few months by Defense Minister Barak
and President Peres, and Mofaz claims that both Barak and
Peres support his plan. Mofaz' plan is in part an effort to
undermine the political position of his rival for Kadima
party leadership, former Foreign Minister Tzipi Livni.
Livni, presumably drawing on her experience negotiating with
the Palestinians during the Olmert government, says she
opposes the idea of an interim solution, but instead supports
intensive final status negotiations, perhaps this time with
direct U.S. involvement. Livni and Mofaz both stress that
they are motivated by a sense of urgency and that time is not
on Israel's side.

12. (C) Netanyahu still holds the political cards here,
however, and we see no scenarios in which Livni or Mofaz
become prime minister in the near future. As Mofaz told the
Ambassador earlier this week, Netanyahu may wait until the
Palestinian elections, if they are in fact held in January,
but the initiative is in his hands. If the Palestinians
continue to refuse to engage on terms that Netanyahu can
accept, it is possible that Netanyahu could turn his
attention to Syria. Media reports that Netanyahu asked
President Sarkozy to deliver a message to Asad may turn out
to be accurate, but as with the Palestinians, Netanyahu will
not resume talks with Syria where they left off under Olmert,
but will insist on negotiations without preconditions.
CUNNINGHAM

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