The Financial Crisis and Israeli-Palestinian Talks/Kissinger on US Mideast Policy

Oct 17, 2008 | AIJAC staff

Update from AIJAC

October 17, 2008
Number 10/08 #05

This Update features two new pieces on how the global financial crisis might affect Israeli-Palestinian negotiations – with the general assumption being the effect will be pronouncedly negative.

First up, Herb Keinon, diplomatic correspondent of the Jerusalem Post, says that the financial crisis makes it likely that both the next US administration and the next Israeli government will be forced to make Middle East peace negotiations a lower priority as they cope with economic problems. Moreover, money to pay for the Israeli security needs, Palestinian refugees, and Palestinian nation-building is much less likely to be there. Finally, he predicts that if international interest in the conflict fades, Palestinian factions are likely to return to terrorism to call attention to their cause. For his full argument, CLICK HERE.

Next up, some Palestinian and Israeli sources say similar things in a piece by Josh Mitnik of the Washington Times. Mitnik quotes both Palestinian activist Hanna Siniora and Israeli columnist Akiva Eldar arguing that the financial crisis may see Israeli-Palestinian efforts set aside as a priority. Mitnik also calls attention to the possibility that, by closing down alternatives, the financial crisis may empower the growing number of Palestinians demanding a “one-state solution” to the conflict. For this complete piece, CLICK HERE.

Finally, this Update features the wisdom and views of the eminence grise of American foreign policy, Henry Kissinger, on Middle East questions, as elucidated at a dinner in his honour by the Washington Institute for Near East Policy earlier this month. In an interview with Washington Institute head Dr. Robert Satloff,  Kissinger offers advice on how to solve the nuclear crisis with Iran, how to wind up the war in Iraq, and also how to move toward an Israeli-Palestinian settlement. He makes some particularly good points on this last issue concerning the need to plausibly present Israel with some guarantee, beyond someone’s word, that the West Bank will not become “a kind of Gaza, in which rockets and other weapons are concentrated.” Finally, he also discusses the financial crisis and its effect on American influence. To read everything he has to say CLICK HERE.

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Analysis: The failing markets’ impact on diplomacy

Herb Keinon


With the global financial hurricane still raging, it is clear to all that everyone and everything is going to get wet. The real question is how wet.

Take, for instance, the Israeli economy. No doubt we will all be affected by Wall Street’s storm, as will nearly every country in the world. No doubt a deep recession is around the bend, and we will feel it – maybe less than folks in the US, certainly less than those in Iceland, but feel it we will.

In Jerusalem, however, where concerns are primarily existential and not merely economic, another question is asked: How will all this impact on the Arab-Israeli conflict, and what will it do to the diplomatic process?

And even though we are in the midst of the tempest and it is too early to predict all the consequences, it is obvious that the financial crisis will have an impact on international relations, on the balance of power, on new alliances. Some have said we are now witnessing the seminal event of the young century, and that the ripple effects will be felt far and wide.

First of all, the crisis is already having an impact on the diplomatic process by having an impact on the domestic political process, both in Israel and in the US.

In Israel, the global financial meltdown will make it easier for new Kadima chairwoman Tzipi Livni to form a government. Granted, Shas and, to a lesser degree, the Labor Party are kicking and howling on their way into a Kadima-led government, but in the final analysis, they will both likely join, using as an explanation to their respective voters the need to “act responsibly” and ensure a stable government at this economically volatile time.

The crisis is also having a dramatic impact on the US presidential election, with Barack Obama opening a 9-percent lead over John McCain in the polls, a gap the pundits explain is due primarily to the economic situation. And the conventional wisdom is that an Obama administration would take a much more activist approach to the Israeli-Palestinian conflict than a McCain administration.

Well, at least on paper. In reality, an Obama government is likely to be so tied down dealing with the economic crisis that even if the new president and his team of veteran Oslo Accord hands would like to dive right into the Middle East conflict, the attention both of the administration and of the American public will be otherwise engaged. With banks collapsing, stocks falling, and the real estate market a shambles, it seems unlikely an Obama team – or, for that matter, a McCain team if things should reverse themselves in the next four weeks – will have a lot of attention or energy left for the Middle East conflict.

And they would not be alone. If Livni does indeed succeed in putting together a government, its top priorities will no longer be the Palestinian track, or even the Syrian track, but rather the economic track.

The disappearance of trillions of dollars worldwide will also make it difficult for the international community to pay for an Israeli-Palestinian, or Israeli-Syrian, agreement, even if they miraculously appear. Who would pay for the tens of billions of dollars worth of new early warning systems Israel would have to set up following deep withdrawals from the West Bank and Jordan Valley, or a complete withdrawal – as the Syrians are demanding – from the Golan Heights?

Who would pay compensation to Palestinian refugees if an agreement were reached that would deny them a “right of return” to pre-1967 Israel, but would recognize their right to compensation? Who would pay for the Palestinian security services or fund the infrastructure if a Palestinian state were agreed upon?

The US? After this month, forget about it.

Europe, the oft-looked-to Middle East payer? Hard to believe that, considering their devastated economies, Europe will be anywhere nearly as generous to the Palestinians in the future as they have been in the past.

The Persian Gulf states? Even in the best of times, it was difficult to get those countries to do more than pledge money to the the Palestinian Authority. But now, with oil revenue at nearly half what it was a few months ago and the stock markets in the Arab countries slipping badly along with the rest of the world’s markets, don’t expect them to step up and fill in the gaps for the Palestinians.

In addition, with the governments of the world now preoccupied with their own economies and the resulting domestic fallout, the importance of solving the Israeli-Palestinian issues right now will likely fade. That fading interest could have negative consequences of its own, because the Palestinians will struggle to make sure their issue does not recede, that it stays front-and-center on the agenda. And if history is any indication, the way the Palestinians keep their cause on the international radar screen is not through letters to the editor or civil disobedience, but through terrorism and other violence.

And that’s how falling stocks on the Frankfurt Stock Exchange could lead to falling rockets on Sderot.

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Financial crisis seen dooming Mideast accord

Joshua Mitnick

Washington Times, Monday, October 13, 2008

Whatever glimmer of hope remained for a Middle East peace accord is being snuffed out by the financial crisis, which is likely to preoccupy the White House into the next administration and sap financial resources to bolster an accord, analysts here say.

The Bush administration had targeted the end of 2008 for an Israeli-Palestinian peace agreement, but with Israeli and U.S. administrations in transition as well as a weak Palestinian Authority, the chances of a breakthrough were already slim.

Now Wall Street’s implosion over the past month and expectations of a deep U.S. recession will leave little time for the next U.S. president to be actively engaged in the talks.

“We are being shelved for the moment,” said Hanna Siniora, co-president of the Israel-Palestinian Center for Research and Information and a veteran Palestinian interlocutor with Israel and the United States.

“And if the crisis deepens, it’s bad news for all of the Middle East. There won’t be any interest in the government of the U.S. to do anything.”

Though the next administration is likely to dispatch its secretary of state or a special envoy to keep on top of Arab-Israeli peacemaking, presidential involvement has been required in the past to clinch deals.

There is also concern that squeezed government budgets could sap foreign financial support for the Palestinian Authority , which is almost entirely dependent on foreign aid to pay salaries.

“It will be less popular to get the American or European taxpayers to contribute money for the Palestinians,” said Akiva Eldar, a political commentator for the Israeli newspaper Ha’aretz. “Especially if the peace process isn’t going anywhere.”

So far, a Palestinian official charged with overseeing foreign aid to the Palestinian Authority said she has seen no signs of donors reneging on the $2 billion the Palestinians are slated to receive over the next year.

Low expectations for an agreement by the Bush deadline have already spurred an uptick in chatter among Palestinians that negotiating a two-state solution to the conflict is futile, and alternative strategies – such as promoting one binational state – should be explored.

Outgoing Israeli Prime Minister Ehud Olmert surprised the country recently when he said that Israel would have no choice but to withdraw from most of the West Bank and parts of East Jerusalem if it wants peace with the Palestinians.

But Foreign Minister Tzipi Livni, who is trying to form a coalition government to back her as Israel’s new prime minister, said that neither Palestinians nor Israelis are ready to move forward on a breakthrough land-for-peace deal.

With the steady expansion of Israeli settlements in the West Bank – settlers claim they now number more than 300,000 – and construction of a separation barrier that cuts Palestinian areas into jigsaw-puzzle pieces, Arabs are beginning to despair that a viable Palestinian state in the West Bank is still possible.

Some Palestinians have called for a strategic reassessment if the sides fail to reach a treaty by the Bush administration deadline. Others, such as Kadoura Fares, a former legislator for the Palestinian party, Fatah, say there is a two- to three-year window before the two-state solution becomes impractical.

“If they continue to build settlements, there doesn’t need to be any negotiations,” he said. “If we don’t succeed in negotiations, we need to switch to a new strategy.”

Realizing that demographics are in their favor, some Palestinians have suggested pressuring for the creation of one binational state including the West Bank, Israel and the Gaza Strip. But others remain skeptical.

“You cannot just sit back to wait for demographics to take over,” said Hanan Ashrawi, a former Palestinian Cabinet minister and negotiator. “Israel is not just a neutral actor.”

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2008 Scholar-Statesman Award Dinner featuring Henry Kissinger and Robert Satloff

PolicyWatch #1411
October 10, 2008

On October 6, 2008, The Washington Institute honored former secretary of state Henry Kissinger with its 2008 Scholar-Statesman Award. Charles Krauthammer introduced Dr. Kissinger, who then engaged in “public conversation” with Institute executive director Dr. Robert Satloff about the past, present, and future of American statecraft in the Middle East. The following are edited excerpts of their conversation.

Robert Satloff: What is the greatest security challenge facing America in 2008?

Henry Kissinger: The greatest short-term security challenge is the role of Iran and the role of nuclear proliferation and the impact of this on jihadist terrorism.

Satloff: How can the United States most effectively prevent Iran from acquiring military nuclear capability?

I begin, of course, with the proposition that the spread of nuclear weapons, if it is not contained, is going to bring about a catastrophe for mankind. [During the Cold War] we never came close to actually using nuclear weapons. But at that time, nuclear weapons were held by countries that had more or less comparable analogies of risks. Nuclear weapons are now spreading into the hands of countries in which suicide bombing is considered a strategy and in which the judgment of the value of human life has a different dimension and is geared toward what happens in the next life and not in this life. Also, it is moving toward societies that cannot safeguard nuclear weapons as the more advanced countries could. So for all of these reasons, to stop the spread of nuclear weapons now is an absolute imperative. . . .

We have to get clear about a number of issues. One, how much time is there for diplomacy? In other words, when will a point be reached when Iranian capacity to reprocess material has reached a level at which it will be almost impossible to stop it, or where they will have accumulated so much material that they will possess enough for a destructive attack on enough of their neighbors?

Second, what is the impact of their being able to do this in the face of a unanimous vote of the Security Council, backed by Germany and Japan, that they should not continue reprocessing? What is the impact on the international system if the repeated unanimous vote of the Security Council is ignored?

And finally, how do we get matters to a point at which we can convincingly tell our public that we have taken every step to avoid taking stronger measures?

So for all of these reasons, I have favored a willingness to negotiate the issue because I think that the present course — where three European countries, in effect, backed by the United States, are conducting negotiations with marginal proposals followed by marginal sanctions — really plays into the hands of the people who are proliferating [the weapons]. So we have to get clear how much time do we have.

Secondly, what should we propose as an outcome? How much time can we give to that process, which is related to the first point? And finally, what are we going to do if it turns out that the negotiations do not succeed? These are questions that will have to be dealt with, in my view, within the first eighteen months of a new administration. And in my view, there is no getting around it.

Satloff: So the time frame is eighteen months for resolution or decision?

Kissinger: Yes, and negotiation . . . I don’t think one can hide behind negotiation. I think negotiation has to be part of the process.

Satloff: As somebody who lived through the threats of first Nazism and then communism, how would you assess the danger of Islamic extremism and what strategies would you use to address this challenge?

The international system with which we are most familiar. . . was based on the state. And the modern state emerged out of the religious wars of the 17th century when leaders assumed the right to convert societies to their religious point of view. In order to stop the massacres that were associated with this process, they developed the notion of sovereignty, in which countries had authority to operate within their own territory and in which foreign policy was what took place beyond the frontiers of states.

The essence of jihad extremism is that one rejects the notion of the individual state. It’s a universal philosophy that has to be generally applied to bring about the unified caliphate. It is aimed at all of the institutions of the Muslim world, but is also aimed at the institutions of the Western world. It has to reject, by its nature, any idea of pluralism because there’s only one truth and, therefore, is aimed at the institutions that have given structure to the international system . . . [I]t is a threat to almost every state, certainly to every state that has Islamic minorities, but also to any state that can, in their view, affect the future of the Islamic world, which is the majority of the population . . .

It is often presented as exclusively or primarily as related to Israel. That is not correct. I think, in many ways, they use Israel as a rallying point for a much more fundamental concern, which is to spread the notion of a universal Islamic empire. In the medium term, a successful jihad will threaten India as much as it threatens Israel, because the 160 million Muslims who live in India cannot be unaffected by a wave that is spreading through the Islamic world.

. . . I know it’s sort of fashionable to criticize President Bush, but I think he has understood what the central problem of the period is, even if one questions this or that tactical approach to it. And the central problem that we now face is Islamic extremism, for which the only real solution is to arrest it and to demonstrate its incapacity to achieve its objectives. Otherwise, the momentum is going to become stronger and stronger.

Satloff: And so, operationally, what would your policy prescription be then for the next president on this issue?

Kissinger: The first thing we need is to bring the war in Iraq to the conclusion toward which it is now heading and not to interrupt it by applying principles from our own domestic debate to a situation that is moving in a basically correct direction. If the situation in Iraq evolves as it is now, then — within a measurable period — one can have an international conference on Iraq that establishes the international position of Iraq which in turn would have the consequence of making it illegal to interfere across the borders of Iraq. Nobody will be restrained by the formal illegality of an act, but it will then create a basis for resistance other than the unilateral intervention of one country. And I would think that, by the end of next year, we should be at that point or clearly approaching that point.

Secondly, Iran presents a challenge not only in defense of the dangers of proliferation, but also of the resurrection in Iranian minds of the ideas of Iranian empire so that the attempt of Iran to lead both the religious upheavals and the various other revolutionary challenges in the region must be resisted. But we have to put this into perspective. Iran is not a strong country. Iran is a country with a reasonably strong ideology and a long history — the only country in the region that, in its present form, has any long history.

So the challenge for us is this: If one were to talk to an Iranian who is not seduced by visions of Islamic universality, one could say, you criticize us for our relations with the shah, but you misunderstand what that relationship was. That was a tribute to Iran. It was not a tribute to the shah. It shows that America can live with a strong Iran that is a major player in the region, provided it conducts itself as a nation and not as a cause.

There is no reason for the United States to resist a strong Iran. Historically, Iran has had good relations with Israel and has had good relations with the United States; so these are the directions in which we have to go and I believe they are achievable. We must not let ourselves get mesmerized by the rhetoric. The majority of the countries in the region are on our side, and the extremists really do not have a strategy for achieving their objective if we stick to a cause along the lines that I have described.

Satloff: There was a time when the strategic rationale for Arab-Israeli peacemaking was, for example, turning Egypt from Soviet to American ally. Today, how urgent is the pursuit of Arab-Israeli peace?

Kissinger: The argument is always made that achieving Arab-Israeli peace will turn around the situation in the region and will remove the principal cause of disaffection of the radical Arabs. I have my doubts about that. And I have my doubts for this reason: whatever the final settlement is, those who oppose it do so because they reject the existence of Israel and not the borders of Israel. So the people who will be placated by this and who might be willing to accept it are going to come under immediate attack from the radicals for having given up that much. And I also believe that among the moderates, those who are willing to make the agreement are probably divided between those who genuinely want peace and those who look at peace as a tactical device, ultimately to destroy Israel.

Having said all of this, the issue therefore becomes how can Israel best survive –under conditions of a recognized settlement or under conditions of the status quo ameliorated? I can see that that is a serious issue. I do not believe that a settlement will bring universal reconciliation in the region. I nevertheless believe that [pursuing a recognized settlement is] on balance, the wiser course to take, provided a number of circumstances or conditions are met.

First, what do we mean by settlement? There is a strange aspect to this negotiation. When you begin most negotiations, normally you don’t quite know what the outcome will be, and the negotiation is supposed to bring about an outcome to which both sides can reconcile themselves or which they can endorse. In this negotiation, it is pretty clear what the outcome will be, if it succeeds. What you don’t know is how to find the parties to carry it out.

On the Israeli side, it will be a searing domestic experience to go through the removal of significant numbers of Israelis from the West Bank. It is going to be a searing experience to the Israeli body politic. And it would require a leadership of truly extraordinary moral strength to carry this out without breaking the spirit of the Israeli people, without which the settlement loses its point. But at least in Israel you can conceive how this could happen.

But on the Arab side, it isn’t clear to me where you get the security guarantees that prevent the West Bank from turning into a kind of Gaza, in which rockets and other weapons are concentrated. So I would think that one needs some kind of security system for the territory that is to be vacated by Israel that can be plausibly presented to the Israeli public as at least a conceivable alternative, other than just a declaration of whatever ruler emerges, all the less so as no ruler has yet emerged.

Secondly, if there is to be a peaceful settlement, there have to be some provisions in it that put an end at least to the government-sponsored propaganda against Israel. It would be necessary to have for the Arab population a vision that includes an Israel that is a permanent feature of the region, and not simply an Israel that that is an intruder and a permanent violator of Arab rights.

Satloff: What is the strategic impact of the U.S. financial crisis and its implications for U.S. leadership in global affairs?

Kissinger: Let me give you a contradictory answer to this. On the one hand, I think we have overreached our capacities in the sort of leadership that we sometimes pursued for ourselves. We cannot simultaneously guarantee the security of the whole world and the domestic political sector of the whole world and engage ourselves actively in every country’s domestic situation, as we sometimes implied in our rhetoric but not necessarily in our actions. So to attach our privileges to our capabilities is not necessarily a bad thing.

But having said this, [the financial crisis] will also force [other countries] into a more realistic assessment and not simply shove every problem to the United States. They will now be obliged to consider what their real contribution has to be to international issues. So while in the short term, the impact is unfortunate, it is also a way to bring some of these countries to a perception of reality, and the same should be true of us.

We are still going to be, when all of this is over, the strongest country in the world. We will still have the strongest military establishment and the strongest economy. We have made it a little bit too easy for ourselves in turning problems into technical issues in which we state grandiloquent goals and design contributions to other societies of how they should participate in it. So we will be forced, now, to think in more achievable goals, but the fundamental principles I talked about in the beginning of what needs to be done — the need to prevent proliferation — hasn’t become any less now that we find ourselves in a somewhat more difficult position. So I would think that with the right leadership here, we can actually turn this crisis into the beginning of a rebuilding of the international system that was in any event necessary, and perhaps has been obscured because we were divided in this country by too many extraneous considerations.

Satloff: So, are you the one optimist in New York?

Kissinger: Yes, I’m optimistic, provided we do what we need to do.

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