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THE location of the American Embassy in Israel is again a presidential campaign issue. The embassy itself has been in Tel Aviv since the founding of the state of Israel in 1947. Some of Israel's American friends want it to be moved to Jerusalem, which Israel now calls its capital. The Israeli government has not made a big issue of the matter, but the cause has been picked up vigorously within the American Jewish community.

Democratic presidential candidate Michael Dukakis went on record last week saying that ``my position is that [Jerusalem] is where Israel says its capital is and that is where the American Embassy should be.''

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US Secretary of State George Shultz labeled the Dukakis position ``shocking'' and said it ``would hurt peace efforts.''

Republican presidential candidate George Bush is on record as saying that ``few actions could more undermine the US role as honest broker in the Arab-Israel conflict.''

Here are the facts behind the arguments, which could influence votes and campaign contributions.

Under international law, Israel does not have a clear title to Jerusalem. The nearest thing to a title Israel has for any of its territory is the partition plan voted by the United Nations on Nov. 30, 1947.

Under that plan, Israel was awarded 53 percent of the total area of Palestine, but Jerusalem was not included and no access by land between Israel and Jerusalem was provided for.

Israel captured a corridor from Tel Aviv to Jerusalem as well as West Jerusalem in the first Arab-Israel war. But the Arabs retained the old walled city and East Jerusalem.

From the end of that first war in 1949 until 1967, Israel's capital was in Tel Aviv. Israel, however, built the Knesset building in West Jerusalem and moved some of the government offices there.

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The 1947 UN partition plan had provided that Jerusalem would not belong to either Jews or Arabs. It called for an international city under international control.

One curious result is that from the beginning of Israel down to today the United States, and most other major countries, still treat Jerusalem as different. The US has one consulate in West Jerusalem and another in East Jerusalem. The first deals with the local Jewish authorities in West Jerusalem. The other deals with the local Arabs. The two consulates are independent of the embassy in Tel Aviv and report directly and independently to Washington.

Between 1949 and 1967 most countries, including the US, treated West Jerusalem as being a de facto part of Israel. As Jewish officials moved to West Jerusalem, diplomats gradually went to meet them there. But most of the embassies remained in Tel Aviv. Israel captured all of Jerusalem in the 1967 war. In 1980, Israel's Menachem Begin decreed the unification of all of Jerusalem, put it all under Israeli law, and declared it to be the Israeli capital.

This action was condemned by the UN Security Council on June 30 by a vote of 14 to 0.

Previous to the 1980 vote in the UN there had been 13 foreign embassies in West Jerusalem. After the vote, most of the 13 moved to Tel Aviv. Today there are only two foreign embassies in Jerusalem - Costa Rica's and El Salvador's. The official US position has always been that ``Jerusalem's final status can only be resolved in negotiations.''

This is the official State Department and Bush position.

Advocates of the move from Tel Aviv to Jerusalem argue that any country should be free to put its capital where it likes in its own territory. But under international law, a transfer of territory is legal only after it has been confirmed by a treaty. There is no treaty yet between Israel and its Arab neighbors.

In other words, under international law Israel does not yet own any part of Jerusalem, and particularly not the predominantly Arab east part, which is identified by the UN as being ``occupied territory'' along with the West Bank and Gaza.

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