Delay of US Loan Guarantee Gets Second-Guessed

WITH the prospect of a Middle East peace conference shimmering on the horizon, United States-Israeli relations have taken a sharp turn for the worse.Even in the best of times President Bush has not gotten along with the Israeli government as well as did Ronald Reagan. Now, by pushing hard to delay action on Israel's request for the US to guarantee $10 billion in housing loans, Bush has piqued Israel and set up a foreign policy struggle with Congress that could be one of the closest-fought of his administration. "Bush has been tough on the politics of the US-Israeli relationship," says William Quandt, a Middle East expert at the Brookings Institution. "When he has disagreed, he has said so bluntly." At issue is something that, ironically, almost everyone involved agrees is a worthwhile cause. The US would simply be agreeing to guarantee commercial loans, not providing direct monetary aid on top of what Israel already receives. The money would go toward desperately needed housing and jobs for Jewish Soviet emigres. It's the timing of congressional action to which the administration objects. Though the US and Israel had earlier agreed that September would be a good time to submit the aid request, Bush says he has since decided that movement now would send the wrong signal to Arab nations entering a hoped-for fall peace conference. The president quietly asked for a 120-day delay. When the request was ignored and pro-Israel groups flooded Congress with importunities, Bush publicly threatened a veto at a hastily called press conference. "A thousand lobbyists" were already working against him, the president said. In its tone and suddenness the preemptive strike was reminiscent of June 1990 congressional testimony by Secretary of State James Baker III, who complained bitterly about Israel's lack of interest in the peace process. Mr. Baker read out the White House phone number, saying the Israeli government could call him if it ever got serious about peace. The Bush administration has made no large changes in policy on such important questions as the US stand on United Nations Resolution 242 and the future of the occupied territories. But it's no secret that Bush doesn't get along with Israeli Prime Minister Yitzhak Shamir, and after the amiable rhetoric of the Reagan years Bush's occasional slaps still come as a shock to Israel, notes Mr. Quandt. "It's not as if Bush has reversed the politics. But he has changed the atmosphere," says Quandt. The $10 billion in loan guarantees has become a point of contention because of the unspoken agendas of both Israel and the US, notes American University political scientist Leon Hadar. On one hand, he says, the Shamir government was hoping to get this bit of business out of the way before the peace process started so that the US couldn't use it as a lever to try to force concessions. The US, for its part, wants to maintain just such leverage, if it can. It also wants the Israelis to agree to stop building settlements in the occupied West Bank, Golan Heights, and Gaza Strip. Such settlements are among the chief obstacles to peace. Though past US housing aid has technically not been used for building in the West Bank, Golan, or Gaza, it frees up resources that then can be used in those areas. Thus, President Bush is not only requesting a delay in the action on housing aid but also is refusing to explicitly say Israel will eventually get the aid. Such a statement could be seen by Arab states as a wink and nod for further settlement building in the controversial territories. Hadar, for one, argues that Bush should make this linkage explicit. He asks: "Why can't we say, 'We think the settlement policies are harmful to American interests and Israel's interests, and we are sending you a clear message about that? Quandt agrees, saying he feels Bush has not handled the situation in an ideal tactical manner. He says Bush should have said, "Yes, in principle" up front to the housing guarantees, but with the condition that no new settlements be built, though current ones could still be expanded. "If we had done that, we would have had allies in Israel," he says. Many of Israel's allies in Congress reacted vehemently to Bush's veto threat, however, and vowed to press on with the aid request. They warned that Bush's move could threaten the coming peace conference by stiffening the spine of Israeli hard-liners and giving Prime Minister Shamir even less room to maneuver. "This is not for the good of the peace at all. It's for the good of the politics of George Bush," said US Rep. Larry Smith (D) of Florida.