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Israel in Response to Mitchell Loan Guarantee Threat: Blame PA

US envoy George Mitchell in interview: 'United States can withhold support on loan guarantees to Israel.' Israel: we are not to blame.
By Hillel Fendel and Gil Ronen
First Publish: 1/10/2010, 9:15 AM / Last Update: 1/10/2010, 10:05 AM

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The Prime Minister's Office reacted Sunday to an implied threat by U.S. Special Envoy to the Middle East, George Mitchell, regarding American loan guarantees to Israel. Mitchell had said that his country could withhold support on loan guarantees to pressure Israel in negotiations with the Palestinian Authority.

Israel rebuffed the threat. “It is the Palestinian Authority that refuses to renew the peace process," a statement released by the Prime Minister's Bureau stated, "while we have carried out significant steps. It is the PA that must change its ways.”

The special envoy, former U.S. Senator George Mitchell, was asked by a TV interviewer on Thursday what types of pressure could be exerted upon Israel to get the diplomatic negotiations underway again. Mitchell said, “Under American law, the United States can withhold support on loan guarantees to Israel," and added that the previous Bush administration had in fact done so. “But I prefer persuasion to sanctions,” he said afterwards.

The loan guarantees are essentially U.S.-backed loans with favorable interest rates. Many in Israel have long called for Israel to turn down these benefits, in accordance with the Biblical teaching (Proverbs) that one who hates gifts will live, in order to remove this pressure point and enable Israel to be more independent. In July 1996, it was Binyamin Netanyahu himself, Israel's then-new prime minister, who pledged to begin reducing American economic aid to Israel, while working to make Israel more economically self-sufficient.

Unnamed American officials have been quoted as saying that Mitchell did not mean to threaten Israel, but was merely answering the interviewer's question.

Sources in the Prime Minister's Bureau said that Mitchell's statement “does not make sense” and “is not accepted” by Israel, as Israel has taken enough steps to advance the diplomatic process vis-a-vis the PA.

Finance Minister Yuval Steinitz said on Sunday that Israel and the U.S. reached an understanding several months ago to extend the loan guarantee agreement for another two years. He added that the government does not plan to use the guarantees in the near future and that it is able to raise money without them.

The interview transcript reads thus:

Mitchell: "The reality is that, yes, of course the United States has both carrots and sticks, you have to be very careful about how and when you use them and apply [inaudible] --"

Charlie Rose: "When was the last time we used a stick? … Give me - I'm serious about this.  You sit there and you say to Israel, if you don't do this, what?"

George Mitchell: "I mean, under American law, the United States can withhold support on loan guarantees to Israel.  President George W. Bush did so."

Charlie Rose: "Exactly."

George Mitchell: "On one occasion."

Charlie Rose: "And his father."

George Mitchell: "Well, the law that the most recent President Bush acted under, wasn't in place at the time of the first President Bush, so there were different mechanisms.  That's one mechanism that has been publicly discussed, there are others.  And you have to keep open whatever options, but our view is that, we think the way to approach this is to try to persuade the parties what is in their self interests.  And we think that we are making some progress in that regard, and we are going to continue in that effort and we think the way to do that is to get them into negotiations."