- WASHINGTON -- The State Department
on Tuesday informed Congress that the U.S. government will not at this
stage cut its loan guarantees to Israel. With the fiscal year ending at
midnight, the department was obliged to advise Congress of its intentions.
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- State Department spokesman Richard Boucher said, however,
that it was not inconceivable the U.S. would in the future deduct from
loan guarantees sums equivalent to those invested by Israel in the territories.
He added that U.S. and Israeli officials were holding talks on the amount.
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- Boucher also did not rule out reductions because of Israel's
construction of the separation fence along its border with the West Bank
that is designed to fence out Palestinian terrorists.
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- The administration is opposed to the continuing construction,
at least where it interferes with Palestinians' lives or impinges on land
that might be part of a Palestinian state.
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- Under the loan guarantee agreement, the Americans will
provide annual guarantees for loans amounting to $3 billion, for each of
the coming three years.
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- Israel has so far secured $1.6 billion out of the annual
sum mandated by this agreement and is expected to obtain loans equivalent
to the remaining, $1.4 billion, by the end of the year.
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- The agreement stipulates that the U.S. government will
reduce from the loan guarantee package sums equivalent to those invested
by Israel in activities that run counter to American foreign policy. This
refers to Israeli investments in the territories that have no security
rationale.
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- On Monday, Prime Minister Ariel Sharon said that the
fence would be routed to include the settlement of Ariel, located deep
in the West Bank and home to some 18,000 Israelis.
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- The Bush administration has sought to freeze construction
of new housing for settlers because the land may become part of a Palestinian
state that U.S. President George W. Bush has touted for establishment in
2005.
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- At least twice before in the past decade the United States
has penalized Israel for expanding settlements. Opposition to settlement
construction during the presidency of Bush's father led to the withholding
in 1992 of $10 billion in loan guarantees, which had been requested to
help settle 400,000 refugees from the former Soviet Union and Ethiopia.
The guarantees were granted after a new government was elected in Jerusalem
and construction was slowed down.
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- The law authorizes the administration to reduce dollar
for dollar what Israel spends on construction prohibited under the U.S.-backed
and now-stalled road map for peacemaking between Israel and the Palestinians.
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- No direct aid to Israel, which amounts to nearly $3 billion
in military and economic aid a year, is involved.
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- The loan guarantees were promises to Israel to cushion
the economic impact caused by the U.S. war in Iraq. Tourism, already off
in light of Palestinian terror attacks, dropped even further out of travelers'
anxieties that Israel might be enveloped in the war.
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