Order Code RL33476
Israel: Background and Relations
with the United States
April 30, 2007
Specialist in Middle Eastern Affairs
Foreign Affairs, Defense, and Trade Division
Israel: Background and Relations with the United States
On May 14, 1948, the State of Israel declared its independence and was
immediately engaged in a war with all of its neighbors. Armed conflict has marked
every decade of Israel’s existence. Despite its unstable regional environment, Israel
has developed a vibrant parliamentary democracy, albeit with relatively fragile
governments. The Kadima Party placed first in the March 28, 2006, Knesset
(parliament) election; Prime Minister Ehud Olmert formed a four-party coalition
government, which another party has since joined. Israel has an advanced industrial,
market economy in which the government plays a substantial role.
Israel’s foreign policy is focused largely on its region, Europe, and the United
States. The government views Iran as an existential threat due to its nuclear
ambitions and support for anti-Israel terrorists. Israel concluded peace treaties with
Egypt in 1979 and Jordan in 1994 but never achieved accords with Syria and
Lebanon. It negotiated a series of agreements with the Palestinians in the 1990s, but
the Oslo peace process ended in 2000, with the intifadah or uprising against Israeli
occupation. Israeli and Palestinian officials have accepted but have not implemented
the “Roadmap,” the international framework for achieving a two-state solution to
their conflict. Israel unilaterally disengaged from Gaza in summer 2005 and is
constructing a security barrier in the West Bank to separate from the Palestinians.
The victory of Hamas in the January 2006 Palestinian parliamentary elections has
complicated Israeli-Palestinian relations as Israel will not deal with a government led
by or including ministers from a terrorist group. On June 25, the Hamas military
wing kidnaped an Israeli soldier, provoking an Israeli military offensive to force his
release. Israel unilaterally withdrew from southern Lebanon in 2000; Hezbollah then
occupied the area and continued to fire rockets from it into northern Israel.
Hezbollah sparked a war when it kidnaped two Israel soldiers on July 12, 2006; a
cease-fire took effect on August 14. European countries collectively are Israel’s
second largest trading partner, and the EU participates in the peace process.
Since 1948, the United States and Israel have developed a close friendship based
on common democratic values, religious affinities, and security interests. U.S.-Israeli
bilateral relations are multidimensional. The United States is the principal proponent
of the Arab-Israeli peace process, but U.S. and Israeli views have differed on various
issues, such as the fate of the Golan Heights, Jerusalem, and Israeli settlements. The
Bush Administration and Congress supported Israel’s 2006 military campaigns as
acts of self-defense. The United States and Israel concluded a free-trade agreement
in 1985, and the United States is Israel’s largest trading partner. Israel is a prominent
recipient of U.S. foreign aid. The two countries also have close security relations.
Other issues in U.S.-Israeli relations include Israel’s military sales to China,
inadequate Israeli protection of U.S. intellectual property, and espionage-related
cases. This report will be updated as developments warrant. See also CRS Report
RL33530, Israeli-Arab Negotiations: Background, Conflicts, and U.S. Policy, CRS
Report RL33566, Lebanon: The Israel-Hamas-Hezbollah Conflict, and CRS Report
RL33222, U.S. Foreign Aid to Israel.
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
War and Aftermath . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Political Scene . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Winograd Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Historical Overview of Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Government and Politics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Political Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Current Government and Politics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Scandals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Current Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Foreign Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Iran . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Palestinian Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Jordan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Syria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Lebanon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Iraq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
European Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Relations with the United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Peace Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Trade and Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Security Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Other Current Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Military Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Espionage-Related Cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Intellectual Property Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
U.S. Interest Groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
List of Figures
Figure 1. Map of Israel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
List of Tables
Table 1. Parties in the Knesset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Israel: Background and Relations
with the United States
Most Recent Developments
War and Aftermath
Israel engaged in a two-front war against U.S.-designated terrorist groups in
response to the June 25, 2006, kidnaping of an Israeli soldier by Hamas and others
near Gaza and the July 12 abduction of two Israeli soldiers from northern Israel by
Hezbollah.1 The Israeli public, press, and parliament supported the war in Lebanon
as a legitimate response to an attack on sovereign Israeli territory and a long overdue
reaction to Hezbollah rocket attacks on northern Israel, but they questioned its
Israelis have been debating the war since it was concluded. Critics note that the
kidnaped soldiers were not rescued and that Hezbollah is rearming and has been
strengthened politically. The government claims success in forcing Hezbollah from
the border, in degrading its arms, and in pressuring the Lebanese government, aided
by international forces, to assert itself in south Lebanon. Israeli officials took
Hezbollah leader Shaykh Hassan Nasrallah’s admission that he would not have
authorized the July 12 action if he had known how strongly Israel would react as
confirmation that the group had been weakened and that Israel’s deterrence had been
The fall-out from the war with Hezbollah included the resignation of Chief of
Staff Lt. Gen. Dan Halutz on January 17, 2007. Retired Maj. Gen. Gabi Askenazi,
Director General of the Defense Ministry and a former infantry commander, was
named to succeed Halutz and promoted to lieutenant general.
Public opinion polls indicate stark lack of support for Prime Minister Ehud
Olmert, head of the Kadima Party, and his main coalition partner, Defense Minister
For additional coverage of these developments, see CRS Report RL33530, Israeli-Arab
Negotiations: Background, Conflicts, and U.S. Policy, by Carol Migdalovitz and CRS
Report RL33566, Lebanon: the Israel-Hamas-Hezbollah Conflict, coordinated by Jeremy
Nasrallah’s August 27, 2006, interview with Lebanon television, cited by Joshua Mitnick,
“Hezbollah Says Its War with Israel Was a Mistake,” Washington Times, August 28, 2006,
Amir Peretz, head of the Labor Party, while support for the rightist Likud and its
leader, Benjamin Netanyahu, has increased.3 The incumbents have no plans to
resign. Olmert has not yet been challenged as leader of his Kadima Party, although
Foreign Minister Tzipi Livni has suggested that she might do so and Ministers Meir
Shitrit, Avi Dichter, and Shaul Mofaz are known to want the post.4 Peretz’s hold on
Labor’s helm may be more tenuous; his competition includes former Shin Bet (Israeli
Counterintelligence and Internal Security Service) head Ami Ayalon, former Prime
Minister Ehud Barak, former Minister Ophir Pines-Paz, and former Mossad (Institute
for Intelligence and Special Operations) chief Danny Yatom. A Labor leadership
primary is scheduled for May 28, 2007.
In October 2006, Olmert broadened the coalition in order to stabilize it, bringing
in Yisrael Beiteinu and increasing the government’s strength in the Knesset to 78 out
of 120 seats. Yisrael Beiteinu leader Avigdor Lieberman became Deputy Prime
Minister and Minister for Strategic Threats, a previously non-existent post. If Labor
withdraws from the government as a result of a leadership change, the coalition
would have 59 seats and need to attract one of the smaller parties in order to hold on
to power and prevent early elections.
Elections still may not be imminent. Members of the Knesset (MKs) might not
vote no confidence in the government when many would lose their seats in an early
vote. The government could be reconfigured without elections if members of Kadima
force the Prime Minister to resign, if Labor withdraws and a smaller party joins the
coalition, or if MKs or parties shift their loyalties. Defectors from Kadima can
legally join a new coalition only if at least one third of the party’s MKs, or ten, break
Amid post-war recriminations, Prime Minister Olmert rejected demands for an
independent state commission of inquiry, such as were headed by Supreme Court
justices after past controversial conflicts. Eventually, however, he named retired
Judge Eliyahu Winograd to head the “Committee for the Examination of the Events
of the Lebanon Campaign 2006” to investigate wartime decision-making; he granted
the committee authority equal to that of an independent commission. The committee
began its work in November 2006.
On April 30, 2007, the Winograd Commission presented its interim findings.
It criticized Olmert for “severe failure” in exercising “judgement, responsibility, and
caution” at the beginning of the war, which it charged he began “hastily” and without
a comprehensive plan. It also claimed that the Prime Minister did not take charge of
the war, but followed the armed forces’ commanders leadership. The report faulted
A March 2007 poll conducted by Israel’s Channel 10 showed Olmert with a popularity
rating of 3%, with Peretz at 1%. Some 75% of those surveyed wanted Olmert to resign.
Poll cited by Harvey Morris, “Olmert Faces Fall-out From Lebanon Report,” Financial
Times, March 14, 2007.
Livni interview by Ari Shavit, Ha’aretz, December 29, 2006, Open Source Document
Labor Party leader Amir Peretz for accepting the defense portfolio without having the
appropriate background and failing to act to compensate for his lack of knowledge.
The Commission was most critical of former Chief of Staff Dan Halutz, who has
already resigned. He is said to have entered the war “unprepared” and to have failed
to inform the cabinet of the (deficient) state of the Israeli Defense Forces (IDF). He
also did not provide options to the government, suppressed dissent, and failed to take
the Hezbollah missile attack on the north seriously and address its threat. The final
Commission report will be submitted in the summer.
In early reactions, opposition politicians have called for Olmert to resign, but
his associates have indicated that he does not plan to do so in response to the
Historical Overview of Israel5
The quest for a modern Jewish homeland was launched with the publication of
Theodore Herzl’s The Jewish State in 1896. The following year, Herzl described his
vision at the first Zionist Congress, which encouraged Jewish settlement in Palestine,
a land that had been the Biblical home of the Jews and was later part of the Ottoman
Empire. In 1917, the British government issued the Balfour Declaration, supporting
the “establishment in Palestine (which had become a British mandate after World
War I) of a national home for the Jewish people.” Britain also made conflicting
promises to the Arabs concerning the fate of Palestine, which had an overwhelmingly
Arab populace. Nonetheless, Jews immigrated to Palestine in ever greater numbers
and, following World War II, the plight of Jewish survivors of the Nazi holocaust
gave the demand for a Jewish home greater poignancy and urgency.
In 1947, the U.N. developed a partition plan to divide Palestine into Jewish and
Arab states, with Jerusalem under U.N. administration. The Arab states rejected the
plan. On May 14, 1948, the State of Israel proclaimed its independence and was
immediately invaded by Arab armies. The conflict ended with armistice agreements
between Israel and its neighbors: Egypt, Jordan, Lebanon, and Syria. Israel engaged
in armed conflict with some or all of these countries in 1948, 1956, 1967, 1973, and
1982. Since the late 1960s, Israel also has dealt with the threat of Palestinian
terrorism. In 1979, Israel concluded a peace treaty with Egypt, thus making another
multi-front war unlikely. Israel’s current relations with its neighbors are discussed
in “Foreign Policy” below.
For more, see Howard M. Sachar, A History of Israel: From the Rise of Zionism to Our
Time, New York, Knopf, 1996.
Government and Politics
Israel is a parliamentary democracy in which the President is head of state and
the Prime Minister is head of government. The unicameral parliament (the Knesset)
elects a president for a seven-year term. The Prime Minister is the leader of the party
with the most seats in parliament. The political spectrum is highly fragmented, with
small parties exercising disproportionate power due to the low vote threshold for
entry into parliament and the need for their numbers to form coalition governments.
In the March 2006, election, the threshold to enter parliament was raised from 1% to
2% — an action intended to bar some smaller parties from parliament but that
spurred some parties to join together simply to overcome the threshold. National
elections must be held at least every four years, but are often held earlier due to
difficulties in holding coalitions together. The average life span of an Israeli
government is 22 months. The peace process, the role of religion in the state, and
political scandals have caused coalitions to break apart or produced early elections.
Israel does not have a constitution. Instead, 11 Basic Laws lay down the rules
of government and enumerate fundamental rights; two new Basic Laws are under
consideration. 6 On February 2, 2006, the Knesset’s Constitution, Law, and Justice
Committee approved a draft constitution encompassing existing Basic Laws and a
chapter of human rights and basic principles. However, the coalition agreement for
the government that took power in April promised the ultra-orthodox Shas Party that
Basic Laws would not be changed (i.e., transformed into a Constitution) without its
approval. Israel has an independent judiciary, with a system of magistrates courts
and district courts topped by a Supreme Court.
There is an active civil society. Some political pressure groups are especially
concerned with the peace process, including the Council of Judea, Samaria, and Gaza
(Yesha Council), which represents local settler councils and opposes any withdrawal
from occupied Arab territories, and Peace Now, which opposes settlements, the
security barrier in the West Bank, and seeks territorial compromise. Both groups
have U.S. supporters.
Recent Political Developments
Israel’s domestic politics have been troubled in recent years. Prime Minister
Ariel Sharon’s plan to disengage from the Gaza Strip and four small West Bank
settlements split his Likud Party. In November 2005, Histadrut labor federation head
Amir Peretz defeated acting party leader Shimon Peres and former Infrastructure
Minister Benjamin Ben Eliezer in a Labor Party leadership primary . Peretz
emphasized the party’s need to champion socioeconomic goals, which it had
subordinated for the sake of joining Sharon’s coalition. On November 20, Labor
voted to withdraw from the government, depriving Sharon of his parliamentary
For Basic Laws, see [http://www.mfa.gov.il/mfa/government/law/basic%20laws/].
On November 21, Sharon said that he was no longer willing to deal with Likud
rebels, resigned from the party, and founded a new “centrist” party, Kadima
(Forward). He asked President Katzav to dissolve parliament and schedule an early
election. Some 18 Likud MKs, including several ministers, the chairman of the
Likud Central Committee, several Labor Knesset members, players in other political
parties, and prominent personalities joined Kadima. Former Labor leader Peres
supported Sharon. Kadima’s platform or Action Plan stated that, in order to secure
a Jewish majority in a democratic Jewish State of Israel, part of the Land of Israel
(defined by some Israelis in the area between the Jordan River and the Mediterranean
Sea) would have to be ceded. It affirmed a commitment to the Roadmap, the
international framework for achieving a two-state solution to the Israeli-Palestinian
conflict. Israel would keep settlement blocs, the security barrier, and a united
Jerusalem, while demarcating permanent borders. 7
Former Prime Minister and Finance Minister Benjamin Netanyahu won a Likud
primary to replace Sharon as leader of Likud on December 19. Netanyahu called for
“defensible walls” against Hamas and borders that would include the Jordan Valley,
the Golan Heights, an undivided Jerusalem, settlement blocs, and hilltops, and
moving the security barrier eastward.
On January 4, 2006, Sharon suffered an incapacitating stroke. In a peaceful
transition under the terms of Basic Law Article 16 (b), Deputy Prime Minister Olmert
became Acting Prime Minister . On January 16, Olmert became acting chairman of
The Hamas victory in the January 25 Palestinian parliamentary elections rapidly
became an Israeli election issue, even though all parties agreed that Israel should not
negotiate with Hamas. On March 8, Olmert revealed plans for further unilateral
withdrawals from the West Bank and said that he would reallocate funds from
settlements to the Negev, the Galilee, and Jerusalem. Although Olmert declared that
he prefers negotiations, if they do not develop in a “reasonable time,” then he would
proceed with what he called “convergence,” or merging of settlements east of the
security barrier with large settlement blocs that will be west of the barrier. 8
Netanyahu charged that the unreciprocated, unilateral withdrawal from Gaza had
rewarded terrorists and contributed to the Hamas win. He criticized Olmert’s plan
as another unilateral concession that would endanger Israel. Peretz proposed that
Israel continue a dialogue with moderate Palestinians, not Hamas.
The March 28, 2006, Knesset election results were surprising in many respects.
The voter turnout of 63.2% was the lowest ever. The contest was widely viewed as
a referendum on Kadima’s plans to disengage from the West Bank, but it also proved
to be a vote on economic policies that many believed had harmed the disadvantaged.
Kadima came in first, but by a smaller margin than polls had predicted. Labor,
emphasizing socioeconomic issues, came in a respectable second. Kadima drew
supporters from Likud, which lost 75% of its votes from 2003. Likud’s decline also
For Kadima’s Action Plan, see [http://kadimasharon.co.il/15-en/Kadima.aspx].
During his May 2006 meeting with President Bush at the White House, Olmert used
“realignment” and not “convergence” as the English translation for his plan.
was attributed personally to Netanyahu, whose policies as Finance Minister were
blamed for social distress and whose opposition to unilateral disengagement proved
to be unpopular with an increasingly pragmatic, non-ideological electorate.
The Shas campaign specifically aimed at restoring child allowances for the large
families of its constituents. Although it opposes disengagements, the party’s spiritual
leader has made rulings in the past that might allow Shas to accommodate Kadima’s
plans for the territories. Yisrael Beiteinu (Israel Our Home), a secular party appealing
to Russian-speakers, wants borders that exclude Israeli Arabs and their land and
include settlements; it opposes unilateral disengagement and the Roadmap. The
rightist National Union/National Religious Party (NU/NRP) drew support from
settlers; it opposes all withdrawals from the West Bank, where it believes Jews have
a biblical right to settle. The new Pensioners’ Party (GIL) was supported by voters
harmed by Netanyahu’s policies as well as young protest voters . It did not elaborate
its positions on other issues. The ultra-orthodox United Torah Judaism (UTJ) also
seeks increased child allowances and military deferments for religious school
students. United Arab List, Hadash, and Balad — Israeli Arab parties — are never
part of a government.
Current Government and Politics
Table 1. Parties in the Knesset
(Our Home Israel)
Russian-speakers, Nationalist, Secular, Against unilateral withdrawals, but for exchange of populations and
territories to create 2 homogenous states
Nationalist, Ashkenazi Orthodox, Seeks to annex the
West Bank (Land of Israel) and transfer Palestinians to
Single-issue: guaranteed pensions for all; Supports
unilateral withdrawal from West Bank
Ashkenazi Orthodox, Anti-withdrawals
Leftist, Anti-occupation, Civil libertarian
National Union (NU)/
National Religious Party
United Torah Judaism (UTJ)
United Arab List/Ta’al
On May 4, 2006, the Knesset (parliament) approved a four-party coalition
government of Prime Minister Ehud Olmert’s Kadima Party, the Labor Party, the
Pensioners’ Party, and the ultra-orthodox Shas Party. It controlled 67 out of 120
seats in the Knesset, with 25 cabinet ministers, and Dalia Itzik of Kadima as the first
woman Speaker of the Knesset. The government’s guidelines call for shaping
permanent borders for a democratic state with a Jewish majority. 9 They state that the
government will strive to negotiate with the Palestinians, but it will act in the absence
of negotiations. The guidelines also promise to narrow the social gap. Labor wants
Olmert to negotiate with Palestinian President Mahmud Abbas before deciding on
a unilateral move. Shas joined the coalition without agreeing to evacuate West Bank
settlements as specified in the guidelines and will decide on the issue when it is on
the government agenda.
Key Cabinet Officers
A seemingly unEhud Olmert
Prime Minister; Acting
ending series of scanFinance Minister
dals has created a sense
Vice Prime Minister;
Minister of Foreign Affairs
that the Israeli government is operating under
Vice Prime Minister; Negev Kadima
and Galilee Development
a cloud of pervasive
corruption. On October
Deputy Prime Minister;
Minister of Defense
15, 2006, police recommended that the AttorAvigdor Lieberman Deputy Prime Minister;
ney General indict President Moshe Katzav on
Minister of Justice
charges of rape, sexual
harassment, and obstruction of justice and,
Deputy Prime Minister;
Minister of Transportation*
on January 23, 2007,
Minister of Interior
Menachem Mazuz anYuli Tamir
Minister of Education
nounced his intention to
Deputy Prime Minister;
do so. Prime Minister
Minister of Industry, Trade,
Olmert, ministers, and
members of the Knesset
called on Katzav to re*Also in charge of strategic dialogue with the United States.
sign. Instead, the President denied the charges
and requested that he be
declared temporarily incapacitated for three months or until after presenting his case
in a hearing with the Attorney General before charges are filed. The hearing will be
held on May 2. Katzav’s leave request was approved on January 25 and has been
extended until the end of his seven-year term in July. Speaker of the Knesset Dalia
Itzik became Acting President. Katzav, who is immune from trial while holding
office, has said that he will resign if indicted.
If Katzav resigns, the Knesset will have 45 days to elect a successor. Itzik has
declared that she does not intend to run. Olmert is backing Vice Premier Shimon
Peres, who lost the 2000 election to Katzav and has not yet declared his candidacy.
For the entire text of the government guidelines, see [http://www.mfa.gov.il/MFA/
Former Speaker Reuven (Ruby) Rivlin, a Likud MK, and Labor MK Collette Avital
have announced their candidacies.
Prime Minister Olmert also is functioning under a cloud. The State Comptroller
has accused him of making illegal appointments and procuring investment
opportunities for an associate while he was Minister of Trade and Industry and has
turned the cases over to the Attorney General. The Comptroller also has called for
a criminal investigation of Olmert’s role as Finance Minister in trying to steer the
sale of a controlling interest in a government-controlled bank toward a close personal
associate. Olmert has denied all allegations.
On January 31, former (Kadima) Justice Minister Haim Ramon, a close ally of
Olmert, was convicted of sexually harassing a female soldier. The verdict triggered
changes in the cabinet. Daniel Friedmann, an academic critic of the Supreme Court
who favors restricting its power to overturn laws, became Justice Minister. Tourism
Minister Yitzhak Herzog of the Labor Party moved to the Social Affairs Ministry
with concurrent responsibility for diaspora affairs and the fight against anti-Semitism.
Yisrael Beiteinu’s Yitzhak Aharonovich took over Tourism and that party assumed
chairmanship of the Knesset Finance Committee. On March 29, the court upheld
Ramon’s conviction for indecent assault, but found him not guilty of moral turpitude,
opening the way for him to resume a political career.
Finally, police are investigating Finance Minister Abraham Hirchson on
suspicion of embezzling funds from a nonprofit organization in order to finance
political activity for the Likud Party, to which he had belonged prior to joining
Kadima. On April 22, Hirchson stepped down for three months or until the
investigation is completed. Olmert is serving as Acting Finance Minister, but the
Attorney General has called on the Prime Minister to appoint a new finance minister
soon because of potential conflicts of interest that may arise from the investigations
of his role in the bank privatization noted above. Olmert is expected to appoint a
new finance minister shortly.
Israel has an advanced industrial, market economy in which the government
plays a substantial role. Most people enjoy a middle class standard of living. Per
capita income is on par with some European Union members. Despite limited natural
resources, the agricultural and industrial sectors are well developed. An advanced
high-tech sector includes aviation, communications, computer-aided design and
manufactures, medical electronics, and fiber optics. Israel greatly depends on foreign
aid and loans and contributions from the Jewish diaspora. After economic declines
in 2001 and 2002 due to the effects of the Palestinian intifadah (uprising) on tourism
and to the bursting of the global high-tech bubble, Israel’s economy has recovered.
For 2006, most economic indicators were positive: inflation low, employment and
wages rising, and the standard of living rising.
7,150,000 (2007 est.)
Population Growth Rate 1.18% (2006 est.)
— Jewish 80% (2007 est.)
— non-Jewish (mostly Arab) 20% (2007 est.)*
GDP Growth Rate
5% (2006 est.)
GDP Per Capita
$26,200 (2006 est.)
1.9% (2006 est.)
8.5% (2006 est.)
Ratio of debt to GDP
91% (2006 est.)
$81.98 billion (June 2006 est.)
crude oil, grains, raw materials, military equipment
cut diamonds, high-technology equipment, fruits and vegetables
Main Trading Partners United States, Belgium, Germany, United Kingdom
Sources: CIA, The World Factbook, January 2007; and the Israeli government.
*Within 1967 borders.
Under Former Finance Minister Netanyahu, the government attempted to
liberalize the economy by controlling government spending, reducing taxes, and
resuming privatization of state enterprises. The chronic budget deficit decreased,
while the country’s international credit rating was raised, enabling a drop in interest
rates. However, Netanyahu’s critics suggested that cuts in social spending widened
the national income gap and increased the underclass. According to Israel’s National
Insurance Institute, 20% of all Israelis and 30% of Israeli children live below the
Israel has a budget deficit target of 3% of gross domestic product, and the
government is allowed by law to raise the annual budget by only 1.7%. Olmert
vowed not to increase the deficit while lessening the social gap. The coalition
agreement calls for raising the minimum wage to $1,000 a month by the end of the
Knesset session, canceling a 1.5% pension cut of the Netanyahu era, guaranteeing a
pension for all workers, and increasing spending on heath care, child allowances,
daycare, and other socioeconomic programs.
The 2006 budget was not approved before the dissolution of the last parliament;
therefore spending remained at 2005 levels from January through May and a budget
surplus accrued due to the low expenditures and higher than expected tax revenues.
The surplus was expected to enable the new government to spend more on social
programs. Finance Minister Hirschson proposed a budget cut of one billion New
Israeli Shekels (NIS) (U.S.$224 million) for 2006, of which NIS 510 million
(U.S.$114 million) was to be taken from defense and none from social programs. The
Knesset passed the budget on June 7, 2006.
In the end, the defense budget was not cut due to military expenditures for the
war in Lebanon. On August 31, the Knesset Finance Committee passed a 6% acrossthe-board cut (totaling about $450 million) for all ministries, except defense and
social welfare. Hirchson estimated the cost of the war to be about $3.5 billion due
economic losses resulting from the closure of industrial plants in northern Israel,
inability to work on agriculture in that region, attendant business, property, and tax
losses, and the loss of tourism revenues. In the first half of 2006, the economy grew
at a 5.9% rate; second half growth fell to 2.9%. At the year’s end, government
economists were very pleased with the economy’s performance, which resulted in a
balance of payments surplus of $3.9 billion and a cut in the government deficit to
1.2%, half of the previous year. 10
On September 12, the cabinet approved the 2007 budget. On January 29, 2007,
Hirschson presented plans to decrease poverty and correct the mal-distribution of
wealth in the country during the period from 2007 to 2010. They include mandatory
pensions, increased taxes on employee vehicles, negative income tax for low-income
earners, and lower-middle-class income taxes. Prime Minister Olmert followed suit
on April 18, by issuing a socioeconomic agenda for 2008-2010 to reduce poverty and
encourage growth and employment.
Iran. Israeli officials state that Iran will pose an existential threat to Israel if it
achieves nuclear capability. Ayatollah Khomeini, founder of Iran’s Islamic
revolution, decreed that the elimination of Israel is a religious duty. President
Mahmud Ahmadinejad quoted Khomeini when he called for Israel to be “wiped off
the map” and has described the Holocaust as a “myth” used as a pretext to create an
“artificial Zionist regime.” He repeatedly makes virulently anti-Israel statements.
The Iranian Shahab-3 missile is capable of delivering a warhead to Israel. Israeli
officials have called on the international community to thwart Iran’s nuclear
ambitions in order to avert the need for Israel to act as it did against Iraq’s reactor at
Osirak in 1981.
When U.S. Vice President Dick Cheney warned in 2005 that Israel might act
pre-emptively against Iran, Israel’s then Defense Minister Shaul Mofaz countered,
urging a pre-emptive U.S. strike. Because Israel is presumed to have nuclear
weapons, the prospect of a counterattack is seen by many as a deterrent against an
Iranian attack. On January 17, 2006, then Acting Prime Minister Olmert said,
“Under no circumstances ... will Israel permit anyone who harbors evil intentions
against us to possess destructive weapons that can threaten our existence.” He added,
“Israel acted, and will continue to act, in cooperation and consultation with ...
Sharon Wrobel, “2006 GDP Growth Tops Forecasts,” Jerusalem Post, January 1, 2007,
citing the Israeli Central Bureau of Statistics’ preliminary figures.
international elements.” 11 On April 23, he told the cabinet, “our position has always
been that it would not be correct to focus on us as the spearhead of the global struggle
as if it were our local, individual problem and not a problem for the entire
international community. The international struggle must be led and managed by —
first and foremost — the U.S., Europe, and the U.N. institutions. We are not ignoring
our need to take ... steps in order to be prepared for any eventuality.” 12 On November
13, Olmert told the U.S. “Today Show” that he would find acceptable any
compromise that President Bush does to stop Iran from acquiring nuclear capabilities.
Israeli estimates of when Iran might have a nuclear weapon differ from those of
the United States. On May 23, 2006, then Chief of Staff Dan Halutz said that,
according to intelligence estimates, Iran would be in possession of nuclear weapons
by 2008-2010 and noted that U.S. assessments predicted a 2010-2015 time frame.
He asserted, however, that Israel must prepare for a possibly more imminent threat. 13
On December 17, Mossad (Institute for Intelligence and Special Operations) Chief
Meir Dagan told a Knesset committee that if there were no sanctions on Iran and no
technological delays, then Iran would have 25 kilograms of enriched uranium by
2008 and nuclear warheads by 2009-2010. 14 In January 2007, Maj. Gen. Amos
Yadlin, head of military intelligence, also said that, barring delays, Iran would have
a nuclear bomb in two and a half years. If it could reduce the time needed to procure
fissile material, Iran might even have one before mid-2009.15 Israeli officials have
called for strengthening and expanding international sanctions against Iran.
Iran also provides financial, political, and/or military support to the Lebanese
Hezbollah as well as to Hamas, Palestinian Islamic Jihad (PIJ), the Al Aqsa Martyrs’
Brigades, and the Popular Front for the Liberation of Palestine-General Command
— Palestinian terrorist groups seeking to obstruct the peace process and destroy
Israel. In January 2006, then Defense Minister Mofaz charged that Iran had financed
a PIJ suicide bombing in Tel Aviv. Israeli officials blamed Iran for Hezbollah’s
attack on northern Israel in July 2006.
Prime Minister Olmert has called upon moderate Sunni leaders to form a
coalition against Iran, Hezbollah, and other regional extremists. At least publicly,
those leaders seek a settlement of the Israeli-Palestinian conflict as a precondition for
dealings with Israel. Nonetheless, it has been widely reported, but not officially
confirmed, that Olmert met Saudi National Security Advisor Prince Bandar in
September 2006, and commentators have opined that Iran was on their agenda.
“PM Olmert, President Qatzav Discuss Iran, Peace Process During News Conference,”
Open Source Center Document FEA20060117017385, January 17, 2006.
“23 Apr Cabinet Session; Daily Says Olmert Readying for ‘Swift’ Convergence,” Open
Source Center, Document GMP20060424621005, Jerusalem Government Press Office,
April 23, 2006.
Ha’aretz report, May 24, 2006.
Sheera Claire Frenkel, “Dagan: Syria more Willing Now than Ever to Attack Israel,”
Jerusalem Post, December 18, 2006.
“Israeli MI Chief: Iran to have Bomb in 2.5 Years,” Voice of Israel, January 9, 2007, Open
Source Center, Document GMP20070109739002.
On January 24, 2007, Olmert declared that the Iranian threat preoccupies him
“incessantly,” but stated his continuing preference for a diplomatic solution and
observed that Iran is “very vulnerable” to international pressure. He added,
“Although the Iranian threat is grave, Israel does not face an imminent danger of a
nuclear attack” and said that there is still time to frustrate Iran’s intentions to become
a nuclear power. 16 Israel welcomed U.N. Security Council Resolution 1747, March
24, 2007, which imposed additional sanctions in Iran due to its failure to halt
uranium enrichment . On April 22, Olmert said that he believed that international
diplomatic pressure will keep Teheran from attaining nuclear weapons and that a
military confrontation will not be necessary.
U.S. Secretary of Defense Robert Gates told Minister of Defense Peretz on April
19 that diplomatic pressure on Iran was working. Peretz, while agreeing that
diplomacy is preferable, noted that Israel could not remove other options from the
table. The Minister also declared that Israel expected the United States and the world
to stand by it regarding the Iran nuclear issue.
Palestinian Authority. During the Oslo peace process of the 1990’s, Israelis
and Palestinians negotiated a series of agreements that resulted in the creation of a
Palestinian Authority (PA) with territorial control over parts of the West Bank and
the Gaza Strip. Israel refused to deal with the late Palestinian leader Yasir Arafat
after Sharon came to power and during the intifadah or Palestinian uprising against
Israeli occupation. Israel’s relations with the PA and its leaders improved somewhat
after Arafat’s death in November 2004 and the election of Mahmud Abbas as
President of the PA in January 2005. Sharon and Abbas met at a summit in Sharm
al Shaykh, Egypt, in February, and promised to end violence and to take other
measures. Israel made some goodwill gestures toward the PA, and President Abbas
and 13 Palestinian factions agreed to an informal truce. However, Sharon and Abbas
did not meet for a long time after June 2005. Although Israeli officials described the
disengagement from the Gaza Strip as unilateral, they met with Palestinian
counterparts to coordinate security for the disengagement and disposition of Israeli
assets in Gaza.
Israel still has at least 242 settlements, other civilian land use sites, and 124
unauthorized settlement outposts in the West Bank and 29 settlements in East
Jerusalem — all areas that the Palestinians view as part of their future state. Israel
retains military control over the West Bank and is building a security barrier on West
Bank territory to separate Israelis and Palestinians and prevent terrorists from
entering Israel. Palestinians object to the barrier being built on their territory. The
barrier is taking the form of a future border between Israel and Palestine and will cut
Palestinians off from East Jerusalem and, in some places, from each other and some
of their land.
The Israeli government accepted the Roadmap, the framework for a peace
process leading to a two-state solution developed by the United States, European
Union, U.N., and Russia, reluctantly and with many conditions. Sharon contended
Verbatim text of speech to the Herziliyya Conference, reported by IDF Radio, BBC
Monitoring Middle East, January 25, 2007.
that the Roadmap requires that the PA first fight terror, by which he meant disarm
militants and dismantle their infrastructure. (It also required Israel to cease
settlement activity in the first phase.) Abbas preferred to include terrorist groups
such as Hamas in the political system and refused to disarm them prior to January
2006 parliamentary elections. Hamas’s victory in those elections created policy
dilemmas for Abbas, Israel, and the international community. Israel demanded that
Hamas abrogate its Covenant that calls for the destruction of Israel, recognize Israel,
disarm and disavow terrorism, and accept all prior agreements with Israel as
preconditions for relations with a Hamas-led PA.
Israel officially refuses to negotiate with Hamas for the return of the Israeli
soldier kidnaped on June 25, 2006. After the kidnaping, in summer 2006, Israel
arrested many members of the Hamas-led PA government and legislature for
participating in a terrorist group, and Israeli forces conducted military operations
against Hamas and other militant groups in the Gaza Strip as well as in the West
Bank. Egyptian officials are attempting to mediate a prisoner exchange. Analysts
believe that this effort is complicated by the need for the approval of Hamas political
bureau head Khalid Mish’al, who is based in Damascus and subject to influence by
the Syrian and Iranian governments.
On March 18, 2007, the Israeli cabinet voted to shun the new Palestinian unity
government, a coalition consisting of Hamas, Fatah, and independents, until it meets
international demands to disavow violence, recognize Israel, and accept prior IsraeliPalestinian agreements. Prime Minister Olmert said that he would continue to meet
with President Abbas to discuss humanitarian and security issues. Other members
of the Israeli government have different view of the situation. Defense Minister
Peretz called for negotiating a permanent agreement with Abbas, while Minister for
Strategic Threats Lieberman called for boycotting Abbas as well as the Palestinian
The Israeli government has shelved plans for unilateral disengagement from the
West Bank. Many Israelis believe that unilateral disengagements from the south
Lebanon and the Gaza Strip had enabled the transformation of those regions into
terrorist bases for Hezbollah and Hamas and led to war.
Egypt.17 After fighting four wars in as many decades, Israel and Egypt signed
a peace treaty in 1979. In 1982, Israel withdrew from the Sinai Peninsula, which it
had taken in the 1967 war. Egypt and Israel established diplomatic relations,
although Egypt withdrew its ambassador during the four years of the second
intifadah, 2001-2005, because it objected to Israel’s “excessive” use of force against
the Palestinians. Some Israelis refer to their ties with Egypt as a “cold peace”
because full normalization of relations, such as enhanced trade, bilateral tourism, and
educational exchanges, has not materialized. Egyptian President Hosni Mubarak has
visited Israel only once — for the funeral of former Israeli Prime Minister Yitzhak
Rabin. Outreach is often one way, from Israel to Egypt. Egyptians say that they are
reluctant to engage because of Israel’s continuing occupation of Arab lands. Israelis
See also, CRS Report RL33003, Egypt: Background and U.S. Relations, by Jeremy M.
are upset by some Egyptian media and religious figures’ anti-Israeli and occasionally
Nonetheless, the Egyptian government often plays a constructive role in the
Arab-Israeli peace process, hosting meetings and acting as a liaison . In March 2005,
it helped secure an informal Palestinian truce and later helped prevent it from
breaking down due to violence between Palestinian factions and Israel and between
Palestinian security forces and factions. After the January 2006 Hamas election
victory in the Palestinian territories, Egyptian officials unsuccessfully urged the
group to accept the 2002 Arab Peace Initiative that offers Israel recognition within
its 1967 borders. Egyptian intelligence chief Omar Sulayman has tried to gain the
release of an Israeli soldier kidnaped by Hamas and others in June 2006 in exchange
for Palestinian prisoners. Egypt supports President Mahmud Abbas generally in
order to ensure that there is a Palestinian partner for peace negotiations with Israel
and is training the Palestinian Presidential Guard.
Egypt deployed 750 border guards to secure the Gaza-Egyptian border (Rafah)
after Israel’s disengagement from Gaza. Israel refused an Egyptian request to deploy
military border guards, instead of police, for greater control of smuggling along the
entire border in Sinai, which some Israelis argue would require a change in the
military appendix of the 1979 peace treaty. Israeli officials have repeatedly
expressed frustration with Egypt’s failure to control arms-smuggling into Gaza.
However, in November 2006, Prime Minister Olmert said that Israel wanted to make
the border agreement more effective and not to change it.
In December 2004, Egypt and Israel signed a Qualified Industrial Zone (QIZ)
Agreement under which jointly produced goods enter the U.S. market duty free as
part of the U.S.-Israeli Free Trade Agreement (FTA). As a result of the QIZ, Israeli
exports to Egypt have grown. On June 30, 2005, Israel signed a memorandum of
understanding to buy 1.7 billion cubic feet of Egyptian natural gas for an estimated
U.S.$2.5 billion over 15 years, fulfilling a commitment made in an addendum to the
1979 peace treaty. The deal includes cooperation in construction of the infrastructure
needed and may expand to other energy areas. An initial agreement for the deal was
signed on December 11, 2006. In April 2007, Israel’s National Planning and
Building Council approved a plan for a gas pipeline; work on the Israeli section is
expected to be completed by the end of 2007.
Jordan. 18 Israel and Jordan signed a peace treaty in October 1994 and
exchanged ambassadors, although Jordan did not have an ambassador in Israel during
most of the intifadah. Relations have developed with trade, cultural exchanges, and
water-sharing agreements. Since 1997, Jordan and Israel have collaborated in
creating 13 qualified industrial zones (QIZs) to export jointly produced goods to the
United States duty-free under the U.S.-Israel Free Trade Agreement (FTA), although
Jordanian companies are now said to prefer arrangements under the U.S.-Jordan FTA
See also CRS Report RL33546, Jordan: U.S. Relations and Bilateral Issues, by Alfred
Prados and Jeremy M. Sharp; and CRS Report RS22002, Qualifying Industrial Zones in
Jordan: A Model for Promoting Peace and Development in the Middle East? by Mary Jane
Bolle, et al.
over the QIZ. Normalization of ties is not popular with the Jordanian people, over
half of whom are of Palestinian origin, although King Abdullah II has attempted to
control media and organizations opposed to normalization.
Believing that a two-state solution to the Israeli-Palestinian conflict would
contribute to regional stability, the King is very supportive of the peace process,
wants the Roadmap to be implemented, and has hosted meetings between Israeli and
Palestinian leaders. In January 2007, Jordan joined Egypt, Saudi Arabia, and
Palestinian President Abbas in advocating an agreement on the “end game” before
following the Roadmap. The King has opposed to possible unilateral Israeli steps in
the West Bank, fearing that they would strengthen Palestinian radicals who could
destabilize the region and undermine his regime. He is one of the strongest
proponents of the Arab Peace Initiative, offering Israel relations with Arab countries
in exchange for its full withdrawal from occupied territories and a solution to the
Palestinian refugee issue, which the Arab League reaffirmed in March 2007.
Syria. Israel and Syria have fought several wars but, except for rare breaches,
have maintained a military truce along their border for many years. Yet, they failed
to reach a peace agreement in negotiations that ended in 2000. Since 1967, Israel has
occupied Syria’s Golan Heights and, in December 1981, effectively annexed it by
applying Israeli law there. There are 42 Israeli settlements on the Golan. Syrian
President Bashar al Asad has said that he wants to hold peace talks with Israel , but
Israeli officials demand that he first cease supporting the Lebanese Hezbollah militia,
which attacks Israeli forces in the disputed Shib’a Farms area of Lebanon and
communities in northern Israel and aids Palestinian terrorist groups. They also want
Asad to expel Palestinian rejectionist groups (i.e., those who reject an IsraeliPalestinian peace process). Sharon said that the Golan is essential for Israel’s
security and discussion of withdrawal would be a mistake.19
After Syria was implicated in the February 2005 assassination of former
Lebanese Prime Minister Rafiq Hariri, international pressure on the Asad regime
mounted. Israeli officials said that Israel was not interested in the fall of the regime,
only in changing its policies. Some reportedly fear that anarchy or extreme Islamist
elements might follow Asad and prefer him to stay in power in a weakened state. On
December 1, 2005, Sharon said that nothing should be done to ease U.S. and French
pressure on Syria, implying that Syrian-Israeli peace talks would do that.
Syria hosts Hamas political bureau chief Khalid Mish’al and supplies Hezbollah
with Syrian and Iranian weapons. After the June 25, 2006, Palestinian attack on
Israeli forces and kidnaping of an Israeli soldier, Israeli officials specifically
requested the United States to exert pressure on President Asad to induce him to
expel Mish’al, whom they believed was responsible for the operation. When
Hezbollah abducted two Israeli soldiers from northern Israel on July 12, sparking an
Israeli-Hezbollah war, some rightwing Israeli politicians demanded that it be
expanded to include Syria. However, the government and military did want to open
a third front. U.S. officials demanded that Syria exert its influence on Hezbollah to
See also CRS Report RL33487, Syria: U.S. Relations and Bilateral Issues, by Alfred
end the conflict; Syrian officials unsuccessfully sought a broader resolution that
would include a revival of a peace process to produce the return of the Golan
Heights. After the war in September 2006, however, Israeli Prime Minister Olmert,
declared, “As long as I am prime minister, the Golan Heights will remain in our
hands because it is an integral part of the State of Israel.” 20 He also has indicated that
he prefers not to differ with the Bush Administration’s policy of not dealing with
Syria due to its support for terrorists, destabilizing of Lebanon, and failure to control
infiltration into Iraq .
Lebanon.21 Israeli forces invaded Lebanon in 1982 to prevent Palestinian
attacks on northern Israel. The forces gradually withdrew to a self-declared nine-mile
“security zone,” north of the Israeli border. Peace talks in the 1990’s failed to
produce a peace treaty, mainly because of Syria’s insistence that it reach an accord
with Israel first. Israel unilaterally withdrew from southern Lebanon on May 25,
2000. Lebanon insists that the Israeli withdrawal is incomplete because of the
continuing presence of Israeli forces in the Shib’a Farms area , in the region where
Lebanon, Syria, and Israel meet. The U.N. determined, however, that Israel’s
withdrawal from Lebanon was complete and treats the Shib’a Farms as part of
Syria’s Golan Heights occupied by Israel. Syria verbally recognizes that Shib’a is
part of Lebanon, but will not demarcate the border officially as long the Israeli
occupation continues. Hezbollah took control of the former “security zone” after
Israeli forces left and attacked Israeli forces in Shib’a and northern Israeli
communities. The Lebanese government considers Hezbollah to be a legitimate
resistance group and a political party represented in parliament. Israel views it as a
Hezbollah’s kidnaping of two Israeli soldiers on July 12, 2006, provoked Israel
to launch a war against Hezbollah in Lebanon. On July 17, Prime Minister Olmert
declared that military operations would end with the return of the kidnaped soldiers,
the end to Hezbollah rocket attacks into northern Israel, and the deployment of the
Lebanese army along the Israeli-Lebanese border to replace Hezbollah units.
Hezbollah demanded a prisoner swap, namely, that the Israeli soldiers be exchanged
for Lebanese and other Arab prisoners in Israel. The war ended with a cessation of
hostilities on August 14. Israeli forces withdrew as their positions were assumed by
the Lebanese army and an enlarged U.N. Interim Forces in Lebanon (UNIFIL).
Hezbollah has maintained the cease-fire, but has not released the abducted soldiers. 22
Iraq. In a March 12, 2007, speech, Prime Minister Olmert warned against the
consequences of a “premature” U.S. withdrawal from Iraq, arguing that a negative
“Olmert Tells Israeli Paper: Golan ‘An Integral Part of the State of Israel’,” Yedi’ot
Aharonot, September 26, 2006, citing a Mishpaha newspaper interview, Open Source Center
See also CRS Report RL33509, Lebanon; and CRS Report RL31078, The Shib’a Farms
Dispute and Its Implications, both by Alfred Prados.
Some have suggested that the soldiers might not be alive due to the nature of the operation
in which the soldiers were captured, the probable injuries they sustained, and the lack of
readily available medical assistance. Moreover, there has been no discussion of a prisoner
exchange comparable to that under discussion for the soldier kidnaped by Hamas earlier.
outcome there would harm Israel, the Gulf States, and the stability of the Middle East
as well as the ability of the United States to address threats emerging from Iran. 23
Israel’s Ambassador to the United States has expressed hope that withdrawal from
Iraq would be done “in such a way that does not strengthen Iran and Al Qaeda or
boost organizations such as Hezbollah and Hamas, so that we don’t face a new
eastern front from Iran to Kfar Saba.” 24 Israeli commentator Ze’ev Schiff has
suggested that if Arabs interpret America’s withdrawal as a sign of defeat, then Israel
could look forward to a radical Arab shift that will strengthen the extremists around
us.25 Others have opined that Israel fears that a U.S. withdrawal would be seen as a
victory for Iran and could prompt Syria to consider military options to recover the
Golan Heights. 26 Some of these sentiments may have influenced H.Rept. 110-060,
March 20, 2007, to accompany H.R. 1591, Emergency Supplemental Appropriations
for FY2007, which states, “The fight is Iraq is also critical to the future of Israel. A
failure in Iraq will further destabilize the region, posing a direct threat to Israel. We
must not let that occur to our friend and ally.”
Other. Aside from Egypt and Jordan, Israel has diplomatic relations with the
majority-Muslim countries of Mauritania and Turkey and has had interest or trade
offices in Morocco, Tunisia, Oman, and Qatar. The latter four suspended relations
with Israel during the Palestinian intifadah. Former Foreign Minister Silvan Shalom
had predicted that relations with Arab and Muslim countries would improve due to
Israel’s disengagement from Gaza. The first diplomatic breakthrough was his
September 1, 2005, meeting in Istanbul with the Pakistani foreign minister, although
Pakistani officials have asserted that they will not recognize Israel until an
independent Palestinian state is established. On September 14, Pakistan’s President
Pervez Musharraf shook Prime Minister Sharon’s hand in a “chance” meeting at the
U.N. General Assembly opening session. In October, Pakistan accepted Israeli
humanitarian aid after a devastating earthquake. In April 2007, Musharraf offered
to mediate between Israel and the Palestinians and said that he would be willing to
visit Israel to help bring peace to the Middle East. Prime Minister Olmert declined
the mediation offer, preferring to deal directly with Palestinian President Abbas.
Shalom also met the Indonesian, Qatari, Algerian, Moroccan, and Tunisian
foreign ministers at the U.N. Also in September 2005, Bahrain ended its economic
boycott of Israel, a move required by the World Trade Organization and the BahrainU.S. Free Trade Agreement, but it has vowed not to normalize relations.
Tunisian President Zine El Abidine Ben Ali sent a personal letter to Sharon,
praising his “courageous” withdrawal from Gaza. Shalom attended the World
For text of speech, see [http://www.pmo.gov.il/PMOEng/Communication/PMSpeaks/
Interview by Tal Schneider, Ma’ariv, April 27, 2007, Open Source Center Document
Ze’ev Schiff, “US Withdrawal in Iraq to Strengthen Arab Extremists Around Israel,”
Ha’aretz, April 20, 2007.
Hussein Agha, “The Last Thing the Middle East’s Main Players Want is US Troops to
Leave Iraq...,” The Guardian, April 25, 2007.
Summit on the Information Society in November 2005 and Knesset members
attended the European-Mediterranean Parliamentary Assembly in March 2007; both
events were held in Tunis.
In September 2006, Foreign Minister Livni was said to have met at the U.N.
with 10 Arab and Muslim foreign ministers, including the Omani foreign minister.
On January 30, 2007, Vice Premier Shimon Peres met the Emir of Qatar in Doha.
Speaker Itzik was invited to the Inter-Parliamentary Union meeting of parliamentary
leaders in Indonesia in May 2007 but decided not to attend because of security
required due to her position as Acting President.
Israel also has developed good relations with the predominantly Muslim former
Soviet republic of Azerbaijan, which supplies about one-sixth of Israel’s oil needs.
Israel has complex relations with the European Union (EU). Many Europeans
believe that the Israeli-Palestinian conflict is a root cause of terrorism and Islamist
extremism among their own Muslim populations and want it addressed urgently. The
EU has ambitions to exert greater influence in the Middle East peace process. The
EU is a member of the “Quartet,” with the United States, U.N., and Russia, which
developed the Roadmap. EU officials appeared to share Palestinian suspicions that
Sharon’s disengagement plan meant “Gaza first, Gaza only” and would not lead to
the Roadmap process. They observed with concern Israel’s ongoing settlement
activity and construction of the security barrier in the West Bank, which, according
to the Europeans, contravene the Roadmap and prejudge negotiations on borders.
Israel has been cool to EU overtures because it views many Europeans as biased
in favor of the Palestinians and hears some Europeans increasingly question the
legitimacy of the State of Israel. Some Israelis contend that the basis of such views
is an underlying European anti-Semitism. Nonetheless, in November 2005, Israel
agreed to allow the EU to maintain a Border Assistance Mission (EU-BAM) to
monitor the reopened Rafah crossing between the Gaza Strip and Egypt. In
November 2006, the 90-man EU mission was extended for another six months
despite European complaints about Israeli restrictions and frequent closures of the
crossing. After the war in Lebanon, Israel also urged and welcomed the strong
participation of European countries in the U.N. peacekeeping force there.
To Israel’s dismay, some EU representatives met local Hamas leaders elected
in December 2004 in order to oversee EU-funded local projects. The EU also
authorized its monitoring mission for the January 2006 Palestinian parliamentary
elections to contact the full range of candidates, including Hamas, in order to carry
out its task. EU officials have said, however, that Hamas will remain on the EU
terror list until it commits to using nonviolent means to solve the Israeli-Palestinian
conflict. The EU agrees with the Quartet’s preconditions for relations with the
Hamas-led government: disavowal of violence, recognition of Israel, and acceptance
of prior Israeli-Palestinian accords. The EU has developed, at the Quartet’s request,
a temporary international mechanism to aid the Palestinian people directly while
bypassing the government.
Israel also demands that the EU include Hezbollah on its list of terrorist
organizations and has protested meetings between European ambassadors and the
Hezbollah ministers in the Lebanese cabinet.
Israel participates in the EU’s Euro-Mediterranean Partnership Initiative,
otherwise known as the Barcelona Process, and in the European Neighborhood Policy
(ENP). And EU countries combined are Israel’s second trading partner, but the EU
bans imports from Israeli settlements in the occupied territories. 27
Relations with the United States
On May 14, 1948, the United States became the first country to extend de facto
recognition to the State of Israel. Over the years, the United States and Israel have
developed a close friendship based on common democratic values, religious
affinities, and security interests. Relations have evolved through legislation;
memorandums of understanding; economic, scientific, military agreements; and
Peace Process. The United States has been the principal international
proponent of the Arab-Israeli peace process. President Jimmy Carter mediated the
Israeli-Egyptian talks at Camp David which resulted in the 1979 peace treaty.
President George H.W. Bush together with Soviet President Mikhail Gorbachev
convened the peace conference in Madrid in 1990 that inaugurated a decade of
unprecedented negotiations between Israel, Jordan, Syria, Lebanon, and the
Palestinians. President Clinton continued U.S. activism throughout his tenure in
office, facilitated a series of agreements between Israel and the Palestinians as well
as the Israeli-Jordanian peace treaty in 1994, hosted the Israeli-Palestinian summit
at Camp David in 2000 that failed to reach a peace settlement, and sought
unsuccessfully to mediate between Israel and Syria during the same year.
In June 2002, President George Bush outlined his vision of a democratic
Palestine to be created alongside Israel in a three-year process. 28 U.S., European
Union, Russian, and U.N. representatives built on this vision to develop the
international Roadmap to a Permanent Two-State Solution to the Israeli Palestinian
Conflict. The Administration remains committed to the Roadmap process despite the
parties’ failure to implement it. 29
See CRS Report RL31956, European Views and Policies Toward the Middle East, by
See [http://www.whitehouse.gov/news/releases/2002/06/20020624-3.html] for text of
See [http://www.state.gov/r/pa/prs/ps/2003/20062.htm]for text of Roadmap.
Secretary of State Condoleezza Rice has not named a Special Middle East
Envoy and said that she would not get involved in direct Israeli-Palestinian
negotiations of issues and preferred to have the Israelis and Palestinians work
together. However, after the Administration supported Israel’s disengagement from
Gaza mainly as a way to return to the Roadmap, the Secretary personally mediated
an accord to secure the reopening of the Rafah crossing between Gaza and Egypt in
November 2005. Some Israelis criticized Rice’s insistence that the Palestinian
elections proceed in January 2006, with Hamas participating, which produced a
Hamas-led government. The Administration now agrees with Israel’s preconditions
for dealing with that government. Rice has indicated that she intends to get more
actively involved and has traveled to the region several times in order to get the
Israelis and Palestinians to focus on what she describes as a “political horizon” for
the Palestinians in order to accelerate the Roadmap. In March 2007, at her
prompting, Olmert agreed to meet biweekly with Abbas, but would not agree to
discuss final status issues such as Jerusalem, borders, and refugees.
All recent U.S. Administrations have disapproved of Israel’s settlement activity
as prejudging final status issues and possibly preventing the emergence of a
contiguous Palestinian state. On April 14, 2004, however President Bush noted the
need to take into account changed “realities on the ground, including already existing
major Israeli population centers” (i.e., settlements), asserting “it is unrealistic to
expect that the outcome of final status negotiations will be full and complete return
to the armistice lines of 1949.” 30 He later emphasized that it was a subject for
negotiations between the parties.
The Bush Administration also has insisted that U.N. Security Council
resolutions be “balanced,” by criticizing Palestinian as well as Israeli violence and
has vetoed resolutions which do not meet that standard.
Since taking East Jerusalem in the 1967 war, Israel has maintained that
Jerusalem is its indivisible, eternal capital. Few countries agree with this position.
The U.N.’s 1947 partition plan called for the internationalization of Jerusalem, while
the Declaration of Principles signed by Israel and the Palestine Liberation
Organization in September 1993 says that it is a subject for permanent status
negotiations. U.S. Administrations have recognized that Jerusalem’s status is
unresolved by keeping the U.S. Embassy in Tel Aviv. In 1995, Congress mandated
that the embassy be moved to Jerusalem, 31 but a series of presidential waivers of
penalties for non-compliance have delayed the move. U.S. legislation has granted
Jerusalem status as a capital in particular instances and sought to prevent U.S. official
recognition of Palestinian claims to the city. The failure of the State Department to
follow congressional guidance on Jerusalem prompted a response in H.R. 2601, the
Foreign Relations Authorization bill, passed in the House on July 20, 2005. 32 The
For text of Bush letter to Sharon, see [http://www.whitehouse.gov].
P.L. 109-102, November 14, 2005.
H.R. 2601 (d) requires that “accurate entries be made on request of citizen.” Specifically,
for the purpose of the issuance of a passport to a U.S. citizen born in Jerusalem, the
Senate did not pass an authorization bill, and it did not become law. 33 H.R. 895,
introduced on February 7, 2007, would reaffirm Congress’s prior steps toward
recognizing Jerusalem as the capital of Israeli.
The United States has never recognized Israel’s annexation of the Golan
Heights, which it views as a violation of international law. However, the current
administration has not attempted to revive Israeli-Syrian peace talks. Olmert and the
Bush Administration appear to agree on isolating Damascus until it ends its relations
with terrorists and Iran. Yet, some in the Israeli coalition, Knesset, and press want
their government to engage Damascus in peace talks in order to remove it from an
alliance that enhances the Iranian threat to the Jewish State.
Some Israeli officials have questioned possible unintended consequences of the
U.S. democratization policy in the Middle East, believing that it is aiding extremist
organizations to gain power positions and to be legitimized. Alarmed, they cite the
examples of Hezbollah in Lebanon, Hamas in the Palestinian Authority, and the
Muslim Brotherhood in Egypt. 34
Trade and Investment. Israel and the United States concluded a Free Trade
Agreement in 1985, and all customs duties between the two trading partners have
since been eliminated. The FTA includes provisions that protect both countries’
more sensitive agricultural sub-sectors with non-tariff barriers, including import
bans, quotas, and fees. Israeli exports to the United States have grown 200% since
the FTA became effective. As noted above, qualified industrial zones in Jordan and
Egypt are considered to be part of the U.S.-Israeli free trade area. The United States
is Israel’s main trading partner, while Israel ranks about 20th among U.S. trading
U.S. companies have made large investments in Israel. In July 2005, the U.S.
microchip manufacturer Intel announced that it would invest $4.6 billion in its Israeli
branch; Israel provided a grant of 15% of an investment of up to $3.5 billion or $525
million to secure the deal. In May 2006, prominent U.S. investor Warren Buffet
announced that he was buying 80% of Iscar, a major Israeli metalworks, for $4
Secretary of State shall upon the request of the citizen or the citizen’s legal guardian, record
the place of birth as Israel. See also CRS Report RL33530, Israeli-Arab Negotiations:
Background, Conflicts, and U.S. Policy, by Carol Migdalovitz; and CRS Report RL33000,
Foreign Relations Authorization, FY2006 and FY2007: An Overview, coordinated by Susan
In August 2006, El Salvador notified the Israeli Foreign Ministry that it was moving its
embassy from Jerusalem to Tel Aviv. With that move, no country that has diplomatic
relations with Israel will have an embassy in Jerusalem.
For example, head of military intelligence, Maj. Gen. Amos Yadlin, in Ahiya Raved,
“Intelligence Chief: Strategic Threats on Israeli Rising,” Ynetnews, June 20, 2006, Open
Source Center Document GMP20060621746004.
The U.S.-Israel Energy Cooperation Act, S. 838, introduced on March 12, 2007,
and H.R. 1838, introduced on March 29, would authorize a grant program of $20
million for each of fiscal years 2008 through 2014 to fund joint ventures between
U.S. and Israeli businesses and academics for research, development, or
commercialization of alternative energy, improved energy efficiency, or renewable
Aid. Israel was the largest recipient of U.S. foreign aid after 1976 and until Iraq
supplanted it after 2003. In 1998, Israeli, congressional, and Administration officials
agreed to reduce U.S. $1.2 billion in Economic Support Funds (ESF) to zero over ten
years, while increasing Foreign Military Financing (FMF) from $1.8 billion to $2.4
billion. The process began in FY1999, with P.L. 105-277, October 21, 1998, and
concludes with FY2008. Separately from the scheduled ESF cuts, Israeli received
an extra $1.2 billion to fund implementation of the Wye agreement (part of the
Israeli-Palestinian peace process) in FY2000, $200 million in anti-terror assistance
in FY2002, and $1 billion in FMF in the supplemental appropriations bill for
FY2003. P.L. 109-102, November 14, 2005, the Foreign Operations Appropriations
Act, 2006, provided $240 million in ESF, $2.28 billion in FMF, and $40 million for
the settlement of migrants to Israel. H.R. 5522, the Foreign Operations
Appropriations bill, FY2007, passed in the House on June 9, 2006, appropriated $120
million in ESF, $40 million for migration and refugee assistance, and $2.34 billion
in FMF (of which $610 million may be spent for defense acquisitions in Israel) for
Israel. The Senate did not pass a bill. Foreign Operations programs for FY2007 are
operating under the terms of a continuing appropriations resolution (H.R. 5631/P.L.
109-289, as amended) which provides funding at the FY2006 level or the Housepassed FY2007 level, whichever is less; for Israel, it is the House FY2007 bill. The
Administration has requested $2.4 billion in FMF for FY2008.
On March 1, Under Secretary of State Nicholas Burns met with Bank of Israel
Governor Stanley Fischer, Ministry of Finance Director General Yarom Ariav, and
other Israeli officials to discuss future U.S. assistance to Israel. Some news outlets
reported that Israel is requesting that annual FMF be increased from the current $2.4
billion to $3 billion over ten years.35 Officials have not confirmed these reports.
On July 14, 2006, during Israel’s war against Hezbollah, the Pentagon notified
Congress that it planned to sell up to $210 million in jet fuel to Israel. On July 22,
it was reported that the Administration was expediting the delivery of precisionguided bombs that had been ordered by Israel in 2005.
Congress has legislated other special provisions regarding aid to Israel. Since
the 1980s, ESF and FMF have been provided as all grant cash transfers, not
designated for particular projects, and have been transferred as a lump sum in the first
month of the fiscal year, instead of in periodic increments. Israel is allowed to spend
about one-quarter of the military aid for the procurement in Israel of defense articles
and services, including research and development, rather than in the United States.
Finally, to help Israel out of its economic slump, P.L. 108-11, April 16, 2003,
Itamar Eichnter, et. al., “Israel to US: Don’t Talk with Hamas,” Yedi’ot Aharonot, March
4, 2007, Open Source Center Document GMP20070304736003.
provided $9 billion in loan guarantees (for commercial loans) over three years. As
of September 2006, $4.5 billion of the guarantees was unexpended. 36 P.L. 109-472,
January 11, 2007, extends the period for which the guarantees are to be provided for
a second time until September 30, 2011.
Security Cooperation. Although Israel is frequently referred to as an ally of
the United States, the two countries do not have a mutual defense agreement. Even
though there is no treaty obligation, President Bush has said several times that the
United States would defend Israel militarily in the event of an attack. 37
On November 30, 1981, U.S. Secretary of Defense Caspar Weinberger and
Israeli Minister of Defense Ariel Sharon signed a memorandum of understanding
(MOU), establishing a framework for continued consultation and cooperation to
enhance the national security of both countries. In November 1983, the two sides
formed a Joint Political Military Group (JPMG), which meets twice a year to
implement provisions of the MOU. Joint air and sea military exercises began in June
1984, and the United States has constructed facilities to stockpile military equipment
in Israel. In 2001, an annual interagency strategic dialogue, including representatives
of diplomatic, defense, and intelligence establishments, was created to discuss longterm issues.
In 2003, reportedly at the U.S. initiative due to bilateral tensions related to
Israeli arms sales to China, the talks were suspended. (See Military Sales, below.)
After the issue was resolved, the talks resumed at the State Department on November
28, 2005. Most recently, on January 21, 2007, Under Secretary of State Nicholas
Burns and Deputy Secretary of Defense Gordon Englund headed a U.S. delegation
to Tel Aviv for the annual talks, reportedly focused on Iran. Minister of
Transportation Shaul Mofaz and Defense Ministry Director General (now Chief of
Staff) Gabi Ashkenazi led the Israeli delegation. After the meeting, Mofaz said that
the Americans want to increase the number of dialogue sessions to four a year.
Secretary of Defense Robert Gates’ visit to Israel in April 2007, the first by a
U.S. Secretary of Defense in eight years, was seen as a clear sign that strains in the
relationship had truly eased. His meetings included discussions of bilateral militaryto-military relations, the peace process, Syria, Iran, and Iraq. Gates tried to assure his
Israeli interlocutors that a planned U.S. arms sale to Saudi Arabia, reportedly to
include satellite-guided munitions, was needed to counter the Iranian threat and
would not threaten Israel’s military superiority.38
On May 6, 1986, Israel and the United States signed an agreement (the contents
of which are secret) for Israeli participation in the Strategic Defense Initiative
(SDI/”Star Wars”). Under SDI, Israel is developing the Arrow anti-ballistic missile
See also CRS Report RL33222, U.S. Foreign Aid to Israel, by Jeremy Sharp.
Interview with Reuters, cited in Glenn Kessler, “Bush Says U.S. Would Defend Israel
Militarily,” Washington Post, February 2, 2006. See also [http://www.whitehouse.gov/news/
releases/2006/05/20060523-9.html] for transcript of joint Bush-Olmert news conference in
David S. Cloud and Jennifer Medina, “Gates Assures Israel on Plan to Sell Arms to
Saudis,” New York Times, April 20, 2007.
with a total U.S. financial contribution so far of more than $1 billion, increasing
annually. The system became operational in 2000 in Israel and has been tested
successfully. The Defense Appropriations Act for FY2007, P.L. 109-289, September
29, 2006 appropriates approximately $138 million for the Arrow program. Of this
amount, $53 million is for producing missile components in the United States and
missile components and missiles in Israel to meet Israel’s defense requirements, and
$20.4 million is for a joint feasibility study of the Short Range Ballistic Missile
Defense (SRBMD) initiative, a missile interceptor designed to thwart missiles and
rockets from 40 to 200 kilometers that is not expected to be operational before 2011.
The U.S. DOD Missile Defense Agency has agreed to extend the U.S.-Israel Arrow
System Improvement Program (ASIP) and post-ASIP through 2013.
Security cooperation extends to cooperation in counterterrorism. The House
passed H.R. 884, the Promoting Antiterrorism through Technology and Sciences Act
(PACTS Act) on February 27, 2007; it includes Israel as a possible foreign partner
for international cooperative activities.
In 1988, under the terms of Sec. 517 of the Foreign Assistance Act of 1961, as
amended, Israel was designated a “major non-NATO ally,” affording it preferential
treatment in bidding for U.S. defense contracts and access to expanded weapons
systems at lower prices. Israel participates in NATO’s Mediterranean Dialogue , its
Istanbul Cooperative Initiative, and in Operation Active Endeavor monitoring the
Mediterranean Sea to thwart terrorism. On October 16, 2006, Israel signed an
Individual Cooperation Program (ICP) with NATO, providing for cooperation in
such fields as counter-terrorism, intelligence sharing, and disaster preparedness. On
February 7, 2007, Amir Peretz became the first Israeli defense minister to visit
NATO headquarters in Brussels. H.Res. 235, introduced and referred to the
Committee on Foreign Affairs on March 9, 2007, states that Israel is deserving of
NATO membership and supports an upgrade in Israel’s relationship with NATO to
that of a leading member of the Mediterranean Dialogue and member of the
Partnership for Peace.
After the war against Hezbollah in Lebanon ended in August 2006, the State
Department Office of Defense Trade Controls began to investigate whether Israel’s
use of U.S.-made cluster bombs in the war had violated the Arms Export Control
Act, which restricts use of the weapons to military targets, or confidential bilateral
agreements with the United States that restrict use of U.S. supplies cluster munitions
to certain military targets in non-civilian areas. On January 28, 2007, the State
Department informed Congress of preliminary findings that Israel may have violated
agreements by using cluster bombs against civilian populated areas. A final
determination has not yet been made. Israel has denied violating agreements, saying
that it had acted in self-defense. The U.N. has reported that 30 deaths and 180
injuries in southern Lebanon from the weapons since the war ended. 39
David S. Cloud and Greg Myre, “Israel May Have Violated Arms Pact, U.S. Officials
Say,” New York Times, January 28, 2007.
Other Current Issues
Military Sales. In 2006, Israel earned $4.4 billion from defense sales. India
was Israel’s biggest customer, with purchases totaling $1.5 billion.
The United States and Israel have regularly discussed Israel’s sale of sensitive
security equipment and technology to various countries, especially China. Israel
reportedly is China’s second major arms supplier, after Russia. 40 U.S. administrations
believe that such sales are potentially harmful to the security of U.S. forces in Asia.
In 2000, the United States persuaded Israel to cancel the sale of the Phalcon, an
advanced, airborne early-warning system, to China. More recently, Israel’s agreement
to upgrade Harpy Killer unmanned aerial vehicles (UAVs) that it sold to China in
1999 angered the Department of Defense (DOD). China tested the weapon over the
Taiwan Strait in 2004. In reaction, DOD suspended technological cooperation with
the Israel Air Force on the future F-35 Joint Strike Fighter (JSF) aircraft as well as
several other cooperative programs, held up shipments of some military equipment,
and refused to communicate with the Israeli Defense Ministry Director General,
whom Pentagon officials believed had misled them about the Harpy deal.
On August 17, 2005, the U.S. DOD and the Israeli Ministry of Defense issued
a joint press statement reporting that they had signed an understanding “designed to
remedy problems of the past that seriously affected the technology security
relationship and to restore confidence in the technology security area. In the coming
months additional steps will be taken to restore confidence fully.” 41 According to the
Israeli newspaper Ha’aretz, Israel will continue to voluntarily adhere to the
Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use
Goods and Technologies, without actually being a party to it. On November 4, in
Washington, Defense Minister Mofaz announced that Israel would again participate
in the F-35 JSF project and that the crisis in relations was over. In March 2006, the
new Defense Ministry Director General Jacob Toren said that an interagency process
had begun approving marketing licenses for Israeli firms to sell selected dual-use
items and services to China, primarily for the 2008 Olympic Games, on a case-bycase basis.
On October 21, 2005, it was reported that Israel would freeze or cancel a deal
to upgrade 22 Venezuelan Air Force F-16 fighter jets, with some U.S. parts and
technology. The Israeli government had requested U.S. permission to proceed, but
it was not granted.
Espionage-Related Cases. In November 1985, Jonathan Pollard, a civilian
U.S. naval intelligence employee, and his wife were charged with selling classified
documents to Israel. Four Israeli officials also were indicted. The Israeli government
Ron Kampeas, “Israel-U.S. Dispute on Arms Sales to China Threatens to Snowball,”
Jewish Telegraphic Agency, June 8, 2005, citing a U.S.-China Economic and Security
Review 2004 report.
“U.S. Israel Agree to Consult on Future Israeli Weapons Sales - Nations Affirm Joint
Commitment to Address Global Security Challenges,” U.S. State Department Press Release,
August 17, 2005.
claimed that it was a rogue operation. Pollard was sentenced to life in prison and his
wife to two consecutive five-year terms. She was released in 1990, moved to Israel,
and divorced Pollard. Israelis complain that Pollard received an excessively harsh
sentence. Israel granted him citizenship in 1996, and he remains a cause celebre in
Israel. Israeli officials repeatedly raise the Pollard case with U.S. counterparts, but
no formal request for clemency is pending. 42 Pollard’s Mossad handler Rafi Eitan,
now 79 years old, is head of the Pensioners’ Party and a member of the current
government. On June 8, 2006, the Israeli High Court of Justice refused to intervene
in efforts to obtain Pollard release.
On June 13, 2005, U.S. Department of Defense analyst Lawrence Franklin was
indicted for the unauthorized disclosure of classified information (about Iran) to a
foreign diplomat. Press reports named Na’or Gil’on, a political counselor at the
Israeli Embassy in Washington, as the diplomat. Gil’on has not been accused of
wrongdoing and returned to Israel. Then Foreign Minister Silvan Shalom strongly
denied that Israel was involved in any activity that could harm the United States, and
Israel’s Ambassador to the United States declared that “Israel does not spy on the
United States.” Franklin had been charged earlier on related counts of conspiracy to
communicate and disclose national defense information to “persons” not entitled to
receive it. On August 4, 2005, two former officials of the American Israel Political
Action Committee (AIPAC), Steven J. Rosen and Keith Weissman, whom AIPAC
fired in April 2005, were identified as the “persons” and indicted for their parts in the
conspiracy. Both denied wrongdoing. On October 24, their attorneys asked the court
to summon Israeli diplomats to Washington for testimony. On January 20, 2006,
Franklin was sentenced to 12 years, 7 months in prison.
Rosen and Weissman are the first nongovernment employees ever to be indicted
under the 1917 Espionage Act for receiving classified information orally; they argue
that they were exercising protected free speech and the law was designed to punish
government officials. In August, a judge ruled that “the rights protected by the First
Amendment must at times yield to the need for national security.” However, he
required the government to establish that national security is genuinely at risk and
that those who wrongly disclosed the information knew that disclosure could harm
the nation. A trial may begin in May 2007.
Intellectual Property Protection. The “Special 301” provisions of the
Trade Act of 1974, as amended, require the U.S. Trade Representative (USTR) to
identify countries which deny adequate and effective protection of intellectual
property rights. In April 2005, the USTR elevated Israel from its “Watch List” to the
“Priority Watch List” because it had an “inadequate data protection regime” and
intended to pass legislation to reduce patent term extensions. The USTR singled out
for concern U.S. biotechnology firms’ problems in Israel and persistent piracy
affecting the U.S. copyright industry. In November 2005, U.S. Ambassador to Israel
Richard H. Jones urged the Knesset to put Israel in line with Organizations for
Economic Cooperation and Development (OECD) countries with copyright law.
(Joining the OECD is an important Israeli foreign policy goal.) On April 28, 2006,
See CRS Report RS20001, Jonathan Pollard: Background and Considerations for
Presidential Clemency, by Richard Best and Clyde Mark.
however, the USTR retained Israel on the Priority Watch List due to continuing
concern about copyright matters and about legislation Israel had passed in December
2005 that weakened protections for U.S. pharmaceutical companies. 43 According to
Deputy Secretary of Commerce David Sampson, the U.S. government claims that
parties in Israel are making unfair use of information submitted when patented
pharmaceuticals are registered in Israel and demands that the information not be
transferred to powerful Israeli generic drug companies, such as Teva. It also is
concerned about software, music and DVD piracy in Israel. 44 Israeli officials have
criticized the USTR decisions as discriminatory.
U.S. Interest Groups
An array of interest groups has varying views regarding Israel and the peace
process. Some are noted below with links to their websites for information on their
American Israel Public Affairs Committee: [http://www.aipac.org/]
American Jewish Committee:
American Jewish Congress: [http://www.ajcongress.org/]
Americans for Peace Now: [http://www.peacenow.org/]
Anti-Defamation League: [http://www.adl.org/]
Conference of Presidents of Major Jewish Organizations:
The Israel Project:
Israel Policy Forum: [http://www.israelpolicyforum.org/]
New Israel Fund: [http://www.nif.org/]
Zionist Organization of America: [http://www.zoa.org/]
For U.S. government explanation of Israel’s listing on the Priority Watch List, see Full
Version of the 2006 Special 301 Report, April 28, 2006, accessible at [http://www.ustr.gov]
Ora Coren, “U.S. Worried about Israel’s Intellectual Property Laws,” Ha’aretz, February
Figure 1. Map of Israel