Headlines about new "threats" against Israel, of any kind, are nothing new in the Israeli media. Fear has always been one of the biggest sellers for Israeli media. The threat this time round is the threat to curtail American financial guarantees to Israel, if the government fails to go the way of a diplomatic settlement.
As a "threat", the guarantees are not really high up on the scale. In 2002, the US approved loan guarantees to Israel totaling $9 billion. The Israeli government can issue bonds under this program abroad, and obtain a US government rating, and so pay a lower interest rate.
The provision of guarantees by the US was a factor in Israel's success in coping with the crisis and the recession at the beginning of the previous decade. But now, the importance of the guarantees has considerably diminished. Israel's economy merits a respectable rating in its own right, and the US government is liable to feel the consequences of a downgraded rating unless the federal deficit is reduced.
Chest thumping
Nevertheless, we should be aware that the US cut the original guarantees program by $1 billion because of settlement activity by the government of Israel, without threats, and without reactions full of patriotic pathos by Israeli government ministers. From the original plan, there remains a little less than $4 billion. Israel can certainly manage a sum like that unaided.
So much for the direct importance of the guarantees, or their lack of importance. If the matter ended there, cabinet ministers could continue puffing out their chests, and time-serving reporters in the Israeli press could continue implying that Israel can do whatever it likes, because President Barack Obama is just a paper tiger, a man without substance, a political novice taking lessons from Benjamin Netanyahu.
The problem is that when an emissary of the US President begins to speak the language of threats, he is unaware of what the Israeli press claims. For him, the US President is still the supreme authority on American foreign policy, and the president is not exactly inclined to be patient or tolerant of the actions of either Israel or the Palestinians.
What is important
Therefore on the question of the "threat" about the loan guarantees, it would be as well for both government and citizens to start to examine what really is important, and what can go wrong. Freezing the guarantees means that the US does not stand behind Israel, not just in bond offerings, but in everything. Therefore the significance of the warnings of the envoy George Mitchell is essentially political. It signals to the Israeli government that the US administration is not thinking of relaxing its effort to reach a settlement.
True, the Israeli economy will survive a freeze of the loan guarantees without undue effort, but there are many other issues, very many, in which the administration's goodwill serves as an asset for representatives of the government of Israel. These include economic issues, from international agreements to trade policy. When these components are introduced into the equation - the conclusion is that the price of losing the US administration's goodwill may be high, even very high.
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2010
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