BICOM

Executive summary

• Prime Minister Ehud Olmert is under police investigation for allegedly receiving illegal funds from an American businessman, and faces growing political pressures.
• The diplomatic process currently underway is likely to experience some difficulties as a result of the unstable political situation in Jerusalem.
• Despite difficulties, Israeli negotiation teams have maintained contacts with Palestinian, Egyptian and Syrian counterparts and the Prime Minister’s Office in Jerusalem indicates that the progress on the diplomatic track will not be compromised.
• Diplomacy is placed at the top of the Israeli government’s agenda and is intended to tackle the ongoing strategic threats the country faces. Despite the political turmoil, the regional reality remains unchanged and the necessity of negotiations uncompromised.

Introduction

The latest police investigations into Ehud Olmert’s financial affairs in the period before he became prime minister has sparked a political crisis which looks set to mark the beginning of the end of the 31^st Government of Israel.  For precisely how long Olmert will continue in his post remains unclear, yet uncertainty regarding the coalition’s future and the prospect of early elections impinges upon the series of diplomatic initiatives in which the present administration is engaged.

Three facets of Israel’s diplomatic and security situation need to be reviewed in light of the new domestic ambiguity.  They are as follows:

      i.        Israeli-Palestinian affairs, which itself has two separate dimensions due to the split in the Palestinian camp:

a.    the Egyptian-brokered understanding of a ceasefire – more accurately described as a tahdiyeh (lull in fighting) between Israel and Hamas – with the likelihood of a military escalation in Gaza if it does not emerge, and the efforts to secure the release of kidnapped IDF soldier Gilad Shalit;

b.    the bilateral talks between Israel and the Palestinian Authority, which were renewed following the Annapolis conference last November.

     ii.        The Israel-Syria peace track, currently being conducted under Turkish auspices, which was announced earlier this month; and

    iii.        The possibility of a forthcoming prisoner exchange with Hezbollah, with a view to returning the two Israeli reservists abducted in July 2006, in an attack which sparked the Second Lebanon War.

Each of these distinct issues is at a different stage of development.  This paper sets the context of the crisis and examines some of the possible ramifications of this domestic political uncertainty for each of these issues at the top of Israel’s diplomatic and security agenda.

The context of the political crisis

Five police investigations have now been opened into Olmert’s affairs since he took office in 2006. However, New York businessman Morris Talansky’s testimony last Tuesday before the Jerusalem District Court marked a shift from ongoing corruption inquiries, whose outcome will be legally determined, into a major political crisis. Talansky claimed to have transferred about $150,000 to Olmert, in cash, both directly and through political aides, over a 15-year period during which Olmert served as Jerusalem mayor and minister of industry and trade. He also gave a detailed account of how he has funded Olmert’s extravagant lifestyle.[1]

Olmert is vulnerable on two counts. The first is a pragmatic view: that it is inconceivable Olmert can properly and effectively fulfil his duties as prime minister, especially in light of grave external challenges (including the Iranian nuclear threat and the increasing power of terror organisations across Israel’s northern and southern borders), under the weight of his legal battle. This is the position Defence Minister and Labour leader Ehud Barak has adopted.[2] Ironically, just a fortnight ago, Olmert was being accused of renewing peace initiatives (with Syria) for purposes of self-preservation; he is now being told that the packed diplomatic agenda warrants his urgent departure. The second reason has to do with an ethical stance, which was conveyed by Foreign Minister Tzipi Livni as she called upon the Kadima party to start gearing up for elections. She commented, “Reality [has] changed…The issue isn’t only legal…It is related to values and norms and their influence on the public’s trust.”[3] The collapse of confidence in Olmert (never restored in the aftermath of the 2006 war with Hezbollah) extends from the most senior ranks of cabinet to the public at large.[4]

The news has been filled with headlines indicating that these internal political developments may cause the various diplomatic initiatives to unravel.[5] Key policy questions concern the long term durability of the peace talks (with Syria and the Palestinian Authority), the short term prospects for a limited Gaza ceasefire, and the possibility of a prisoner exchange, to which we now turn.

The Israeli-Palestinian sphere

(a)  The situation in Gaza

A senior Hamas operative said last week that Hamas is preparing for a situation in which Olmert might seek to divert attention away from the corruption investigation by initiating a “severe escalation”.[6] It is likely that, in coming weeks, Hamas will present the domestic political crisis as ‘an Israeli excuse for reoccupying Gaza’, especially if violence ensues. The reality remains that ever since Israel withdrew from the Strip in 2005, there has been no appetite to return. The current situation in Gaza is intolerable, and the security cabinet is on the verge of choosing between imperfect options for dealing with it. Political instability threatens to further constrain the decision-makers, but an escalation would have nothing to do with the corruption scandal.

A workable ceasefire looks increasingly bleak for substantive reasons. First, Israel is wary that any lull in fighting will be used by Hamas to concentrate on recruitment and training and to accelerate the pace of weapons smuggling in order to be better equipped for a future round of conflict.  Second, intelligence chiefs are warning that the Hamas threat is increasing and that a military operation will be required to diminish the rocket threat.[7] Third, even prior to the Talansky debacle, there existed a sizeable gulf in the parties’ positions. For instance, Israel wants to ease the economic blockade gradually, and condition it on Hamas’s compliance with the truce, whereas Hamas is demanding its immediate lifting.

Admittedly, Olmert’s leadership troubles have made it more difficult for him to accept a ‘weak’ ceasefire deal – one which, for instance, does not at least facilitate the release of Gilad Shalit (a soldier kidnapped by Palestinian militants on 25 June 2006) or contain comprehensive safeguards against weapons smuggling into Gaza.[8] Doubts that the government would be able to withstand criticism from the right are further compounded by Vice Prime Minister Haim Ramon and Interior Minister Meir Sheetrit, the two most prominent voices within Kadima protesting against an accommodation with Hamas.[9] Yet if Olmert’s hands are bound tighter regarding a ceasefire, he is equally as unlikely at this time to approve a major incursion into the Gaza Strip. First, however well prepared might be the IDF, there would be casualties, which the public would find especially hard to stomach on Olmert’s watch.  Second, mutual suspicion between Olmert, Barak and Livni – the three ministers who would be required to sign off on such action – has only intensified in the last week. The most likely scenario for the time being, perhaps even more so in light of Olmert’s personal woes, is intermittent, stepped up action in relation to specific intelligence, but not an all-out incursion akin to Operation Defensive Shield in the West Bank in 2002.[10]

(b)  Bilateral peace talks with the Palestinian Authority

In the separate framework of bilateral peace talks, Nabil Abu Rdainah, a spokesman for Palestinian President Mahmoud Abbas, also expressed concern about Olmert’s woes, commenting, “No doubt, what’s happening will leave a negative impact on negotiations.”[11] The media reported similarly, with statements such as “Olmert’s downfall could dash U.S.-backed efforts by Israel and the Palestinians to work out a final peace agreement by the end of the year.”[12]

Given that all three of the leaders who instigated the talks at Annapolis are now reaching the end of the road, it seems difficult to imagine how the diplomatic process can be reach viable goals. President Bush is in the twilight phase of his presidency, Prime Minister Olmert’s days are clearly numbered, and President Abbas has stated that he would resign if a peace settlement is not reached within six months. (Palestinian analysts are saying that Abbas has been further weakened by Olmert’s troubles and, though unlikely, some believe that if Olmert goes, Abbas will fall as well).[13] Olmert’s hope to accelerate the timetable and complete formulation of a “shelf” agreement by the end of the summer is now unfeasible.[14]

Nonetheless, it is conceivable that some of the progress on the bilateral talks will outlive all three of their most public protagonists. First, there are indications of some substantive advances, both on ‘core’ issues and on matters being negotiated in parallel, such as incitement.[15] Israel policy makers have been investing more time and effort in the details of a future agreement. There are also encouraging signs regarding the PA security forces, which have improved their performance in parts of the West Bank, according to an Israeli security source.[16] Both sides have an incentive for ensuring that developments on the ground in matters of security and counter-terrorism are not rolled back due to uncertainty in the political echelons. Second, long-standing perceptions that both Abbas and Olmert are weak leaders might actually serve to benefit the process in the long run. Both Foreign Minister Tzipi Livni and former Palestinian Prime Minister Ahmed Qurei (Abu Ala) are leading national figures who head the negotiating teams in current talks. Whether they will manage to lend sufficient continuity, and whether the next US president will pick up the reins, remains to be seen.

The Israeli-Syrian peace track

Formal renewal of the Israeli-Syrian peace track is the second major element of Israeli foreign policy which is impacted by domestic political uncertainty. Although it is the most recent diplomatic track to be launched it receives overwhelming support from the Ministry of Foreign Affairs and the backing of the IDF intelligence command. The announcement of talks was preceded by months of discreet contact, which began in February 2007. However, the most durable policy area could prove to be the one that is least publicly mature, with a majority of Israelis still wary of any Israeli withdrawal from the Golan Heights.

One view suggests that Syria will remain committed to the peace to improve its domestic and international standing. Damascus assesses that in order to sustain its control it must integrate more directly into the global economy, and renew economic ties with Washington in particular. The Syrian economy is in bad shape; it is being hit hard by the global rise in fuel prices.[17] Inflation is purported to have sparked protest demonstrations in the north of the country. Israeli intelligence sources estimate that Iran invests around $800 million per annum in the Syrian economy, but this is insufficient to support President Bashar Assad’s long term vision for Syria. Economic reforms would be substantially less risky to implement if US sanctions are lifted, which is an objective that the president has declared as part of a broader peace agreement with Israel.[18] This underlying logic explains why Syria did not cancel the continuation of meetings when the political crisis erupted last week, why the sides are set to convene again this week for further talks under Turkish auspices, and why expectations have not been dashed for direct talks which could be launched later this month.

A more circumspect view emphasises Syria’s strategic interest in maintaining its position within the Iranian-led regional bloc, which is enjoying regional ascendency in defiance of the West and the moderate Sunni Arab regimes.[19] Assad reinforced this position with a parliamentary delegation from the UK last Wednesday, informing them that he has no intention of complying with Israel’s stipulation for withdrawing from the Golan Heights that Damascus distance itself from Iran.[20] Much might depend on Iran’s approach to Syria over the coming months, and the influence of conservative pro-Iranians in the Damascus regime. Ibrahim Hamidi, considered Syria’s leading independent journalist, writing in the London-based Al-Hayat newspaper, has written that Damascus intends to make efforts to further talks but is concerned that Olmert’s domestic situation will make it impossible.[21]

Assad may be torn between conflicting interests, but he is not under any immediate pressure to make a decision. The political fiasco in Israel will likely buy him more time before he is forced to do so.

Indirect talks with Hezbollah: bringing the boys back home

Recent progress has purportedly been made in indirect talks between Israel and Hezbollah for the release of the two IDF reservists whose abduction in July 2006 sparked the Second Lebanon War. The deal is thought to involve the release of up to six Lebanese prisoners being held in Israel, including a convicted terrorist, Samir Kuntar, and the bodies of 10 Hezbollah fighters, in return for the Israeli soldiers, Ehud Goldwasser and Eldad Regev. Notably, it will not include the release of Palestinian prisoners, as per consistent Hezbollah demands, nor is it likely to lead to information pertaining to the whereabouts of Ron Arad.[22] Arad is an Israeli navigator who went missing over Lebanon in 1986, whose unknown fate continues to haunt the Israeli public.

The veracity of reports on this issue is extremely difficult to confirm. Indeed, owing to obvious sensitivities, it is impossible to provide a complete picture about the tim
ng and nature of any forthcoming exchange. Nonetheless, a series of developments are being construed as signs of an impending deal, manifesting in the release last Sunday of a convicted Hezbollah spy, Nissim Nasser, to Lebanon. This was followed with the surprise return by Hezbollah of the remains of soldiers killed in the Second Lebanon War. Nasser was due to be released for legal reasons; Israel has denied that it is part of a broader deal. Some analysts are suggesting that this was an indication by Hezbollah chief Hassan Nasrallah that he is serious about a prisoner exchange, though others point to it as a means of undermining Israel’s position that it does not negotiate for body parts.[23]

On the issue of an exchange, the question of paramount importance relates to whether or not the two soldiers are still alive. Of course, Hezbollah will not freely provide details. That Nasrallah has not extracted a concession from Israel for a proof of life (such as a photograph, letter or Red Cross visit), and the relatively low price seemingly being discussed, have led to unconfirmed fears that they are dead.[24] In the past, “Israel has paid with hundreds, even thousands of prisoners for living captives.”[25] Yossi Beilin set out the position to which the vast bulk of the Israeli public subscribes, that “The principle must always be the living for the living and the dead for the dead.”[26] Israel is naturally concerned that an asymmetric swap of live detainees for soldiers’ bodies will provide an incentive for further kidnappings.[27]

It is plausible that since Olmert’s domestic troubles began to mount, he has been seeking to accelerate the completion of a deal. However, Samir Kuntar has for years been considered a potential bargaining chip for information about Ron Arad. His release, therefore, in exchange for Goldwasser and Regev, without information about Arad, has already been hypothetically described as “a resonating failure…[but] less intolerable than setting a norm of exchanging prisoners for dead soldiers.”[28] Nonetheless, Smadar Haran, the sole survivor of the 1979 terror attack led by Samir Kuntar in which her husband and daughters were killed, has expressed confidence that the government will responsibly conduct the negotiations to bring home the two reservists.[29] Olmert is mindful that a prisoner exchange could be the one saving grace of Nasrallah’s political and military victory in Lebanon last month (which has enabled Hezbollah to return to the Lebanese cabinet). Nasrallah might well seek to drag the process out for many years to come and ensure that Israel’s promise “to bring the boys home, no matter what” remains unfulfilled.[30] However, he also has some room for manoeuvre, without losing face, and as such might retreat from his demand for the release of Palestinian prisoners (who could be released in a separate exchange with Hamas for Gilad Shalit). Olmert is likely to do everything possible with whatever remnants of power he can wrestle to secure a substantive achievement, such as a prisoner exchange, to offset the corruption affair looming over his departure from public life.

 

 

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[1] At present, it must be borne in mind that no charges have been brought and so the testimony was not part of a formal court proceeding against the prime minister.  Among the reported donations was $30,000 for Olmert’s failed 2002 campaign for Likud chairman.  Police suspect that Olmert took as much as $500,000 in illicit campaign contributions before becoming prime minister.  In 2004, Olmert purportedly asked Talansky to pay a $4,700 hotel bill for a three-day stay at the Ritz Carlton in Washington, which he did on his personal credit card.  The businessman is also thought to have paid the cost of an upgrade on an airline ticket from business class to first class, and provided a loan (which was not repaid) of up to $30,000 for a family holiday in Italy.  Sources close to Olmert say the vacation never took place.  It remains unclear whether Olmert broke the law.  Professor Emanuel Gross, an expert in criminal law, and other senior legal authorities point out that the transfer of money might be insufficient to prove charges.  Other legal sources point to money laundering as the most likely charge to be brought against the prime minister.  Other possible grounds for indictment include breach of trust, receipt of a prohibited gift, money laundering and tax evasion.  Bribery is a less likely charge.  Olmert maintains his innocence, arguing that he did not use any cash for personal expenses, and has said that he would resign if indicted.  Meanwhile, Talansky is expected to be cross-examined by Olmert’s legal team on 17 July.  For further details, see, for instance: ‘Olmert given cash, witness tells court’, The Associated Press, 28 May 2008; ‘Talansky: I gave Olmert thousands of dollars’, Tomer Zarchin, Ofra Edelman and Barak Ravid, Haaretz, 28 May 2008; ‘Legal source: Cash envelopes alone may not prove charges against Ehud Olmert’, Tomer Zarchin, Haaretz, 26 May 2008; ‘Olmert’s sea of cash’, Ze’ev Segal, Haaretz, 28 May 2008; ‘Leading legal sources: Money laundering the key charge in Olmert corruption case’, Haaretz, 29 May 2008.

[2] In the wake of the Talansky testimony, Ehud Barak held a press conference in which he called upon Olmert to take one of four steps: resign; take a leave of absence; declare temporary incapacity; or suspend himself from office.  Barak threatened to pull Labour out of the coalition, though he did not specify a timeframe.  Labour’s departure would almost certainly induce elections, in which Labour would at present be expected to fare badly.  As such, Barak is keen to remain in the coalition provided that Kadima chooses a replacement for Olmert.  ‘With elections just around the corner, Barak takes charge’, Yossi Verter, Haaretz, 29 May 2008; ‘100 days for a decision’, Ze’ev Segal, Haaretz, 29 May 2008; ‘Let him wait outside’, Yoel Marcus, Haaretz, 30 May 2008; Interview with David Horovitz, IBA Television News, 28 May 2008.

[3] ‘Livni to Kadima: Get ready for elections’, Mozal Mualem, Haaretz, 30 May 2008.

[4] Current polls show that 70 percent of the Israeli public do not believe Olmert’s version of events that the money he received was only for campaign finance, and that 51 percent of his Kadima party voters do not believe him either.  Similarly, another commentator added, “Whether or not Olmert’s behaviour was formally criminal, and whether or not the investigation morphs into an indictment, his decision to accept money secretly is enough to morally disqualify him from being one of the country’s leaders.”  ‘In Argentina it wouldn’t faze anyone’, Uzi Benziman, Haaretz, 28 May 2008; ‘A kept politician cannot be PM’, Ari Shavit, Haaretz, 29 May 2008; ‘The good life, Olmert-style’, Yossi Verter, Haaretz, 28 May 2008.

[5] For instance, ‘Syria says Olmert’s weakness may affect negotiations’, Yoav Stern, Haaretz, 29 May 2008; ‘Syrian: Talks hinge on Olmert’s troubles’, Yoav Stern, Haaretz, 30 May 2008; ‘Olmert’s U.S. visit: Business as usual or a farewell tour?’, Barak Ravid, Haaretz, 30 May 2008.

[6] ‘Hamas fears Olmert probe will lead to escalation in Gaza’, Ali Waked, Ynetnews, 29 May 2008.

[7] There is a view within the defence establishment that only by intensifying operations against Hamas in response to attacks such as those at the Erez crossing the week before last, a similar attack at the Kerem Shalom crossing a month ago, and continuous rocket attacks on Israeli communities, will Israel be able to enter into a meaningful ceasefire.  ‘Truce looks farther away’, Amos Harel and Avi Issacharoff’, Haaretz, 26 May 2008.

[8] ‘Decision on Gaza cease-fire postponed’, Yaakov Katz, Herb Keinon and JPost Staff, The Jerusalem Post, 29 May 2008.

[9] ‘Ramon: ‘Gov’t negotiating with Hamas”, JPost Staff, The Jerusalem Post, 19 May 2008; ‘Shitreet says would oppose any submission accord with Hamas’, PalToday News, 27 May 2008.

[10] ‘Decision on Gaza cease-fire postponed’, Yaakov Katz, Herb Keinon and JPost Staff, The Jerusalem Post, 29 May 2008.

[11] ‘Hamas fears Olmert probe will lead to escalation in Gaza’, Ali Waked, YNet News, 29 May 2008.

[12] ‘Olmert given cash, witness tells court’, The Associated Press, 28 May 2008.

[13] ‘Palestinians: Israeli political crisis erodes peace talks’, China View, 29 May 2008.

[14] First, developments over the coming weeks (rather than months) would be crucial in meeting this target.  Second, even if an agreement was reached, Olmert would need to garner sufficient Knesset support for supporting legislation. See ‘The Israeli-Palestinian Negotiations: What was – and was not – Agreed On’, Aluf Benn, Institute for National Security Studies, Insight No. 56, 21 May 2008.

[15] A joint committee dealing with “the culture of peace” has established several proposals for reviewing school textbooks, with a view to removing content that incites to violence or to a lack of tolerance on national or religious grounds.^[15]  It has been argued that this issue is the most important means of securing peace in the long run.  For instance, “[f]ormer Prime Minister Ariel Sharon put the issue of incitement at the head of the list of demands that he made of the Palestinians, sometimes even before the demand that a halt be put to terrorism.” ‘Bilateral talks address incitement’, Barak Ravid, Haaretz, 28 May 2008.

[16] ‘Israeli source: PA security forces have improved dramatically in West Bank’, Amos Harel and Avi Issacharoff, Haaretz, 27 May 2008.

[17] Daily oil production is reported to have been reduced recently from 600,000 barrels a day to 360,000, and oil revenue has fallen from 70 percent of the annual budget in 2000 to less than 20 percent today. ‘Syria says Olmert’s weakness may affect negotiations’, Yoav Stern, Haaretz, 29 May 2008.

[18] ‘Syria Seeks U.S. Role in Talks’, Jay Solomon, The Wall Street Journal, 31 May 2008.

[19] ‘An empty package’, Jonathan Spyer, Haaretz, 30 May 2008.

[20] ‘Syria’s Assad dismisses Israeli demand on Iran’, Khaled Yacoub Oweis, Reuters, 27 May 2008.

[21] ‘Israel, Syria said to have made progress in talks’, Haaretz, 30 May 2008.

[22] In 2006, Nasrallah declared that Arad was dead and that his remains had been lost, though Israeli intelligence sources believe that he was ‘sold’ to Iran.  Israel operates on the assumption that he is still alive.

[23] Other developments include a speech by Nasrallah, broadcast last Monday 26 May, to the Lebanese public, in which he promised (though not for the first time) that “very soon Samir Kuntar and his brothers will be among us.”  More significantly, diplomatic sources in Beirut have reported a visit by the German mediator, Gerhard Konrad, during which he met with senior Hezbollah figures.  Some Israeli security sources have been more guarded, though they have not denied the existence of a deal.  For instance, Haaretz was told, “This is a very complex deal that we are still uncertain whether will take place.  Most of its elements are not known to the press.  The talks are ongoing – and we have no intention to make any updates to anyone at this time.”  For more details, see ‘Hezbollah spy to be released next week’, Amos Harel, Haaretz, 28 May 2008; ‘Israel says Hezbollah exchange deal is close’, Amos Harel, Barak Ravid, Yossi Melman and Yoav Stern, Haaretz, 27 May 2008; ‘Lebanese prisoner Nissim Nasser released’, Raanan Ben-Zur, YNet News, 1 June 2008.

[24] ‘Playing poker with Nasrallah’, Amir Oren, Haaretz, 30 May 2008.

[25] The deal of the dead?’, Amos Harel and Avi Issacharoff, Haaretz, 27 May 2008.

[26] An exchange of living prisoners for bodies is not entirely unprecedented.  In 1998, Israel freed 60 detainees in exchange for the body of a marine, Itamar Iliya, who was killed in Lebanon in September 1997.

[27] ‘Ron Arad supporters avoid media amid hostage talks’, Yuval Azoulay, Haaretz, 28 May 2008.

[28] Editorial, ‘Alive or dead’, Haaretz, 30 May 2008.

[29] ‘I hope the rumours are true’, Jack Khoury, Haaretz, 28 May 2008.

[30] ‘Playing poker with Nasrallah’, Amir Oren, Haaretz, 30 May 2008.