Israeli Protests Block U.S. Plan for Aid to West Bank

The Reagan Administration has reportedly bowed to Israeli objections and shelved a proposal to “borrow” $30 million in aid money earmarked for Israel and divert it for the benefit of Palestinians on the occupied West Bank of the Jordan River.

The money, which is equal to 1% of the $3 billion in total U.S. military and civilian grants to Israel this year, was to have been contributed to a five-year Jordanian development plan aimed at shoring up the sagging West Bank economy. Jordan ruled the area from 1949 until Israel captured it in the Arab-Israeli war of 1967.

According to Israeli and U.S. sources, Israel objected to the aid diversion plan for at least two reasons:

--Because it could not be guaranteed that Congress would later approve an aid supplement to restore the $30 million.

--Because it was feared that agreement might be seen in Congress as an indication that Israel does not need the high level of U.S. aid it gets.

Promoters of the plan had hoped Israel might agree to it because of its public support for improving the quality of life for West Bank Palestinians and because of its sympathy for Jordan’s political goals in the occupied territories.

Jordan is seen here as eager to undercut West Bank support for the Palestine Liberation Organization, with an eye toward ultimately signing a treaty with Israel that would establish some form of joint rule in the area.

Both Jordan and Israel oppose what they see as the destabilizing option of an independent, PLO-run Palestinian state on the West Bank, which according to disputed polls, is what the majority of residents have indicated they want.

Palestinian sources here who are aware of the aid proposal contend that Israel’s attitude demonstrates the limits of its stated commitment to improving the quality of life for the 850,000 Palestinians who live under military rule on the West Bank. About 60,000 Israelis live among them in more than 100 Jewish settlements.

Murphy’s Backing

The proposal originated in the U.S. State Department’s Near East bureau and had wide support, informed sources told The Times. Richard W. Murphy, assistant secretary of state for Near Eastern and South Asian affairs, is said to have been a particularly strong advocate.

The proposal reportedly reached the desk of Secretary of State George P. Shultz, who is said to have ordered that the Israelis be sounded out.

According to high-level Israeli officials, the proposal was first brought up through normal diplomatic channels. “It was carefully asked how we would view such a possibility,” one Israeli source said. “We carefully said we will think about it.”

This source said that eventually a decision was made “at the top level” to reject the plan, and another senior Israeli official said the rejection was communicated to the United States before last month’s state visit to Washington by Prime Minister Yitzhak Shamir.

In Washington, Shamir discussed the “quality of life” issue generally with Administration officials, but the specific notion of diverting $30 million to the Jordanian development fund did not arise there, the official said.

Negative Reaction

American sources, speaking on condition of anonymity, confirmed that the Israeli reaction to the proposal was negative. One source said the Israelis viewed it as “tampering with our money.”

The plan envisioned the return by Israel of $30 million from the $1.2 billion in civilian aid it has received for the current fiscal year. (In addition, Israel gets $1.8 billion in military aid, and the entire package is in the form of outright grants, which do not have to be repaid.)

The plan was to divert the money to the Jordan Development Fund and later to seek a supplemental grant from Congress to restore the money for Israel. One American source noted that “it is not uncommon to raid one budget for another and then replenish it later.” Besides, another said, Israel’s strong support in Congress makes it unlikely that such a supplemental request would be refused.

However, U.S. officials could not guarantee to Israel that the $30 million would be restored given the current pressure on government budgets.

Largest Aid Recipient

American aid is vital to Israel, equal to about 12% of the total value of goods and services produced in the country and contributees a substantial share of the government’s budget.

Israel is the largest recipient of American aid, having received $22 billion in outright grants and $10 billion in loans since 1975.

U.S. aid to West Bank Palestinians in the same period has totaled about $70 million, funneled through half a dozen “private voluntary organizations” that undertake development projects in the occupied territories. The voluntary organizations are slated to get $10 million this year, compared with $14 million the previous year and from a requested $18 million in fiscal 1987.

The $30 million envisioned for the Jordan Development Plan would have been in addition to this regular U.S. aid to the West Bank.

In addition to Israeli opposition to the plan, there was some concern within the Reagan Administration that once the diversion of Israeli aid money to Jordan became public knowledge, as was thought inevitable, it could embarrass King Hussein and possibly hinder his effort to raise funds from other Arab countries.

Extensive Cooperation

Jordan and Israel cooperate extensively on the West Bank but the two nations are still technically at war. And Jordan’s West Bank Development Plan is already controversial in the Arab world, where some see it as a form of capitulation to Israeli rule in the occupied territories.

Jordan reportedly sought a $50-million U.S. contribution to the West Bank Development Fund this year. But the request came while sharp reductions were being made in the U.S. foreign aid budget, and American officials said these reductions are making it difficult to allocate new funds to the Jordanian plan.

The State Department had sought $15 billion in foreign aid money for the current fiscal year but got only $13 billion. Because foreign aid budgets for some countries, including Israel and Egypt, are protected from cuts, aid for many other countries was slashed by 40% to 50% from requested levels.

Jordan has said it seeks $1.3 billion over the next five years to bolster the West Bank economy. The area has been hard hit by the oil slump, which has cut deeply into the funds formerly sent home by Palestinians working in the Persian Gulf region. Also, donations by the Persian Gulf region governments have dropped sharply.

Hussein is concerned that if conditions on the West Bank become too bad, Palestinians may leave it and cross the river into Jordan, where they could be a threat to his rule. Palestinians already constitute about 60% of the Jordanian population.