Housing-Loan Linkage Carries an Impossible Price : Israel: What sort of peace could be negotiated if the Arabs saw a caving in to U.S. demands about where Jews may live?

The economic difficulties of Israel arise from an enormously asymmetrical arms race in the Middle East. Israel’s Arab enemies have acquired huge quantities of weapons from every possible source. In the decade 1979-1988, the Arab countries purchased weaponry for $168 billion, while Israel purchased weapons for $10 billion. The ratio is easy to calculate, but is difficult to live with.

Recently, with Europe’s contraction as an arms market, the Western democracies, led by the United States, have become chief suppliers of first-line weapon systems to the Arab dictatorships, threatening to close the quality edge that sustained Israel and compensated for the staggering disparity in numbers.

Post-Gulf War developments also are alarming: Saddam Hussein is very much alive; and a powerful lobby secured a $21-billion check to Syria, which then hastily purchased long-range surface-to-surface missiles and 300 modern Soviet tanks as an opening gesture toward future talks with Israel.

The brunt of all that is fully taken by the Israeli democracy: 34% of our annual budget is devoted to the servicing of debts that originated in past defense expenditures; and last month, in anticipation of new threats, the Ministry of Defense prevailed over the Treasury, and its share was increased to 16% of the budget.

With 50% of the budget allocated to guard the house, not too much is left to run it, and therefore Israel has asked the United States for aid. It has been a very generous aid indeed, but it should be noted that the Israeli taxpayers carry 90% of their economic burden. It is certainly not easy to make it in our rough neighborhood.

Enter Mikhail Gorbachev, exit Soviet Jews. In the last two years, more than 300,000 Jews have fled from the disintegrating Soviet Union and found a haven in the world’s only Jewish state. A total of about 1 million--one-quarter of the Israeli population--is expected to emigrate, and there simply is not a country on the globe willing to accept them but Israel.

We are not choosy--we do not admit only the young, the healthy and the skilled; we embrace all of them, including the elderly and the infirm.

To meet this formidable humanitarian challenge, we have turned again to our American friends for some help, which in this case should not cost the American taxpayers anything. We asked that the United States guarantee bank loans to Israel, and with our perfect past performance in debt servicing, this is actually a mere formality.

Last Thursday, an attempt was made by President Bush to create a linkage between this humanitarian request and Middle East diplomacy. Political pundits soon interpreted that move as an attempt to gain latitude that would enable the White House to “persuade” Israel to accept positions that are closer to those of the Arabs in the upcoming negotiations.

This is not only an unpleasant proposition, it is also counterproductive, as it could easily be misconstrued by the Arabs. If Arab leaders entertain the illusion that the United States has signaled a readiness to twist the Israeli arm, they will express ever more extreme and intransigent positions.

If an impression prevails that Israel is about to be strong-armed in accepting covetous Arab positions, peace will be the immediate victim. Arab fantasies that they can persist in their unyielding anti-Israel stands while Israel is to be served to them on an American platter will turn peace into yet another fantasy.

Thus, linking loan guarantees for the absorption of Soviet Jews in Israel to the Middle East political process would be detrimental to the cause of peace.

On Tuesday, Israel made another effort to achieve progress on the road to negotiations with our Arab neighbors. In discussions with Secretary of State James A. Baker III, some mileage reportedly was gained. It was agreed long ago that the negotiations would entail the implementation of the Camp David accords; the right of Jews to live in Samaria, Judea and Gaza is not an issue in these accords.

An attempt now to make a precedent of then-Prime Minister Menachem Begin’s special gesture concerning Jewish settlements in 1978 should be treated rigorously, for that was a freeze on new settlements only, for only three months, and it was offered only after the accords had been signed.

Unrelated issues should not be artificially joined. Help our people come, and let’s work together toward a defensible, viable peace.