Rabin Power Base Crumbles Under Trade Union Corruption Charges : Israel: Peace process hangs in the balance as prime minister’s Labor Party reels and Likud waits in the wings.

In the midst of Israel’s crucial peace negotiations with the Palestinians and Syria, Prime Minister Yitzhak Rabin’s political base is crumbling under charges of corruption high in his Labor Party and in the trade union federation allied with it.

For Rabin, who lost the premiership in 1977 in another, smaller scandal and regained it only three years ago, this could become paralyzing, diverting his attention from the peace negotiations to domestic politics and making him even more cautious in calculating what risks he can take for a settlement.

Within Rabin’s Cabinet, the mood is grim. Senior ministers are quoted in Israeli papers as saying that “this is an earthquake, a total collapse--this will bring us down” and that “this is a snowball, threatening to bury all of us under it and bring Likud (the right-wing opposition party) to power.”

Nahum Barnea, a leading political commentator, described the unfolding scandal as “a political cluster bomb that could destroy not only the careers (of the former trade union officials) but also of Rabin.”

“His ship is breaking up and sinking,” Barnea wrote in Yediot Aharonot, the country’s biggest newspaper.

As support for Rabin declined, President Ezer Weizman this week renewed his suggestion for a “government of national unity” that would bring Likud into the Cabinet as Labor’s partner, but undoubtedly at a cost of slowing, even suspending, Israel’s negotiations with the Palestine Liberation Organization and perhaps Syria.

But Likud leader Benjamin Netanyahu, scenting blood, is more interested in early elections, and Likud and other right-wing parties intend to press for dissolution of Parliament in a motion next week.

Although most commentators focused on the long-term question of whether the coalition government will be forced into early elections that the Labor Party would lose, some warn that Rabin’s very attempt to survive the crisis will inevitably slow and weaken his pursuit of peace with Israel’s Arab neighbors.

“He’s looking over his shoulder, seeing whether Likud is gaining on him or whether he can maneuver a bit more this way or that with Syria, with the PLO,” a former Rabin adviser said. “All his energy is going into an escape from this crisis. He keeps remembering how Labor lost power in 1977. He was depressed before, now he’s worse. You can’t negotiate that way.”

Rabin, speaking to the Labor Party’s executive bureau, sought to defend his leadership.

“The party is under an assault, which is often baseless,” he said. “I read, for instance, that I am depressed--something that I hadn’t noticed myself.

“There are always ups and downs in political life, and sometimes en route to the target soldiers have to put on their helmets,” Rabin continued, seeking to rally supporters. “We in Labor need to remain cool and composed, especially as it is hard to contend with an attack in the press in which unfounded rumors are circulated.”

Rather than hold a regular meeting of Labor Party ministers last week, Rabin met instead with Haim Ramon, a reformer who broke from the party last year to win election as secretary general of the Histadrut, Israel’s trade union federation, the long-rumored corruption of which now threatens the government.

“The ministers could contribute nothing but mutual recriminations and more acrimony to what is already a crisis,” a Rabin aide said dismissively. “They would have made a bad situation worse. The discussion would have strengthened the link in the public’s mind between Histadrut corruption and the Labor Party leadership. Ramon, however, could help constructively.”

Police Minister Moshe Shahal told Parliament that the intensive investigation appears likely to lead soon to indictments of a number of past Histadrut leaders on charges of fraud, forgery, embezzlement and other crimes.

According to Israeli press accounts, the Histadrut officials used union funds, which were raised by mandatory, tax-like dues paid by almost all Israeli workers, to finance their own and their friends’ political activities.

Much was ordinary campaign organizing, but some reportedly was “dirty tricks,” including hiring private investigators and paying for wiretaps to get materials discrediting Ramon.

The amounts of money siphoned from the Histadrut into Labor Party politics are not really known, but speculation that began with amounts like $200,000 now reaches up to $10 million, a huge sum in Israeli politics.

Those involved, according to the daily accounts in the Israeli press, may include Transport Minister Yisrael Kessar, a deputy trade minister, several former top Histadrut officials and as many as five Labor Party members of the Knesset, Israel’s Parliament.

Kessar, a former Histadrut secretary general who sought the leadership of the Labor Party in 1992 but was defeated by Rabin, has rejected all charges of wrongdoing, as have others.

Representing more than 60% of Israel’s work force of 2 million, the Histadrut was the Labor Party’s main power base for three-quarters of a century until Ramon won last year’s election, bashing both the party and union leadership. It owns scores of companies, factories and collective farms that together account for about a fifth of Israel’s economic output.

Although Rabin has denied all knowledge of the alleged misuse of Histadrut funds and pledged a full cleanup, the impact on his government was clear.

“The longer the police examine Labor’s affairs, the greater the danger for the party,” said Industry and Trade Minister Micha Harish, a former secretary general of the party. “The investigation could be very prolonged, people’s nervous systems would be placed under strain for months, and there is no telling where that could lead.”

Tourism Minister Uzi Baram, the veteran Labor Party leader in Jerusalem, added: “There’s no doubt that this will hurt Labor’s election chances. If the election were held tomorrow, the result would be very clear. Fortunately, we have 18 months. . . . Still, I must say this has shaken the government.”

Within the Labor Party, Rabin has come under intense pressure from the “Group of Eight” reformers, who include Ramon, Deputy Foreign Minister Yossi Beilin and Jewish Agency Chairman Avraham Burg. The decade-old group is pushing for an overhaul of the party leadership, with its members to be promoted to the top ranks before the 1996 elections.

“We must quickly purify the house, because if the purification isn’t done, the evil will infect,” Burg reportedly told others at a strategy session last week. “Our group all the time warned against what is happening in the Histadrut.”

Even Rabin’s closest adviser, Shimon Sheves, had handed the prime minister his resignation three weeks ago, believing that he no longer had the influence he once had and that Rabin was drifting without direction. Only with great effort did Rabin persuade him to stay as the director general of his office.

To restore his political credibility after widespread speculation that he was now all but a lame duck at the age of 73, Rabin said he will be a candidate for prime minister next year--and he persuaded Ramon, 44, his most likely rival for the Labor Party nomination, to support him publicly.

“I say and, more importantly, I am operating so that Rabin will run at the head of the Labor list for the premiership again in 1996, and I will support him,” Ramon declared, “and it isn’t important where I will be.”

In June, Rabin is likely to bring a number of the reformers into his Cabinet in a further attempt to consolidate his political base.

Rabin already had serious political problems, and Netanyahu, 45, the telegenic Likud chairman, had begun to overtake him in opinion surveys, adding to the impression of an aging leader in trouble.

Recent polls show a 66-54 right-left split in the 120-seat Parliament and 45% of voters preferring Netanyahu to 35% for Rabin in the first direct election of a prime minister.

Support for the peace process dropped significantly in recent months as Palestinian radicals, mostly militant Muslims, continued attacks on Israelis, carrying them into the center of the country, and PLO Chairman Yasser Arafat failed to establish an effective administration in the Gaza Strip.

Israeli sentiment, moreover, is strongly against returning the Golan Heights to Syria--even as the price for a full peace with the country that has been its most implacable and dangerous enemy.

Even a minimal pullback--and Syria wants a total withdrawal--will be tough for Rabin to sell, and he has promised a referendum on any treaty with Syria.

Both were issues on which Netanyahu could campaign hard, having warned that the agreement with the PLO was fatally flawed and that the majority of Israelis would see a withdrawal from the Golan Heights as a strategic blunder.

Still, many Israeli political analysts endorsed as sound Rabin’s basic political strategy of negotiating the best--and most visibly secure--deals he could with Syria and the PLO and then calling elections for late next year to ratify what he had done and seek a mandate to continue the peace effort.

A political consultant who has advised the Labor Party in past elections said, “If the economy came right, we would get that mandate.”

The economy is now a political problem, with inflation of 15%, very high interest rates, sharp declines in stock prices, troubled pension funds and slower economic growth.

“If the peace agreements come together, if security holds and if the economy is all right, then Histadrut corruption won’t matter at election time,” another political analyst argued. “But the contrary is also true, and things could fall apart badly.”