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Israeli housing unaffected by U.S. restrictions Settlement policy skirts aid limits


WASHINGTON -- American restrictions on $400 million in U.S. loan guarantees to Israel last year had no impact on Israeli settlement policy, congressional investigators have found.

While the aid stipulated that it not be used in the occupied territories, where Israel is aggressively encouraging a controversial buildup, it freed other funds that Israel could use there, congressional investigators found.

The General Accounting Office study, released yesterday, bolstered the view of administration officials and some members of Congress that U.S. restrictions on future loan guarantees won't be sufficient to curb settlements, which the United States calls an obstacle to peace.

"In other words, receiving written assurances as to how the money will be spent, without any accompanying change in Israeli settlement policy, is an exercise in building a paper dam," said Sen. Robert C. Byrd, D-W.Va., chairman of the Senate Appropriations Committee.

As a condition for granting $10 billion in new loan guarantees to settle immigrants from the former Soviet Union, Secretary of State James A. Baker III is seeking a halt in new construction in the territories and a dollar-for-dollar aid reduction on a certain number of units when they are completed.

Complying with U.S. restrictions on earlier loan guarantees, Israel earmarked $400 million worth of "mortgage loans to Soviet Jews buying homes within Israel's pre-1967 borders," which exclude the occupied territories, the GAO reported.

However, "funds made available through loan guarantees made other Israeli funds available for use as the Israeli government determined," the agency found.

While the Israeli government does not direct Soviet emigres to the occupied territories, it "provides strong incentives to encourage any Israeli, including immigrants," to move there.

It cites State Department estimates that 8,800 of the emigres who arrived in 1990 now live in the occupied territories, now home to more than 100,000 settlers, the GAO said.

The Israeli policy of encouraging construction in outlying areas, including settlements, may result in the government's having to buy up to 40 percent of newly built housing, the study said.

The GAO said that if Congress approved the $10 billion in loan guarantees, Israel would likely be able to continue its past record of loan repayment. But the guarantees would not be without risk to the United States, it said.

This risk would be minimized by rapid structural economic reforms and a strategy to employ the former Soviets in the private sector, not in government-funded jobs.

In another finding, the GAO said that Israel's estimates of as many as 1 million new immigrants entering the country by 1994 are "reasonable."

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