JERUSALEM -- In what began as a dispute between the United States and Israel over financial aid, Israel's government now is being forced to choose between two goals central to its ideology: the absorption of thousands of Soviet Jews and the continued expansion of Jewish settlements in disputed lands.
is a stark choice that Prime Minister Yitzhak Shamir probably never expected to face.
Since Israel captured the West bank and Gaza Strip in the 1967 war, every U.S. president has publicly opposed the development of Jewish settlements in the territories, arguing that it would obstruct negotiations for peace.
But while the colonization proceeded, they were discouraged from acting by foreign policy as well as domestic political considerations. But now, President Bush may have found a way to cause Israelis to reconsider by focusing on the country's need for peace and its even more pressing need for cash.
Much to Israel's discomfort, Mr. Bush and Secretary of State JamesA. Baker III have linked the issue of settlements to plans for a Middle East peace conference and to Israel's request for a $10 billion U.S. loan guarantee, needed to help Israel absorb a wave of immigrants.
The confrontation arises at a time when Israel not only has nowhere else to turn for help, but also appears to be in a weaker position than ever before in its long and intimate relationship with Washington.
Its historic claim to being Washington's only military ally in the Middle East diminished significantly after Saudi Arabia, Syria and Egypt came in as partners in the coalition against Iraq during the Persian Gulf war. And with the end of the Cold War and the fall of communism in the Soviet Union, Israel also lost its status as an outpost against Washington's superpower rival.
In this atmosphere, the Americans are resisting principles that Mr. Shamir has advocated for much of his life. The 75-year-old premier has insisted that he will never give up "an inch" of the West Bank and Gaza Strip, and he has been no less firm in opposing any limits on the settlements, whose population has reached 100,000.
The adjustment to change has been painful. Two days before Mr. Baker's latest visit here, a member of Mr. Shamir's Cabinet was calling President Bush "an anti-Semite." A week before, Mr. Bush had asked Mr. Shamir to delay his request for the loan guarantee. When Mr. Shamir refused, the president vowed to veto any congressional measure offering the guarantee.
Pressure and an occasional exchange of insults have left Mr. Shamir apparently unmoved. "I didn't promise anyone anything, regarding some kind of step being made in Israel," he told an Israeli interviewer this week. "It is clear as day that the Land of Israel belongs to us."
His chief of staff, Yossi Ben-Aharon, has maintained the same hard line. To stop construction in settlements, he said yesterday, "is an impossible demand." The U.S. demand for stricter accounting on how money is spent "means no kind of money can be brought into Israel for any reason whatsoever."
There have been fights before. But only rarely has Israel been the party to back down.
In 1953, when Israel sought to divert the waters of the Jordan River, the United States froze a $26 million loan. When Israel abandoned the project, the loan was restored.
When Israel invaded Egypt in 1956, the United States demanded that Israel and its British and French allies withdraw. Israel complied, but only after Washington warned that it was considering a break in diplomatic relations.
In 1981, when Israel bombed a nuclear reactor in Iraq, the United States cut arms shipments, but only temporarily. The Reagan White House sought to repeat that measure to protest Israel's invasion of Lebanon in 1982, but Congress left aid to Israel unchanged.
Mr. Shamir and Mr. Baker are engaged in three squabbles that are becoming more closely linked even as each side insists the issues are separate.
One issue is the peace conference tentatively scheduled to take place in October under U.S. and Soviet sponsorship. Like every would-be party to the talks, Israel has not wanted to be blamed if the conference fails to take place, an anxiety that probably has been Mr. Baker's greatest source of power.
He has coaxed Israel, Arab states and Palestinians forward step-by-step because no one wants to be accused of lagging behind. By implicitly threatening to cast each party as the spoiler, Mr. Baker wins everyone's cooperation. He then appears both masterful and magnanimous by praising everyone who accepts his terms.
Israel's need for the loan guarantee has become a second dispute. Mr. Shamir wants the United States to issue a guarantee that Israel would repay up to $10 billion in new loans, money to be borrowed as part of an urgent program to build housing for Soviet immigrants.