WASHINGTON -- Two key senators have crafted a compromise loan guarantee proposal for Israel, but it appears to fall short of Secretary of State James A. Baker III's requirement of a halt in new construction in the Israeli occupied territories.
The plan would provide up to $1 billion worth of loan guarantees to Israel immediately, without making them subject to presidential discretion, according to a source familiar with the plan.
The Bush administration would be able to block future sums, depending on whether Israel met conditions in the bill. The initial $1 billion also would be reduced on a dollar-for-dollar basis if Israel continued to build housing in the occupied territories.
Sen. Patrick J. Leahy, D-Vt., and Sen. Bob Kasten, R-Wis., submitted the proposal to the State Department this week.
So far, Mr. Baker has given no reaction. But a senior administration official has said that his bottom-line condition remained: "No new housing starts if you want new money."
Aside from what was contained in the bill, the official said, "There is no indication from the Israelis that they accept that principle."
The months-long conflict over Israel's request for $10 billion in loan guarantees to help absorb Soviet Jews has rubbed relations raw.
Adding to the friction is a new intelligence report that Israel may have violated U.S. arms-transfer requirements by sharing Patriot missile technology with China.
Israeli Defense Minister Moshe Arens, who is on a visit to the United States, strongly denied any sale of U.S. technology occurred between Israel and China. Israel's ambassador to Washington, Zalman Shoval, also criticized the Bush administration yesterday for its handling of the intelligence report, suggesting that it was leaked to the press.
Mr. Leahy, chairman of the Senate panel that dispenses foreign aid, has pressured the Bush administration to provide a response by scheduling a session Tuesday to draft a foreign aid bill that would include the loan guarantees. He has said that without agreement on loan guarantees, the measure will die for lack of support.
The bill would include new aid that the administration badly wants for the former Soviet republics and for peacekeeping forces around the world. Although support for Russian aid is building, the election-year outlook for increases in foreign aid remains bleak and there is strong opposition to major increases for peacekeeping forces.
Refusing to be pressured to cut an unacceptable deal on loan guarantees, the Bush administration resigned itself months ago to the prospect of not getting a foreign aid bill this year.
There will be "pain in a lot of programs," an official said. But given the lag between appropriations and actual spending, the administration expects to muddle through.