The Cable

Why the U.S.-Israel settlement deal fell apart

Last month, Secretary of State Hillary Clinton and Israeli Prime Minister Benjamin Netanyahu met for seven hours in New York in an attempt to strike a deal on extending Israel's partial moratorium on settlement construction. This week, the State Department announced it would no longer pursue a settlement freeze extension as a way to revive the talks.

Why did the agreement fall apart? The United States had offered Israel a host of security incentives, including 20 brand-new fighter planes, for Netanyahu to take back to his cabinet in exchange for a renewed three month settlement moratorium. But President Barack Obama never put that deal in writing, and the Israelis never were clear on its terms or what would happen when the three extra months expired.

"We have determined that a moratorium extension will not at this time provide the best basis for resuming direct negotiations," State Department spokesman P.J. Crowley said Wednesday. "We will consult with the parties in the coming days as we move forward. And as we proceed, our position on settlements has not and will not change. The United States does not accept the legitimacy of continued Israeli settlements, and we will continue to express that position."

When Clinton takes the microphone on Friday evening at the Brookings Institution's Saban Center event, the world will be watching to see how she charts out the U.S. view on the way forward for the Israeli-Palestinian peace process. She's predicted to say by experts close to the administration that that the direct talks between the Israelis and the Palestinians will formally pause, and that the United States will begin "parallel talks" with each side separately.

There is a slight difference between the "parallel" talks and the "proximity" talks that preceded the "direct" talks, which started in September with great fanfare. In the "proximity" talks, the two sides were in close proximity and the U.S. mediator shuttled back and forth between the parties. In "parallel" talks, the U.S. meetings with the two sides could be far apart in both time and geography.

But Clinton is expected to argue that the parallel talks are the best way to get back to direct talks, which the United States still believes are the only way to reach a negotiated two-state solution. She is not expected to spell out exactly how long the "parallel" talks could last.

Some experts see the shift as an overdue recognition by the Obama administration that their focus on the settlement issue was wrongheaded, as was their commitment to extending the direct talks, no matter the cost.

"Their actions are an admission that the route they were on was not the right one," said Rob Malley, Middle East director for the International Crisis Group. "The U.S. administration reached the conclusion they couldn't get the deal [with the Israelis] and even if they got it, it wasn't clear the Palestinians would accept it. And even if they accepted it, wasn't clear what would happen after 90 days expired except that there could be another crisis."

Crowley acknowledged that the negotiations over the proposed 3-month extension of the settlement moratorium became too much of the focus of negotiations.

"We thought that this had, in a sense, become an end in itself rather than a means to an end," Crowley acknowledged. "We're going to focus on the substance and to try to begin to make progress on the core issues themselves. And we think that will create the kind of momentum that we need to see - to get to sustained and meaningful negotiations."

Over the last month, the Israelis had intense discussions with U.S. officials about the specifics of the offer to extend the settlement moratorium, but the negotiations never came to fruition. For example, regarding the 20 F-35 fighter jets the Obama administration was offering as a sweetener,  the Israelis wanted to know how the United States could promise the fighters without Congressional approval. They also had further questions about the offer: Who would pay for the planes? When would they be delivered? Could the Obama administration even promise F-35 planes, considering they don't yet exist and are years behind schedule?

More broadly, the United States never agreed to Netanyahu's demand that this would be the very last time the Israelis would be asked to extend the settlement moratorium. Moreover, administration officials could not assure Israel that the 90 days would yield progress toward a peace deal. The Palestinians would just wait out the three months, the Israelis predicted.

"We felt uncomfortable with the premise of it," one Israeli official told The Cable, "It would not necessarily guarantee that after three months time we would make any headway with the Palestinians, so we in three months would be in the same situation we are today."

And so the negotiations fizzled. They were snuffed out when Israeli Defense Minister Ehud Barak, the Israeli official closest to the Obama team, publicly declared the direct talks over because, as he put it, the United States was "very busy with North Korea and the WikiLeaks releases."

Barak is headed to Washington Friday, where he will attend the Saban Center event and meet with Clinton on Friday and Defense Secretary Robert Gates next Monday. Israeli negotiator Isaac Molcho is also in town with his team. Palestinian Prime Minister Salam Fayyad is also speaking at the Saban event, and chief Palestinian negotiator Saeb Erekat will be in Washington with his team to meet with Obama administration officials. Special Envoy George Mitchell will travel to the region next week.

The Israeli line is that end of the neogtiations over settlements is a good thing, because it will force the Palestinians to choose to either come back to the table without what Israel calls "preconditions," such as a settlement freeze.

"It's probably better to redefine the playing rules and the Palestinians are going to have to back down from their precondition," the Israeli official said. "They can't just wait for the Americans to deliver the Israelis on a plate."

But the Palestinians view the failure of the U.S.-Israeli negotiations as just one more sign that the Israelis will never meet their demand to stop building in disputed areas while talks are ongoing. They also see the failure to convince Israel to agree to a settlement freeze as yet another sign the Obama administration isn't willing to use sufficient leverage over Israel to advance the peace process.

"Although the U.S. administration may have their own reasons, the fact that they have backed down [from insisting on a moratorium extension], an objective they set for themselves a year and a half ago, is really of a great concern to us,"  said the head of the PLO mission in Washington, Maen Rashid Areikat in an interview. "One wonders in the future if they will be able to get Israel to comply with international law to reach a conclusion to the process."

In the most favorable analysis, by taking settlements off the table, the Obama administration can now come up with new and creative ways to get both parties back to the negotiating table -- without constantly looking at the clock.

"We have removed self imposed obstacles by agreeing that we will give up on the settlement freeze and by removing the requirement for direct talks," said Malley.

But that still leaves all sides quite far away from real, sustainable progress towards peace.

"All of the other obstacles remain," Malley added. "The lack of trust and the huge gaps between the two sides, the divided Palestinians, the dysfunctional Israelis, the polarization of the region, the damaged credibility of the U.S... all those remain."

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The Cable

State Department: We did not ask PayPal to cut off WikiLeaks

The State Department denied a report today that it contacted the online money transfer service PayPal and asked them to cut ties with WikiLeaks and its founder, Julian Assange, who remains behind bars in the United Kingdom.

"It is not true," State Department spokesman P.J. Crowley told The Cable. "We have not been in touch with PayPal."

Osama Bedier, vice president at PayPal, told an audience Wednesday at Paris' tech conference Le Web'10 that PayPal had shut down its business with WikiLeaks, which used the electronic money transfer service to collect donations, at the request of the State Department.

"The State Department told us these were illegal activities. It was straightforward. We first comply with regulations around the world making sure that we protect our brand," Bedier reportedly said..

Crowley said that PayPal made the decision based on a publicly available letter sent last week to Assange and his lawyer from State Department counselor Harold Koh, which called the disclosure of 250,000 diplomatic cables by WikiLeaks an "illegal dissemination" of classified documents and said the leaks "place at risk the lives of countless innocent individuals -- from journalists to human rights activists and bloggers to soldiers to individuals providing information to further peace and security."

A reporter from the TechCrunch blog confirmed with Bedier after his speech that he was in fact working from the Koh letter that State had sent to WikiLeaks.

Crowley also responded to the remarks of Australian Foreign Minister Kevin Rudd, who seemed to alter his country's position on Assange, who is an Australian citizen, "Mr. Assange is not himself responsible for the unauthorized release of 250,000 documents from the US diplomatic communications network," said Rudd Tuesday. "The Americans are responsible for that."

"He's correct in that the primary responsibility for the leak existed within the United States government," Crowley said, being careful not to criticize Rudd and create yet one more diplomatic problem.

As for whether the United States will seek to prosecute Assange under the Espionage Act of 1917 or some other U.S. laws, Crowley said that decision would be made by the Justice Department and the Defense Department. But he was clear about the State Department's position on the matter.

"Certainly, we believe that what Mr. Assange has done in the aftermath of that leak has put the interests of our country and others at risk, and put the lives of people who are reflected in these documents at risk," Crowley said. We haven't changed our view."

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