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On Tuesday evening, the sound of powerful explosions shook the window panes of James Wolfensohn's office in the American Colony Hotel in East Jerusalem. "Don't worry, it's only fireworks," said an aide. "The Palestinians are celebrating their independence day."

It was 17 years since the Algiers declaration of the Palestinian National Council, which recognized Israel and paved the way for a dialogue between the U.S. and the PLO. Wolfensohn drew a bottle of whiskey from the small bar. Coincidentally, that same morning, the special emissary of the Quartet had been the chief intermediary in an agreement that, for the first time, grants Palestinians a certain authority that bears a similarity to independence. Six months after complying with President George W. Bush's request to rescue the Gaza Strip from the siege imposed on it by his friend Ariel Sharon, the Australian Jew with the gray shock of hair was raising a glass and toasting "Lechaim."

Only two days previously, at the Karni cargo terminal, he was telling the manager of the facility how depressed and upset he was by the acute situation in besieged Gaza. "Yes," confirmed the man who spent 10 years at the helm of the World Bank, in an interview with Haaretz. "I was serious when I told them that if the border-crossing crisis was not ended in two or three days, I would seriously consider going home."

Wolfensohn has a pacemaker in his chest and is under medical supervision. The recurrent crises in the negotiations have not been beneficial to his state of health. The victory of Amir Peretz in the primaries and the impending elections only heightened the need for a quick solution.

"My experience in watching each side during an electoral period, is that you don't get a lot of balance and a lot of rationality, because it's a crazy season," explains Wolfensohn.

He confirms that he is mainly referring to the horror scenario of Israeli politics: The government makes a "gesture" to the Palestinians, and the next day, a bus blows up in Afula. Benjamin Netanyahu did not wait for a terrorist attack - news reports about the signing of the border-crossing agreement were coupled with Netanyahu's warning about the bringing of missiles into Israel.

Wolfensohn was concerned that the political aftershocks of Amir Peretz's election would lead to shutting Israel's small window of goodwill. He has also had ample opportunity to learn that whenever the Israeli media gets a whiff of succulent prey in the political jungle, it loses interest in what is happening in the Palestinian jungle. The old fox knew that when politicians are fighting over their fate in the primaries, it's party time for the generals. In the past few months he has seen reserve major general Amos Gilad and his people in action. They did not seem noticeably concerned that the Palestinian strawberries were rotting in the fields and that Abu Mazen would pay the price in the elections.

The timing of U.S. Secretary of State Condoleezza Rice's visit was peerless. She came to pay her respects to the memory of Yitzhak Rabin, determined the urgency of the m atter, and was dragged against her will into intensive care of the crisis. The talks were on the verge of blowing up after the Palestinians learned that the American team, headed by Deputy National Security Advisor Elliott Abrams, had succumbed to Israeli pressure and at the last minute inserted changes in the wording of the agreement. They were especially incensed by the "Black List" clause - an Israeli veto on Palestinians whose entry into the Gaza Strip was opposed by Israel. The clause was spirited into the document behind the backs of Wolfensohn and his people. Rice realized that if she returned home empty-handed, she would have to take Bush's appointee Wolfensohn with her. The old friend, Dov Weissglas, was rushed in to save the day, the result being a half-baked agreement, with critical sections left open (including measures for imposing closures in the West Bank and operational procedures of the airport in Gaza).

MicromanagementWolfensohn is devoid of political ambition. Supreme Court President Aharon Barak would say about him that he has no agenda. Which may explain why he has no problem giving complete credit for the achievement to President Bush and Secretary Rice. Still, there was a note of disappointment and affront from his staff, mainly in regard to the Israelis, who had allowed him to sweat buckets for months on end, and ultimately handed the trophy to Rice. He could find comfort in editorials appearing in The Washington Post and The New York Times, which welcomed the agreement.

The Post compared Bush and Rice to Jimmy Carter and Henry Kissinger. It was the first time this administration had dared to push its two hands into the mud and deal with details, what they call "micromanagement" − a policy that conjures up the memory of the much-reviled Bill Clinton, and the stinging failure of the Camp David summit of 2000. Perhaps this singular moment of pleasure, which came in a week in which the Senate tied the president's hands due to the investment in Iraq, will encourage him to invest in the disengagement stock, which has yielded an occasional profit.

"The secretary of state really gave of herself during the last few days," relates Wolfensohn. "Having the most powerful nation on earth taking this interest is a hell of a big thing. President Bush is deeply committed. I have seen him several times, and it's not a superficial interest. When I see him, he is not the big player of publicity. We sit and talk for an hour, without any photographers." Wolfensohn believes that Bush's commitment derives from his being a religious man, and therefore the Israeli issue speaks to him personally.

Wolfensohn's attraction to the Israeli quagmire also has religious and personal roots. At the start of the interview, he relates that his father was an officer in the Jewish Battalion, and that he himself is a "relatively observant Jew" who cares deeply about the well-being of the State of Israel. He paid several visits here during the years in which he worked at the World Bank, and is quite familiar with the Israeli economy and social gaps in Israel.

It is important for him to talk about his Arab friends, including many Palestinians, acquired through no small effort during his years at the bank, and about the feelings of trust they have for him despite his being a proud Jew. He did not seek any financial remuneration for his work, and even contributed generously out of his own pocket to restore the hothouses in the Gaza Strip. At his age - next month he will be 72 - time is the most precious asset, but he is prepared to invest it so that his children and the people he loves will know he tried to do something for the sake of peace in this region.

Wolfensohn is pleased with the agreement reached this week. He feels his team succeeded in striking the right balance, albeit imperfect, between the needs of the Palestinian population and the security concerns of the Israelis. "You can say that these are not dramatic steps, but, having now been involved in these negotiations for six months, to get both sides actually to take a decision of almost any sort, is a victory," he says.

Nevertheless, the accomplishment that he considers most consequential is not the border-crossing agreement, but his contribution to the decision reached by the G8 last year in Scotland, to contribute $3 billion a year for three years to rehabilitation of the economy in the territories. This is an immense sum even by the parameters of the developed Israeli economy. Wolfensohn believes that if the field calms down, it would be possible to raise equally large amounts from Arab states and from Europe.For many years, you have been busy with matters of supreme importance, such as poverty and epidemics and putting out fires, and now you are dealing with numbers of trucks and security arrangements at a little border crossing.

"When I come here and get engaged in discussions with Palestinians and Israelis, they almost assume that this is the center of the world and the issues here are the most important issues. The issue of two bombs going off and six people being killed or 20 people getting killed and then a reprisal and then another reprisal are the most important things going on."The solution lies in building trust between neighbors, not in building concrete walls," he says on the day after Senator Hillary Clinton justified the existence of the separation barrier.

"It is just so preposterous. Not the wall maybe as a technical matter, but the costs that are involved in the wall and all those bypass roads as defense expenditure, the amount of money that is spent every time there is a bomb threat. Closure of the territories after every alert also has far-reaching economic repercussions. I am not suggesting madness, I am not suggesting that Israel has to give up its fundamental right to security and safety. But there is a need to recognize the equivalent desire of the Palestinians to have hope and to have a life for themselves and for their kids.

"I have been consistently worried that the issue of Israel, while emotionally it is great, in terms of scale it's quite small. Altogether 10 or 12 million Jews and Arabs are fighting with each other in an area of 320 million people and in a world of six billion. The issue of Palestine and Israel has, compared with any other conflict, received a hugely disproportionate share of journalists' attention.

"In my 10 years in the bank, I saw an increasing shift to the larger issues, to the issue of poverty, which is the number one issue in the world. If you want to talk about the poverty issue among Israelis and Palestinians - you do have serious problems with poverty in Israel. I have forgotten the exact percentage, but you are well over 15 percent living under the poverty line. But if you take the same statistics for the Palestinians, you are talking about a community of four or five million, in which more than 50 percent of the people are living in absolute poverty. Whatever you say about Palestinians, there is a strong commitment to education. This is not a 90 percent illiterate group, this is a 90 percent literate group, and whatever you say about Palestinian life, the commitment of Palestinian parents to their children is matched by Israeli parents' commitment to their children. They are not so different.

"Aside from dealing with the issue of poverty, I also dealt with the implications of people moving from the Third World to the developed countries, the issue of population growth, the issue of immigration, the issue of Africa and Central Asia and also problems such as the one France is facing now.

"I feel somehow at this moment that the world is changing. I may be totally wrong, but my belief is that it will be hard for Palestinians and Israelis to maintain the centrality they have in years past. When I come here and get engaged in discussions with Palestinians and Israelis, they almost assume that this is the center of the world and the issues here are the most important issues. This is a very dangerous assumption. We now have a chance, while the scale is as it is between Israelis and Palestinians, to put this conflict behind us and take some risks for peace."

Many Israelis are skeptical about coexistence between such geographically close neighbors that, in terms of economic development, are light years distant.

"I happen to know residents of the territories who are equally talented in modern technology. At the leadership level, there are also many similarities. But I don't think it matters what judgment you make, because concerning demographics, the birthrate in Palestinian communities is somewhere between 4 or 5 percent, and it is somewhere between 1 and 2 percent in Israel. And you can say let's wait another 25 years until we address this question, and then the demographics will be significantly against you. And you have just missed an opportunity for better understanding.

"The point I want to make here is that everything I am saying might be debatable, and in any event I am not the king and not the prime minister. A decision has to be an Israeli or Palestinian decision. I think what I and my colleagues might be able to do is to give you choices. You can say, to hell with the Palestinians, we can't trust them, and we are just going it alone and build one wall or two walls, and we're going to do whatever is necessary to protect ourselves and kill them. And the Palestinians can say: I'm not going to let my kids grow up undernourished with 60 percent in poverty and so if I can get back at them, I'm going to kill them. If you want that environment, there's nothing I can do to stop it. I am not saying I am morally right, or economically right or anything right; what I am saying is it seems to me as an individual, who has traveled 130 capitals in 10 years, who knows the world, that there is something crazy about these two peoples beating each other up, showing total distrust, and not giving some new approach to peace a chance."And after months of negotiating on technical details, do you believe there is a chance?

All that someone like me can do is to try and contribute, first, to understanding some of the problems, and secondly, to lay out some practical ways in which the tensions can be reduced and in which understanding can be increased. When the majority wants to give peace a chance, you'll have a huge commitment from the global community. All that I can do and my colleagues can do is to lay down options. You will have to decide - not me - whether it's worth picking them up. If you ask me if it is fragile or if I am certain of it, I will say that it is fragile and that I am not certain of it. But I will do everything I can to make it stronger. It's your decision to give it a chance."