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The following text is a full transcript of former United States president Jimmy Carter's exclusive interview with Haaretz upon his visit to the Middle East.

Haaretz: You just met Mr. Shalit. Do you have any news for them?

President Carter: Not really, he didn't ask for news. He wanted to know if the Israelis and the Egyptians and Hamas were making any progress. I told him that the Israelis don't have a representative for their discretion. The last word we got from Egypt was that no progress was being made. He gave me a letter, which I certainly deliver to the Hamas authorities in Gaza.

Haaretz: What about the boy's health?

President Carter: We didn't discuss that.

Haaretz: As far as Hamas is concerned, the Egyptians put a deadline, I think for July 7. Is there hope that they will meet this deadline?

President Carter: There's certainly hope, always. My discussions last night were with Hamas leaders and they expressed hope and confidence that the deadline might be met. I haven't yet met with the leaders of Fatah, which I'll be doing when I'm here. My guess is that they will also express that hope. But there are still some very difficult issues between the two. And I have more confidence now with Obama in the White House that the Egyptians are making sincere efforts to make progress.

Haaretz: Is it still about this phrase, "respect previous agreements" or to comply with them? What's the main issue?

President Carter: The Hamas leaders point out that no one in the Netanyahu government supports the Oslo agreement. And I think the Hamas leaders are more inclined to say they support United Nations resolutions, 242, 194 and so forth. Not sure what PM Netanyahu's position is on that. But as Hamas has always been in favor of a cease fire, and on an agreement with Israel on the West Bank and Gaza, throughout Palestine. That would be a factor at least in the balance?

Haaretz: We also discussed unity government. It seems that Hamas and Fatah have huge ideological gap that will not make it possible. Some say that at the end of the day Hamas has to make a decision. They can't just hope that Netanyahu will do the dirty job of saying.

President Carter: I don't agree with that being a major factor. As a matter of fact, I was here in January 2006 and all Hamas candidates pledged to forego violence. And they were permitted by the United States and also, reluctantly, by Israel, to run for office. They were very eager to form a unity government then. I saw a public opinion poll that was conducted at that time where 81 percent of the Palestinian people in Gaza and the West Bank said they would not approve under any circumstances of having a religious government. They insisted on a secular government. I don't think that any of the Hamas leaders that I know are religious leaders. One is a scientist, one is a medical doctor one is a public accountant - I don't think among top leadership nobody is religious. (Unlike in Iran.)

Haaretz: What you are trying to say is that once Israel is clear about Oslo and a two-state solution, it will force Hamas to take a clear decision?

President Carter: I'm not sure about Netanyahu, but I remember when Oslo was announced, Sharon declared it was a death sentence for Israel. And I would presume at that time that Netanyahu and Sharon were compatible in their denouncing the Oslo agreement. But I can't vouch for it - you would know better than I.

Haaretz: Obama keeps mentioning the Arab peace initiative. Would you make the initiative a prerequisite, or a pillar, for a comprehensive agreement that will put forward, to Hamas and Israelis, a package deal?

President Carter: Yes I would. I don't see any substantive incompatibility among the Arab peace proposal and the Geneva recommendation and the final stage of the Quartet Road Map and the United Nations resolutions. I think they're all completely compatible. King Abdullah of Saudi Arabia - I spoke to him last year - he indicated some flexibility on withdrawal to pre-67 borders, in that if Israel and the Palestinian leaders can negotiate a modification to the borders, a swap, that he would be willing to accept that. He wasn't speaking of all Arab countries, but in his own leadership position he'd be willing to agree.

Haaretz: Did you mention Jerusalem?

President Carter: That's a presumption, that Jerusalem would be divided.

Haaretz: Physically divided?

President Carter: I wouldn't say - I have never been in favor of physical division. This is something I discussed with Begin and Sadat at Camp David back in 1978. We never envisioned a physical division of Jerusalem, but access to the holy places by the believers, and a joint administration of East Jerusalem.

Haaretz: Netanyahu gives his talk in Begin-Sadat Center, which is against two-state solution.

President Carter: Netanyahu was never friendly toward me because of the peace treaty with Egypt. He accused me of giving away the Sinai. Both he and former PM Olmert criticized me for the peace treaty that I negotiated.

Haaretz: Benny Begin said that if the two-state solution is the only solution, there is no solution. I would remind him, and I'm sure you'd agree with me, that in the Camp David Agreement, you mention the "legitimate rights" of the Palestinians. What does it mean? What did you have in mind when you used this phrase?

President Carter: Let me just refer to what PM Begin signed and the Knesset approved. There were three elements: 1) the withdrawal of Israeli political and military forces from the West Bank and Gaza, what they refer to as Judea and Samaria. And the other thing was full autonomy for the Palestinians. I drafted all of this final agreement. I put in: "yield to the Palestinians autonomy." Begin said: Put in full autonomy! So we put in "full autonomy," which means the complete right to run their own affairs.

Haaretz: But was it was clear that this was only an interim agreement? That autonomy is not the last phase?

President Carter: That was just the first phase, while negotiations were [ongoing.]

Haaretz: So you and Begin had a Palestinian state in mind?

President Carter: I wouldn't say that, even though I'd like to say that. The answer is now. When I had only been in office for less than two month, in March of 1977, I gave a speech in Massachusetts and I called for a Palestinians homeland. It was the first time anyone had said that. The rest of my administration, we never defined what that would mean, although that was a phrase I used throughout my term. There was still some thought that Jordan would retain its control over the West Bank.

Haaretz: A confederation?

President Carter: Yeah, something of that kind. Let the Palestinians in Jordan work out an appropriate relationship under Begin's proposal to let the Palestinians have full autonomy.

Haaretz: This was 11 years before the declaration of the Palestinians' acceptance of the 242 resolution?

President Carter: Begin accepted 242 at Camp David. It's in the document. It took me two, three days of negotiations, but he accepted 242 as a premise. Begin promised me - and Sadat - very clearly that there would be no more settlement building during the time of peace talks. It wasn't easy to get it, but Begin made that commitment. Shortly after we left Camp David, Begin maintained that his presumption was that peace talks would be over in 3 months.

Haaretz: So it wasn't a big deal, to freeze it for just three months?

President Carter: We thought it was. And everybody at Camp David thought it was. But Begin used that excuse to maintain that he was not misleading us.

Haaretz: During your term, the official approach to the settlement was that they're illegal.

President Carter: Illegal and obstacle to peace, both. Absolutely.

Haaretz: Through the years, it was reversed. It became only "unhelpful," "to be negotiated," etc. Bush even accepted settlement blocs. Would you recommend Obama go back to your terminology.

President Carter: I have never changed my opinions about that.

Haaretz: Would it be a good idea for the USA to go back to that terminology?

President Carter: I am really not prepared to criticize what Obama decides. He and his people are discussing what his position will be. If Israel should withdraw to the 67 borders, with some modifications, maybe to include the large settlements that are very close to the line, that would suit me fine. I was involved in the final stages, with Yossi Beilin and a few others, of negotiating the Geneva accords. We were there. I gave a keynote address in Geneva. It was a big deal. So I accepted that premise, which Geneva recommends, that the '67 borders be modified to permit half of the Israeli settlers to stay in Palestine. And then that amount of land would be swapped to the Palestinians. In January [2005] I had a long talk with Mr. Sharon about this; he suggested that that land swap would include a corridor between Gaza and the West Bank, safe passage. We discussed the details: that it would be a railroad track, and a highway alongside. The security and ownership would stay in the hand of the Israelis and the operation of the railroad would be in the hand of the Palestinians. That is in [2005] when I came over for the election of Arafat?s successor. It was not long after that that we were stricken.

Haaretz: Would you accept the argument about the need to expand some existing settlements - natural growth?

President Carter: No.

Haaretz: Why not?

President Carter: The key obstacle to any peace agreements are in my opinion Israeli settlements, which by now permeate the entire West Bank.

Haaretz: So you support Obama's position.

President Carter: Absolutely.

Haaretz: What about the Cairo talk. You were in Lebanon when it happened. How did Lebanese react?

President Carter: Very positively. No one in Lebanon has ever been to Israel, it's prohibited by their law. Lebanon has two key factors in their minds. One of them is for Israel to withdraw from the Sheba farms. To get Israel out of Lebanon. The second thing is to negotiate a complete peace agreement with Israel, but only after the Golan issue is resolved. They're perfectly willing to stay aloof.

Haaretz: Some people in Israel think that handing over Sheba would be a wise move.

President Carter: I think so too. It gives Hezbollah an excuse - which is supported by a lot of Palestinians - to retain their weapons and arms. I didn't meet with Hezbollah leaders in Lebanon. Hezbollah chose not meet with me. I didn't ask them.

Haaretz: If they don't talk to you, for sure they won't talk to us.

President Carter: I had a talk instead with the Ayatollah of Halala, who is a Shiite spiritual leader.

Haaretz: Did you sense any willingness of Hezbollah to reconsider their attitude toward Israel once Israel will give back the Sheba farms and there will be no dispute about territory? Is Hezbollah willing to accept the existence of Israel?

President Carter: I wouldn't know. I can't answer that.

Haaretz: What about the Syrians? You met with President Assad. How did he react to Obama's speech?

President Carter: He was very pleased. I think [the speech] was an adequate move on part of U.S. that satisfied the president [Assad].

Haaretz: Is Obama is going back to Madrid motto?

President Carter: I don't know.

Haaretz: Is it possible to negotiate with Palestinians without any progress on the Syrian track, since they are hosting Hamas, and have the power to undermine?

President Carter: I don't think Hamas has any power to undermine what Syria does. I don't see that at all and I think I know the situation quite well. What the Syrians want to do, including the minister of foreign affairs and the president, they want to be constructive in an overall peace proposal. They don't connect Israel and Palestine negotiations with the Golan Heights. They think they're two separate things and they don?t want either one to hold off the other.

Haaretz: They're willing to get back to the table without preconditions?

President Carter: The only precondition Assad - and his father - ever had was an Israeli withdrawal from Golan Heights. In the past, Olmert and Barak have both said it, and if I'm not mistaken Netanyahu also said it. The only question is the exact delineation.

Haaretz: So overall, you sensed a positive atmosphere since Obama took office?

President Carter: Oh yes, everywhere. There is a new hope that progress would be made. I think the hope is justified, I certainly share it. There was no hope under the previous administration. And I think now Israel will have to make a very profound decision.

Haaretz: Some people compare Obama to you.

President Carter: That's a compliment for me. One thing we have in common is that I started working on Mideast peace on my first day in office, even before. He has promised me and others during his campaign that he would do that. He has kept that promise. That's a dramatic difference between the Clinton and the Bush administrations and Obama's. Because you can't wait until the last year you're in office, when you are on your way out, to start working on something as important and difficult as this is.

Some of the public statements Obama has made basically indicate support for the Arab Peace Initiative. And even Condoleezza Rice has expressed that opinion. It's in the road map. There are four different things, as I said before, and I think they're all compatible, none of which I believe would be acceptable now to the Israeli government.

Haaretz: If we don't put a deadline - next we are going to have elections in the West Bank.

President Carter: Obama promised to do as best as he can to have a comprehensive peace before the end of his term, 2012.

Haaretz: You'll probably come back next January to supervise Palestinian elections. If there will be no or very little progress until then, it will affect the elections.

President Carter: It will.

Haaretz: The question is would you impose a deadline to coincide with the elections. Because if nothing happens until then things will deteriorate.

President Carter: neither the Carter Center, nor I personally, has the authority to set deadlines.

Haaretz: The Iranians are voting.

President Carter: It's a very interesting election.

Haaretz: What should the U.S. do? As far as the nuclear race - it's not the [Iranian] president who decides, it's the spiritual leadership.

President Carter: It's true. He has in fact sworn before God that it's his religious belief that his country [should have] nuclear weapons.

Haaretz: How should West react?

President Carter: With extreme caution and with determination to cooperate with the Iranians. Hopefully to confirm that they are not moving toward a nuclear weapon. They have a legal right, under the non-proliferation treaty, to develop enhanced uranium. That's what they're doing so far. They have never renounced the non-proliferation treaty. Which every country on earth has adopted except four: North Korea, India, Pakistan and Israel. I think Obama has taken the right step in advocating mutually respectable talks directly with Iran. Of course the ultimate step would be if the supreme leader, Khomeini, maintains his position, then maybe they would be amenable, without being under pressure, to let the IAEA confirm that they are moving toward a weapon.

But I have dealt with the Iranians in a way I'll never forget when I was president and I know they can't be pushed around. The more pressure you put on Iran and the more threats come toward Iran, the more unlikely it is that they will make an approvable commitment.

Haaretz: Can we learn something from the Lebanese elections about atmosphere in Iran?

President Carter: There is no doubt that whoever is elected has to be completely subservient to the Ayatollah, and they all know that. I don't see any reasonable likelihood of the election results being challenged. And one of the most gratifying things for us as election observers - we only deal with troubled elections - this was our 67th elections. We're very gratified at the results. My wife and I were there. We were there with 60 observers. 24 nations. The results came in without any doubt of inaccuracy. The Hezbollah leader acknowledged the results and congratulated the winner.

As a matter of fact, the results have been misinterpreted to some degree. Actually, the March 8 alliance (Hezbollah) gained one seat compared to the last election, which was 2005. They got about 100,000 more votes in the whole country.

But expectations had been built up that they'd win a tremendous victory. When they got the same seats as before, it was interpreted to be a defeat.

Haaretz: Room for optimism, radicalism losing ground?

President Carter: I think so. Hezbollah has 11 seats out of 128, that?s less than 10 percent. They could have easily won two or three more seats. They didn't even seek to do so. They didn't even put candidates forward, they put only put 11 candidates forward. And they won those 11 seats. The only portfolio they have now is labor. Of course they're putting together a new cabinet now. I don?t think they would ask for finance or foreign affairs or interior or defense.

Haaretz: Doesn't seem they're willing to consider giving away their arms.

President Carter: No, not as long as Israel is in Lebanon.

Haaretz: So if Israel gets out of Lebanon things may change?

President Carter: I can't speak for them. I didn't meet them.

Haaretz: But as long as Israel stays?

President Carter: That's their rationale for keeping their weapons, that's why they're not incorporated into the Lebanese army. And that rationale is accepted by a substantial number of Lebanese. Of course some hate Hezbollah deeply. But it would remove their major excuse if Israel would withdraw.

Haaretz: When some Israelis and people in the Jewish community compare Obama to you they don't do it in a positive way. See him as an Arab lover. Sounds familiar?

President Carter: It does. You know, I reached out first to Israelis. The first leader I met with was Yitzhak Rabin, who was Prime Minister when I became president. When he was surprisingly defeated in 1977 by Begin, I immediately invited Begin to me. In the process I met with King Hussein and with Sadat and Assad. So I met with all the leaders, but the Israelis were always first. I never deviated at all from saying, in private and in public that for the last 30 years my preeminent goal in life is to bring peace and security to Israel. And peace to Israel's neighbors.

Haaretz: We said that you are motivated by the Bible and your deep belief? What motivates Obama?

President Carter: A commitment to peach and justice. He's a deeply religious person; he's a Christian like I am. I know him well. I would say the same basic motivations that guided me.

Haaretz: He's a popular president. He can hope for more generous support from the Jewish community?

President Carter: I know. I had, in summer of my first year, still 66 percent approval, which is very high. But the more I dealt with controversial issues - and the Mideast peace process is only one of them - my political popularity decreased. I began to lose a lot of support from the American Jewish community. But I had Hubert Humphrey on my side, who was known as one of the Jewish community's staunchest supporters. And I had Senator Javits was on my side and some others. But I had a strong cadre of support among the top U.S. senators whose commitment to Israel was unquestionable.

Assad was more despised, more than Arafat. Sadat was responsible for attacks on Israel. But over a period of time - Sadat's popularity changed.I would say that Obama now has a solid base of support in America for what he's doing in the Middle East.

American Jews don't like to see Israel's PM at odds with the American president. I think many Israelis don't like to see Israeli and American leaders cross and cross purposes, either. Both sides have to move with caution and mutual respect.

Haaretz: If Israel doesn't comply, head-on collision?

President Carter: Yes. Two states is insignificant compared to the settlements. He's committed to a world wide audience.

Haaretz: No way back?

President Carter: I don't see how he could go back.

Haaretz: Your advice to Netanyahu before his speech?

President Carter: I'm reluctant to answer this question.

Haaretz: In other words: What should the Israeli PM do to take advantage of what you see as a new atmosphere?

President Carter: Action. To me, the most grievous circumstance is the maltreatment of the people in Gaza, who are literally starving and have no hope at this time. According to the UN 41,000 of their homes are either severely damaged or destroyed. And for five months they haven't gotten a single sack of cement, or single sheet of plaster. They're being treated like savages. The alleviation of their plight to some means I think would be the most important the Israeli PM could do.