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The violent confrontation with the Palestinians could last until 2006 - the full extent of the period covered by the IDF's current multiyear development plan - and the conflict could deteriorate into a regional war, either as a result of escalation of the violence with the Palestinians or because of a confrontation in the north with Hezbollah and Syria. This is the view currently being finalized by the IDF General Staff as part of the army's annual strategic assessment.

The assessment, based in part on Military Intelligence assessments, also states that the Chairman of the Palestinian Authority, Yasser Arafat, can at most reach an agreement with Israel for a lull in the fighting, but even that is not likely, since Arafat believes that time is on the Palestinians' side. Furthermore, his domestic position in the face of the Hamas and other radical forces is likely to worsen, up to complete loss of control on his part.

The two "fronts" - the Israeli-Palestinian and the northern one - are "stable but fragile," with internal balances, because both sides are careful not to shatter them, the assessment says. Nonetheless, any serious incident, particularly a major terror attack, could send either front into war.

The assessment's purpose is not to predict developments, but rather to describe the threats that comprise the basis for how the army will be prepared over the next five years. Another assessment, put together by the IDF Operations Directorate, draws on both the General Staff and Military Intelligence assessments to formulate the IDF's operational plans for the problems it will face in the coming year.

Chief of Staff Shaul Mofaz has yet to summarize the strategic situation that will be presented to the defense minister and the ministerial committee on defense. That summary is prepared by the Strategic Planning Department, headed by Brigadier General Michael Herzog of the Plans and Policy Directorate. Major General Giora Eiland, the head of the Planning Directorate, also heads the Israeli team in security meetings with the Palestinians together with Avi Dichter, the head of the Shin Bet security service. Eiland has also been appointed to accompany Foreign Minister Shimon Peres in Peres's contacts with the Palestinians. Yesterday, he was to meet with U.S. Ambassador Daniel Kurtzer.

According to the Planning Directorate, traditional military threats, like a surprise pan-Arab attack such as happened in 1973, have been reduced. However, a new kind of limited threat, typified by the Palestinians and Hezbollah, could still lead Israel and its neighbors into war. Due to a lack of resources, it is critical for the IDF to set its priorities among the different kinds of threats. Each one requires a different kind of preparation, but with a certain overlap between the two main investments: Personal protection equipment for soldiers in battle with the Palestinians, for instance, diverts resources from investment for a war against Syria, but without such personal equipment, the IDF could suffer more casualties, respond with greater severity and contribute to an escalation that leads to regional deterioration.

The Planning Directorate recommends preparing the army through 2006 according to a severe scenario: a continuation of the conflict with the Palestinians, and a possible deterioration stemming either from this conflict or from escalation in the north that could lead to war.

These developments, say the IDF General Staff planners, are not necessarily predestined, and Israel's behavior can influence their fruition. Between the two poles - full-scale war or complete calm - the Planning Directorate tends to believe a third way is most likely: a continuation of the current situation, but with the gradual addition of escalatory elements - more severe means, new targets, greater numbers of casualties.

Neither extreme case - total Israeli surrender to Palestinian dictates or an initiated escalation leading to chaos on the Palestinian side and military intervention by regional elements - is regarded as a realistic estimate. Instead, the policy established at the start of the conflict, attrition, will continue.

Another alternative, a unilateral separation, is possible, but is not on the current government's agenda.

An offensive attack by Iran or Iraq and possible changes in the regimes in Egypt and Jordan are not considered likely factors that could lead toward war by 2006.

According to the Planning Directorate, Arafat will remain the main address for the functioning of the Palestinian establishment. The Palestinian Authority will not collapse, and Arafat will not lose his control over it. Nonetheless, his ability to make decisions and implement them will weaken as a result of growing power in the hands of the radical forces.

The Palestinians and Israel both lost some of the international credibility they had attained before September 2000, when the Intifada broke out, without either side gaining from the other's loss, the assessment said.

It also predicted that the political effort will continue along the lines of the Mitchell Report and the Tenet cease-fire deal, but Arafat will try to improve his situation by skipping a cease-fire and putting the burden of the first move - a settlement freeze - on Israel, as well as by bringing in international observers as a first, symbolic step toward moving responsibility for the crisis to the international community. He has failed so far to win important political support in the Bush administration, but he is trying to bring about the collapse of the national unity government headed by Ariel Sharon.