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"On the eve of my departure, I would like to pass to you my views of the current situation in Israel and what we are likely to face in the months ahead. I write against the background of an eighteen-month tour in this complex part of the world and a long career on its northern periphery - shortly to be resumed.

"In my time here two major events have had a significant impact on Israel's relations with its neighbors and the rest of the world, including the United States. The first of these was the Sinai II agreement which, as we both know, was a terrific psychological wrench for the Israeli leaders. It is clear now - and Rabin and his colleagues agree - that Sinai II was a success and has contributed substantially to reducing the dangers of an Israeli-Egyptian flare-up. The second great event has been the upheaval in Lebanon, the consequences of which are not yet clear. [...]

"Now [the Israelis] are awaiting with some trepidation an initiative from the Carter administration and the pressures they feel we will inevitably bring to bear on them in connection with it. [...] but this time the more accommodating noises heard in Arab capitals have thrown the Israelis slightly off stride. Threats and invective they can handle easily; softer tones from their adversaries give them trouble.

"We have to believe that Rabin would not be unhappy with an American initiative for peace. I suspect that his motives are mixed in this regard, as one would expect from a man who tries to be both a statesman and a politician. With an election less than a year away Rabin needs an issue on which to go to the voters and with which to overcome the internal threat from Shimon Peres. The issue can hardly be that of his management of the Israeli economy, which has been something short of a success, or his handling or mishandling of other internal problems. Therefore a foreign policy issue - perhaps Rabin playing David against the American Goliath [...] On the other hand the prime minister has also indicated on several occasions that he wants an era of quiet for Israel [...]; he as well as anyone knows what internal turbulence would be caused by the concessions Israel would be called upon to make in any real movement toward peace. It is thus easy to question the genuineness of his expressed desire for a major effort toward a settlement, certainly at this time.

"The founding giants of Israel (Ben-Gurion, Golda, Sapir) have passed or are passing from the scene, and those who were closely associated with them like Dayan and Eban are at present wandering in the political wilderness. Rabin and Peres, while every bit as pragmatic as the founders, seem to lack their messianic vision and sense of purpose - or maybe the electorate has heard it all before. As to other political leaders, there are few stand-outs. Begin has been around so long that he is as much a figure of history as an active politician, while people like Yigael Yadin and Arik Sharon, who may have some potential as leaders, remain to be tested in the political arena, and, in any case, are rank amateurs. Rabin, Peres and their associates, whatever shortcomings they have, have shown themselves able to take decisions on the major issues of national security and to have them accepted. They will probably be around for some time.

"Like many Western countries Israel is faced with serious economic problems [and growing social tensions, but] I do not feel the country is near collapse. While the situation Israel confronts might drive an orthodox economist to consider a change of profession, my experience has been that these people manage to muddle through and to keep their economy sputtering along, but at the price of increased dependence on U.S. aid.

"In the absence of counterpressure it will always be easier for an Israeli prime minister and government to yield on issues which seem to have popular support, even though they violate international wishes and complicate the over-all peacemaking process. The Kadoum settlement is a good example. Over seven months ago Rabin promised that the illegal settlers there would 'soon' be removed. They are sitting there today and increasing in strength. The prime minister found it easier to placate a small but vocal segment of the populace rather than do what he knew was right. [...]

"I have come to the conclusion that in the broad field of security arrangements and effective counterpressure to the temptation of the Israeli government to give in to the easiest course can only come from the U.S. Applying such pressure is not a simple matter for us, as you well know, and is positively painful for the Israelis; it will become increasingly so as we ask them to give up more of the occupied areas for what they consider to be intangible results. [...] In a sense, the Israeli government has itself partly to blame because it has gone along with the establishment of new settlements in the occupied areas. The pioneers who move to these settlements generally have the spirit of zealots, and consequently they have far more political clout than their numbers would warrant. [...]

"Since the Yom Kippur War Israeli dependence on us has increased greatly, and they know it. This in turn adds to the leverage we can bring to bear on them, if we are willing to do so. While squeezing them, we must, of course, reassure them of our continuing commitment to their survival [and] continue high levels of military and economic assistance for the next few years at least, but we should gradually diminish it. Otherwise there will never be any incentive for the Israelis to take the stringent measures they must take to put their house in order. I see no need to refrain from linking our assistance to certain steps on their part - the quid pro quo they dread so much. They would certainly like to implant the feeling that we 'owe' them virtually unlimited assistance, and that it would be wicked of us to make any demands on them in return for this assistance. This point of view should be rejected. The situation in the Middle East is so serious for us, as well as for them, that we will have to use every bit of leverage we have - and aid to Israel is the biggest. [...]

"Our problem will be how to put enough pressure on the Israeli government to take the steps it will inevitably have to take in regard to territorial concessions without doing so in a manner that brings down the present relatively moderate government and lands the blame on us. A tall order, but it must be remembered that anything which would replace the Rabin government is likely to be more difficult for us to deal with, certainly on the issues of territorial settlement and peace and perhaps on the PLO. As we face this process we must get a fix on what is durable here; this is a task for the Washington experts, but I would caution them not to press the separate state idea since most Israelis regard this as a recipe for suicide and I'm not sure they aren't right. (It can be argued that a government led by Peres or even Yadin might be able to take bold steps like President de Gaulle did in regard to Algeria and President Nixon in regard to China, but it would not be prudent to count on such a turn or to base our policy on it.)"