that the effect of it? It weakens further U.S. opposition to Israeli
settlement activity; doesn't it?
Mr. Pelletreau. No, the deduction for the settlement activity is
still there. Then we are making as a separate step, as a separate
action
Chairman Hamilton. I think there would be broad agreement
that we want to try to help the Israelis with these extra expenses.
But why do you choose this means of doing it? Because it seems
to me that by doing it, you are in effect weakening further U.S. op-
position to Israeli settlement activity. Why not try something else?
Why focus on this way of doing it?
Mr. Pelletreau. We looked at different ways of making this rec-
ognition and gesture to Israel. To state it frankly, we thought we
could do it through this vehicle without eroding the message we
are sending with respect to sanctions by making it separate ac-
tions. And we knew that doing it in this way would not entail a
separate charge against the U.S. budget. We thought that was im-
portant, as well.
Chairman Hamilton. Aren't we acquiescing to $95 million worth
of non security expenditures in the territories?
Mr. Pelletreau. No, we are not. We are not acquiescing in any
nonsecurity expenditures in the territory. What we are doing is
making a separate gesture that happens to come out of this par-
ticular sum. Of course, we have other provisions of assistance to Is-
rael, as well.
Chairman Hamilton. Do you think this offset will have an im-
pact on the U.S. ability to oe perceived as an honest broker be-
tween the Israelis and the Palestinians?
Mr. Pelletreau. I do not expect it will have an impact on that.
Chairman Hamilton. What kind of a message do you think we
send here with this $95 million offset about our commitment to dis-
couraging Israeli settlement expansion in the territories?
Mr. Pelletreau. I think the message that we intend to send by
this offset is we recognize that Israel has had additional and un-
usual, extraordinary burdens with respect to its part in carrying
out the Gaza-Jericho Agreement and the early empowerment
agreement, and we wanted to recognize that.
Chairman Hamilton. I understand your intent. But picking this
to weaken our commitment — you are going right to the point of our
commitment to discourage Israeli settlement expansion. Why do
you do that? Are there no other ways to do it, to provide some help
to Israel?
Mr. Pelletreau. Obviously, there are other ways to do it. This
was a way to do it that did not entail an additional scoring against
the U.S. budget.
HOUSING CONSTliUCTION IN WEST BANK
Chairman Hamilton. Now, last week the Israeli Government an-
nounced that it intended to approve 1,000 house construction con-
34
tracts that had previously been canceled in the West Bank settle-
ment of Alfamanosh. It is east of Tel Aviv. And the Israelis de-
scribed this project as a lifting of the freeze on construction in this
settlement. What message do you think it sends that, in the same
week that Israel announces it is going to approve for construction
1,000 previously frozen housing contracts, the administration re-
duces the loan guarantees deduction for settlement construction by
$95 million?
Mr. Pelletreau. There was obviously no connection between our
action and these particular news stories about what Israel may be
intending to do.
Chairman Hamilton. Now wait a minute, Mr. Secretary. How
can you making that statement that there is no connection?
Mr. Pelletreau. Well, we have a very clear record of
Chairman Hamilton. There is a connection in everybody else's
mind in the world but yours. There events are happening together.
You can't ignore them.
Mr. Pelletreau. You know, there are a lot of events that have
happened over the past week that don't all have direct and imme-
diate connections one with the other. We have sought some addi-
tional information and clarification from the Israeli Government
with respect to that announcement that you referred to. And we
are studying the additional information they have given us.
Chairman Hamilton. Let me say, I believe there is broad sup-
port in the Congress to look for ways to help offset Israel's ex-
penses associated with the peace process. I really don't think that
would be all that difficult to work out. I just think you picked abso-
lutely the wrong way to do it.
consultation with congress
Now, I was informed of this I think Thursday afternoon. The fis-
cal year ran out Friday. And I understand my colleague, the chair-
man of the Appropriations Committee, likewise was informed the
same day. We weren't consulted. We were contacted by a high level
administration official who told us that this is going to happen. We
were told just a few hours before the fiscal year ended. There was
no request for our opinion. We were just told.
Now, some day when you are sitting over there in the State De-
partment talking with your colleagues about how to deal with the
Congress on foreign policy questions and you are wondering why
the Congress from time to time gets a little upset with the adminis-
tration on the conduct of foreign policy, and why we sometimes try
to micromanage, as you often accuse us of doing — ^you being the ad-
ministration — I hope you will recall this incident.
This is about as clumsy an effort to consult with the Congress
as I can ever recall. It is an insult to me, and I am authorized to
say to the chairman of the Appropriations Committee, Mr. Obey,
neither one of us like the substance of what you did. We think it
seriously weakens American policy to discourage the settlements.
And we think the manner in which it was done was quite unaccept-
able to us as a means of consultation.
There really was no consultation at all. It was just a matter of
informing us. Politely, but no consultation. Now, the goal of the —
of this deduction process in the loan guarantee agreement, I want
35
to be clear about that. Is it to discourage all settlement expansion
or is it to discourage only government-funded settlement expan-
sion?
Mr. Pelletreau. In this particular process with respect to the
loan guarantees, what was covered was government funding and
government support, government expenses in the occupied terri-
tories.
ISRAELI PRIVATELY FUNDED EXPANSION
Chairman Hamilton. By deducting only for government funded
expenditures, do we in effect encourage Israeli Grovemment to ap-
prove privately funded expansion?
Mr. Pelletreau. That is not our intent, Mr. Chairman.
Chairman Hamilton. Does the loan guarantee agreement be-
tween the United States and Israel say anything about privately
funded settlement expansion that has been approved by the Israeli
Government?
Mr. Pelletreau. Not to my best recollection, but I will go back
and review the text.
[The information referred to was subsequently supplied for the
hearing record and follows:]
The understandings associated with the Loan Guarantees for Israel Program re-
late to nonsecurity expenditures by the Government of Israel, not privately financed
construction.
Chairman Hamilton. Well, what is the administration's view of
privately funded settlement expansion in the West Bank that has
been approved by the Israeli Government?
Mr. Pelletreau. We would like to discourage such activity.
Chairman Hamilton. But what — and why would you like to dis-
courage it? Do you think it has an adverse impact on the peace
process?
Mr. Pelletreau. Yes, we feel it would be a complicating factor
in the peace process.
Chairman Hamilton. Do you do anything to discourage the pri-
vately funded settlement construction?
Mr. Pelletreau. As I mentioned, we have sought some clarifica-
tions from the Israeli Government with respect to the latest an-
nouncement. And we are — we are studying the information that
they gave us. We understand that this has not been a fully ap-
proved action.
Chairman Hamilton. Do you think the use of the privately fund-
ed settlement construction violates the loan guarantees agreement?
Mr. Pelletreau. I don't believe that it violates the agreement as
such, no. But we would still like to discourage such activity.
Chairman Hamilton. I understand. Now, why do you think the
Israeli Grovernment has decided to move ahead on those housing
contracts I referred to a moment ago in Alfamanosh?
Mr. Pelletreau. I think there has been some particular pres-
sure from the inhabitants of this area and
Chairman Hamilton. Are they trying to improve their bargain-
ing position on the final settlement talks?
Mr. Pelletreau. I think they are trying to relieve overcrowding
in this particular area. And as I understand it, subject to further
36
clarification that we receive from the IsraeH Government, this is
not involving any expropriation of land or any public expense. But
that doesn't mean that we condone it.
Chairman Hamilton. Do you consider the action that they took,
the Israeli Government, to be consistent with the Declaration of
Principles?
Mr. Pelletreau. The Declaration of Principles declares settle-
ments to be an issue for final status negotiations. And I think the
implication of that is that there would not be actions taken that
would prejudice that issue.
Chairman Hamilton. With regard to that announcement on
those housing contracts in that settlement, have we said anything
to the Israeli Government about that?
Mr. Pelletreau. Yes, we have sought clarifications on that.
Chairman Hamilton. Have we expressed our disapproval?
Mr. Pelletreau. We have as yet — at this point, we have only
sought information on what is being intended. The news stories
were quite incomplete.
Chairman Hamilton. Will you let me know what you conclude
with respect to that?
Mr. Pelletreau. I would be pleased to.
[The information referred to was subsequently supplied for the
hearing record and follows:]
The Government of Israel is reexamining its decision to release additional land
for privately financed development in and around Alfe Menashe. Even as originally
proposed, the plan did not call for any new public construction. We have been as-
sured by the Government of Israel that there has been no change in government
policy regarding settlement construction.
Chairman Hamilton. When would you expect to make a judg-
ment about it?
Mr. Pelletreau. I would say within a — within a month. But it —
I say that advisedly, because I understand that the approval proc-
ess is a very lengthy one and it could be something that would take
as long as 6 months.
Chairman Hamilton. OK. About last year, only $6 million of the
$437 million deducted from Israeli loan guarantees refiected Israeli
Government spending in East Jerusalem, according to the informa-
tion we have. Now, that means that we calculated that the Israeli
Government spent only $6 million in nonsecurity expenditures in
Jerusalem in the previous year; is that correct?
Mr. Pelletreau. I am not sure I have that specific calculation
here.
Chairman Hamilton. OK. What portion of this year's deduction
of the $311 million reflects Israeli Government spending in Jerusa-
lem, do you know that? Maybe you can furnish that for us.
Mr. Pelletreau. I would have to look further for that.
[The information referred to was subsequently supplied for the
hearing record and follows:]
TTie deduction from loan guarantee authority for government spending is a cal-
culation based on gt)vernment infrastructure development cxf>cnditures in those
parts of Jerusalem not under GOI administration prior to June 5, 1967. Only a
small portion of this year's deduction was due to GOI expenditures in these areas.
37
U.S. POLICY TOWARD JERUSALEM
Chairman Hamilton. OK. Now, when you testified before us last
time, you said that U.S. poHcy toward Jerusalem is that Jerusalem
is a final status issue, pursuant to the Declaration of Principles,
and we do not want to characterize Jerusalem in any other state-
ment or form. That was your position, as I understood it.
Mr. Pelletreau. Yes, that is correct.
Chairman Hamilton. It is my understanding that under pre-
vious administrations U.S. policy was that we oppose unilateral ac-
tions taken by any party regarding the ultimate disposition of Jeru-
salem prior to negotiations to determine Jerusalem's final status.
Is that your view, also?
Mr. Pelletreau. My view would continue to be the way I stated
it to you in previous testimony.
Chairman Hamilton. OK. What is current U.S. policy with re-
gard to unilateral actions by any party that could affect the final
status of Jerusalem prior to final status negotiations?
Mr. Pelletreau. I think the implication of the Declaration of
Principles is that there would not be actions taken that could prej-
udice the final status negotiations.
Chairman Hamilton. Does the Israeli construction in East Jeru-
salem qualify as unilateral action?
Mr. Pelletreau. I think we would want to look at the specific
activity involved, sir.
Chairman Hamilton. Well, the specific activity is construction.
The question is, does construction qualify as unilateral action?
Mr. Pelletreau. It certainly could qualify as unilateral action,
yes.
Chairman Hamilton. But you haven't made a determination
that it does?
Mr. Pelletreau. No, we have not made such a determination.
Chairman Hamilton. Is it under consideration?
Mr. Pelletreau. It has not been under active consideration in
our recent deliberations, no.
Chairman Hamilton. All right, OK. I am about coming to the
end here. You have had a long morning, and I do want to just
check on a couple of things with regard to Iraq.
U.S. POLICY ON easing OF IRAQI SANCTIONS
The administration has insisted that there has to be a substan-
tial testing period of the long-term monitoring program before the
question of easing Iraqi sanctions can be addressed. That is the ad-
ministration position, isn't it?
Mr. Pelletreau. Yes, that is correct.
Chairman Hamilton. Is there a minimum period of testing that
we want to see before taking up the question of easing the sanc-
tions?
Mr. Pelletreau. We have not felt it appropriate to take any spe-
cific period at this time because the monitoring period hasn't begun
yet.
Chairman Hamilton. There is some talk at one point about a 6-
month testing period. Where did that come from, do you know?
38
Mr. Pelletreau. Some other governments started sounding out
such a possibihty.
Chairman Hamilton. That didn't come from us?
Mr. Pelletreau. That did not come from us.
Chairman Hamilton. If you did estabhsh a set period of testing
on the monitoring program, would that require a new Security
Council resolution?
Mr. Pelletreau. I am not sure of the answer, because we have
opposed such a specific set, fixed time period for testing. I will cer-
tainly look into it. Whether that would require a new resolution or
would be part of the 60-day roll-over, I am not positive.
[The information referred to was subsequently supplied for the
hearing record and follows:]
The United States remain.s firmly opposed to any defined probationary period.
Such an arrangement would create an assumption that Iraqi cooperation in only one
of the areas addressed by the Security Council — weapons of mass destruction — will
result in lifting sanctions. The Council already has a mechanism — its regular 60-
day review process — to consider the full range of sanctions issues.
The lifting of the embargo on Iraq's oil exports would require further Security
Council action. If the Security Council were to establish a monitoring period meant
to lead to lifting the embargo, in our view such action would also require a new Se-
curity Council resolution. We would oppose such a step.
Chairman Hamilton. How about France and Russia, do they
favor setting a specific time period of testing?
Mr. Pelletreau. They have spoken about it, yes.
Chairman Hamilton. In support of it?
Mr. Pelletreau. They have spoken in support of it, but I am not
sure what their final position would be.
Chairman Hamilton. China.
Mr. Pelletreau. I don't think China has been specific.
Chairman Hamilton. Can you give us the mood of the Security
Council on this issue?
Mr. Pelletreau. In the last review, it was generally recognized
by all members of the Security Council that Iraq was not in compli-
ance, and so there was unanimous consent to renewal. There was
also no statement that was made indicating any Iraqi progress, al-
though there were some members that favored making such a
statement.
I think that all members of the Security Council recognized that
Iraq must comply with the Security Council resolutions. There are
some that I think would look to the day of lifting the oil embargo
sooner than others. And that is a question to be further debated
and resolved in the future. Because up to this point, as I have stat-
ed, there is unanimous agreement that Iraq is not in compliance
with the Security Council sanctions.
Chairman Hamilton. So we have got some differences in the Se-
curity Council on this question, right?
Mr. PELLt:TREAU. Some potential differences for the future, yes.
flushing of IRAQI-TURKISH PIPELINE
Chairman Hamilton. OK Last time you were here, you testified
that you anticipated a U.N. Security Council resolution authorizing
a limited flushing of the Iraqi-Turkish oil pipeline in order to, I
39
think, allow for repairs. But no pipeline flushing deal has been
forthcoming. The Security Council has taken no action
Mr. Pelletreau. That is correct.
Chairman Hamilton [continuing]. Is that correct? What is hold-
ing up formal Security Council action on that pipeline flushing
issue?
Mr. Pelletreau. Well, Turkey has not come to the Council with
a full plan of what all aspects of the agreement would be. There
is particular outstanding difference on how foodstuffs and medi-
cines that would be purchased with the funds from the pipeline
flushing would be distributed in Iraq.
Chairman Hamilton. Have we played any role in trying to reach
an agreement on flushing the pipeline, the United States?
Mr. Pelletreau. The United States has discussed the issue with
Turkey, to ensure that a flushing agreement stayed within the con-
text of the overall Security Council sanctions.
Chairman Hamilton. Is there time to flush that pipeline and
complete repairs before the onset of winter?
Mr. Pelletreau. We have not specifically examined that ques-
tion.
Chairman Hamilton. Can the pipeline be repaired in the winter?
Mr. Pelletreau. I think the flushing can take place at any time.
But I am not
Chairman Hamilton. The repair?
Mr. Pelletreau. I am not positive of the full answer.
[The information referred to was subsequently supplied for the
hearing record and follows:]
We understand that the required repair and maintenance would be much more
difficult to accomplish during tne winter months. During the winter, the area where
the pipeline crosses the border is very mountainous and subject to significant snow-
fall and low temperatures, making access to the pipeline and related equipment
very difficult.
Chairman Hamilton. OK We haven't had a chance to get to a
number of areas. We will probably be submitting some questions
to you.
EGYPT
We did have the initiative launched by President Mubarek and
Vice President Gore on this Egyptian Partnership for Economic
Growth and Development. That promises benefits to both countries.
Do we expect the provisions of that initiative to be implemented
soon?
Mr. Pelletreau. Yes. We have had some further discussions
with the Egyptians about setting up the committees that were
called for in that initiative. The Vice President has stated his hope
that he would be able to go back to Egypt early next year and that
by that time we would have the mechanisms in place for the new
initiative.
Chairman HAMILTON. Now, the IMF is pressing Egypt again to
devalue the pound, and Egypt, of course, is objecting to that. Do
we agree that the pound is overvalued?
Mr, Pelletreau. We have not been actively involved in that dis-
cussion.
40
Chairman Hamilton. Do we think that if the Egyptian Govern-
ment does not devalue now, it will be forced under market pres-
sures to devalue later, probably under less favorable conditions?
Mr. Pelletreau. That is a possible outcome.
Chairman Hamilton. It certainly is.
All right, look, I have sat on this committee for many years and
we have approved aid to Egypt over and over and over again. And
we put about $30 billion into economic and military assistance to
Egypt since the signing of the Israeli-Egyptian peace treaty. And
yet when you look at the Egyptian economy today, I don't think you
can say that they are better off in 1994 than they were back then,
1980. Maybe worse.
They are ranked among the developing states with the most
highly skewed income distribution. And thousands of Egyptian
Eeasants who received land are about to be kicked off their land
y the government.
There is very widespread official corruption, and so you have to
ask yourself the question, what has all that $30 billion done? Or,
as we say in our politics, are they better off in 1994 than they were
in 1980? Do you have any comment to make on those general ob-
servations?
Mr. Pelletreau. I think that the Egyptian economy is consider-
ably better off now than it was at the oeginning of our assistance
program. I think that the macroeconomic Egyptian situation is con-
siderably improved.
Infrastructure, particularly in the areas of power generation,
telecommunications, water and wastewater treatment, is consider-
ably improved. The agricultural scene is vastly improved with im-
proved yields from rice in particular and other crops and commod-
ities.
Chairman HAMILTON. I am aware of some of the improvements,
of course, but let me just express my concern here. I am worried
that the social and economic policies of the government, which real-
ly appear to me to be deepening the impoverishment of the inral
masses, while the elite in Egypt are becoming very, very rich, and
I think you might very well be feeding a situation which leads to
Islamic extremism.
I don't want to overstate that. There are good trends that you
have identified. But I am very worried about that. And I just men-
tion it for your consideration.
Mr. Pelletreau. Thank you.
TRAVEL BAN ON LEBANON
Chairman Hamilton. And then finally on Lebanon, you extended
this ban on the use of U.S. passports for travel to Lebanon.
Mr. Pelletreau. Yes, that is correct.
Chairman Hamilton. And we had it come up yesterday in the
committee and decided to pull the bill, the bill which had already
been passed by the Senate. Are you giving any consideration to re-
ducing the ban to a travel advisory?
Mr. Pelletreau. That is one of the options that we could take
during our review of the situation. At present, we thought that con-
tinuation of the ban was justified for another 6 months.
Chairman Hamilton. What do you base that on?
41
Mr. Pelletreau. We base it on the fact that there are eroups in
Lebanon that operate outside the control and authority of the gov-
ernment, that entertain a special hostility toward Americans, that
we know have Americans in Lebanon under surveillance. And we
do not believe that the situation there ensures the safety and secu-
rity of Americans for travel.
Chairman Hamilton. Do we base that on information that Amer-
icans are being targeted for Hezbollah or some similar group?
Mr. Pelletreau. Yes, we do.
Chairman Hamilton. All right. Now, if— given the current situa-
tion on the ground in Lebanon — if a travel ban were not now in
place, would the administration impose a ban?
Mr. Pelletreau. It is still a very unsettled and in some areas
dangerous situation. I certainly think we would consider it.
Chairman Hamilton. Now, you have got a large number of U.S.
citizens who travel to Lebanon in violation of the ban. I was told
yesterday, I don't know of the accuracy of this figure, that it is
40,000 Americans or so. Is that about right, do you think?
Mr. Pelletreau. I have heard that figure, as well. I honestly
don't know what the true figure is.
Chairman Hamilton. It is a pretty large number.
Mr. Pelletreau. There is a substantial number of people who
travel. Whether they all travel on American passports or other
travel documents, I couldn't be sure.
Chairman Hamilton. Why don't we prosecute them?
Mr. Pelletreau. Well, we don't know who they are.
Chairman Hamilton. You confiscated the passports of people
who are returning from Lebanon. You must know who they are.
Mr. Pelletreau. Well, in a few cases that happened. But we