Unsettling the West Bank:

Those Once-Divisive Loans Guarantees for Israel Can Help Build the Peace

Khalil Jashan, William Quandt and Jerome M. Segal


The Washington Post, May 29, 1994


The issue of Israeli settlers and settlements in the West Bank cannot go long ignored. If mishandled, the date of the settlers will undermine the prospects for later stages of Israeli-Palestinians negotiations. Ironically, the $10 billion U.S. loan guarantee program—just two years ago the single most contentious issue in U.S.-Israeli relations—could serve as a vehicle of conciliation and peacemaking.

            Israeli Primes Minister Yitzhak Rabin has courageously said that peace is more important than settlements. So far he has given no indication of how, or under what conditions, settlements might be removed. But Israel has the capacity on its own to adopt non-coercive policies that could at least reduce the magnitude of the settler population, leaving until later negotiations the precise details of how settlements will be dealt with in a final peace agreement.

            When the Camp David accords were signed in 1987, some 10,000 Israelis lived in the West Bank and Gaza (beyond the expanded municipal boundaries of Jerusalem). The, during the 1980s, the Israeli governments intensified substantially its financial incentives to pure more Israelis to settle in the West Bank. The goal was to make it impossible for any future Israeli government to relinquish the area. As a result, more than 130,000 Israelis now live in the territories, excluding those in expanded Jerusalem.

            American aid, up until 1991, contributed to the settling of the West Bank by cushioning what would otherwise have been a substantial drain on the Israeli budget, in the form of subsidies to settlers. Now, when peace is a real prospect, the time has come for the United States and the Israeli government to reverse the financial incentives.



An appropriate instrument for this is the $10 billion loan guarantee program authorized by Congress in 1992 to provide housing for hundreds of thousands of Jews expected to emigrate from the former Soviet Union. Since actual immigration has turned out to be less than anticipated, the loan guarantees—now largely unused—could facilitate emigration from the territories by financing housing within pre-1967 Israel for tens of thousands of returning Israeli settlers.

            Here’s how such a program much work:


  • Relocation assistance would be made available to families that agree to leave apartments and homes in the territories.
  • There properties would then become the property of the Israeli government and might at some later date be transferred to the Palestinians, within the context of final status negotiations.
  • The amount of assistance provided would decline over time. In the first year, $100,000 per family might be made available. This could be reduced in $20,000 increments each year, so that settlers waiting until the fifth year would receive only limited compensation. In short, those who leave early would be rewarded.


            At present, there are approximately 25,000 Israeli families living in the territories. If, in each of the next five years, 4,000 families took advantage of the program, the cost to the Israeli government would be just over $1 billion dollars, a limited part of the total $10 billion in U.S.-guaranteed loans.

            A program of this sort will not draw the most ideological of the settlers from the territories, and it can also be expected that smaller groups of extremists committed to violence will not leave in response to financial incentives. But polls show that even now more than 30 percent of the settlers are ready to leave if the compensation is provided. And this number will grow once the process is started.

            The program could be implemented unilaterally by the Israeli government; no negotiations with the Palestinians are required; and no coercion would be involved. Moreover, it would still leave open the future of the settlements themselves and of those settlers who remain. By agreement, those issues are to be dealt with in the final-status negotiations, which according to the Declaration of Principles are to “commence as soon as possible but not later than the beginning of the third year of the interim period.”



The advantages of assisting the settlers to leave now are compelling.

             By reducing the size of the settler population, the problem of dealing with settlements in the final status negotiations will be significantly easier, both to negotiate and to implement. Indeed, if this is not done, the settlement question may prove “a deal breaker” in the final status talks.

            A government-assisted exodus of settlers would also send the clearest possible signal to the Palestinians that the Israeli government is serious about ultimately withdrawing form the West Bank. This would greatly strengthen the position of Palestinian moderates who have been negotiating with the Israelis.

            Moreover, a major return of Israeli settlers from the territories would help limit the violence in coming years. With respect to extremists on the Israeli side, it would demonstrate that the effort to create permanent facts on the ground have failed and that the Israelis were leaving the territories regardless of attempts by extremists to disrupt negotiations. An exodus of settlers from the territories would also refute the claim of the Palestinian extremists that the only way to end the occupation is to mount violent attacks on Israelis.

            The precedent of ample compensation paid to settlers who left the Sinai when peace was achieved with Egypt has created expectations of compensation among Israeli settlers. They will not leave without it, and the real choice is whether the process begins now or in five years. Logic says do it now.

            The main obstacle standing in the way of this idea in the Israeli government’s view that settlements and settlers are bargaining chips to be saved for final status negotiations. This outlook is reminiscent of the old Palestinian arguments that acceptance of Resolution 242 or Israel’s right to exist was a card to be help until the final status negotiations. However, the PLO made these decisive concessions in 1988, recognizing that peace negotiations are not a zero-sum game and that both sides must take steps to strengthen each other, regardless of whether there is an immediate quid pro quo.

              It is time for Prime Minister Rabin similarly to recognize that it is in Israel’s interest to act now t reduce the number of settlers. The United States, as Israel’s closest ally, has a specific role to play in encouraging and facilitating this significant contribution to the peace process.