A $500 Million Misunderstanding

Doubt over debt, but smiles about weapons

Prime Minister Shimon Peres returned to Israel early last week after a highly successful trip to the U.S. He carried with him the assurances of strong U.S. economic backing, possibly including a postponement of the $500 million in Israeli debt that comes due early next year. But disturbing news awaited him as he resumed work on Israel's economic problems. Inflation, which had already been roaring along at 500%, jumped last month to around 900% on an annual basis.

The Reagan Administration seemed taken aback by the Israelis' claim of a U.S. offer on the debt postponement, which would be in addition to a previously announced U.S. decision to accelerate the payment of $1.2 billion in economic aid. The Administration insisted that the possibility of a deferral had merely been discussed as one of many courses that might be necessary for Israel if all else failed.

Apart from economic problems, the Israeli Cabinet plans to address itself soon to the question of withdrawing Israeli forces from southern Lebanon. Peres has emphasized that Israel is ready to bring its troops home but would like assurances from Syria that the security of southern Lebanon, and therefore of northern Israel, will be respected. Specifically, he wants a pledge that Syria will not send its own troops to occupy the area the Israelis leave, will bar Palestine Liberation Organization guerrillas from re-entering southern Lebanon, and will allow the area immediately north of the border to be controlled by the largely Christian militia known as the South Lebanon Army, an Israeli ally.

As Syrian President Hafez Assad visited Moscow last week, his Chief of Staff, Major General Hikmat Shehabi, declared that Syria was prepared to dispatch thousands of volunteers to fight the Israeli occupation of southern Lebanon. Thereafter, the Israelis let it be known that they might not leave the areas in which they face Syrian forces after all. That was an apparent effort to press the Syrians to make some tangible concessions on the security question.

In the meantime, U.S. Defense Secretary Caspar Weinberger arrived for two days of talks with Israeli leaders. On leaving, he announced that the Administration had decided to grant Israel access to the advanced U.S. technology needed for the Lavi fighter jet, which is expected to become the workhorse of the Israeli air force in the 1990s. He said the U.S. would also consider meeting Israeli requests to buy three diesel submarines and to sell Israeli-made 120-mm mortars and ammunition to the U.S. Army.

Then, declaring that the Administration was eager to "reinvigorate the peace process" and that the time was ripe for initiatives, Weinberger left for an unexpected meeting with Jordan's King Hussein. He went to Jordan partly because Egyptian President Hosni Mubarak, whom the Defense Secretary also visited, thought the stop would be useful. Hussein, in turn, had just returned from Iraq, where he had urged President Saddam Hussein to follow Jordan's lead in restoring diplomatic relations with Egypt. Weinberger's optimism about the peace process contrasted with the caution of Secretary of State George Shultz, who said that despite "a lot of motion," there was no reason to believe that any kind of agreement on Lebanon was near.