For the first time, an administration in Washington has linked further American generosity toward Israel to Israel’s willingness to stop further settlements on the West Bank. The government in Israel and officials of American Jewish organizations have reacted by denouncing President Bush for using a humanitarian cause, the need to finance the settlement of hundreds of thousands of Soviet Jews, as a weapon in his battle against Yitzhak Shamir’s expansionist policies. But these denunciations fail to conceal the real issue, which is whether American-backed aid is to finance the absorption of the West Bank into Israel, thus making an eventual exchange of territory for peace impossible. Both the Israeli government and the leaders of American Jewish organizations know that, whether a peace conference soon takes place or not, the long-predicted fight over the future of the territories that Israel acquired in the war of June 1967 has finally begun.

For months signals from Washington have made it clear that the Bush administration has lost patience with the policies of the Shamir government. Israel’s ambassador in Washington, Zalman Shoval, a political appointee who was formerly a Likud member of the Knesset, said bluntly in June, in an interview on Israeli radio, that the government would have to choose between more West Bank settlements and American aid. Several cabinet ministers bitterly denounced him, although he was simply reporting on the Bush administration’s policies, and his warning was only one of several signs in recent months of growing disaffection in Washington. Why did the administration harden its position, and why did the Israelis and the American Jewish organizations disregard the signals and head into confrontation?

The administration, for its part, came to the conclusion that the present government, the most right wing in Israel’s history, intends to hold on to the West Bank and Gaza, and the Golan Heights, at any cost. During the last fifteen years some US officials were drawn to theories that “only the Likud can make peace,” that only the right wing could lead Israel to territorial compromise. These have turned out to be false, as did the notion that supposedly moderate right-wingers—Yitzhak Shamir is sometimes cast in this role—would strike a deal if they did not have to depend for a majority in the Knesset on the extremists—such as Geula Cohen and Rechavam Zeevi—who oppose the slightest concession to the Palestinians. The Labor party has said it would support Shamir against any vote of no confidence if he were to move toward a policy of “territories for peace.” Shamir has ignored this offer. In 1979, when he was speaker of the Knesset, he voted against the Camp David agreement because he thought its provisions for autonomy for Palestinians on the West Bank would lead inexorably to the creation of a Palestinian state. He has made clear his belief that Jewish failure to settle the West Bank will lead to the same result.

Mr. Shamir was warned recently in private by several leaders of American Jewish organizations and…

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