On January 27, 2000, The Israel State Comptroller, the highest arbiter of the Israeli legal system, asserted that the campaign to elect Ehud Barak as the prime minister of Israel had established no less than twenty three fictitious non- profit organizations that had channeled illegal contributions to Barak's campaign coffers.

These organizations, with innocuous names such as "Hope for Israel", "The movement for better taxi service", "Citizens from right and left", "Doctors for immigrant absorption", were established in 1998 and 1999 as bonafide health, education and welfare organizations, and duly registered as such in the Israeli government registrar of non-profit organizations.

However, the Israeli State Comptroller documented was that these groups were transformed into clandestine conduits for Barak's election campaign in the Spring of 1999. These organizations never bothered to maintain appropriate book-keeping procedures under the bylaws of the Israeli government registrar of non-profit organizations, and they were all stricken from the record.

Some of these organizations maintained organizational ties to American Jewish organizations such as the Israel Policy Forum, a respected lobbying organization in Washington, which had been using the services of Attorney Yitzhak Hertzog as a liaison to the Barak camp in Jerusalem. Hertzog, the son of the late Israeli president Haim Hertzog, is now the prestigious cabinet secretary of the Barak government has been identified by the state comptroller as the attorney of record who oversaw the registration of this plethora of non-profit organizations on behalf of Barak's election. Only fifteen minutes after the official publication of the state comptroller report, the Israeli attorney general Dr. Elyakim Rubenstein ordered a police investigation to review the Barak campaign allegations.

Essentially, that inquiry will address the question of Barak's accountability which has shades of the challenge to Nixon in the 1973-74 Watergate committee: What did he know, when did he know it and was he directly involved?

Barak did not get off to a good start. His first reaction to the Israel State Comptroller report, issued on January 30, was that he was never directly engaged in fund-raising activities. Barak had apparently forgotten about his March 25th, 1999 personal appearance at a $10,000 a plate dinner given on his behalf in Los Angeles, hosted by California industrialist Haim Saban and reported on the wire of the Jewish Telegraphic Agency on March 28th. Reached by Raanana journalist Aaron Lerner at his home, Tugend affirmed that he had covered the event where Barak had personally solicited funds from wealthy American supporters.

American citizens who make non-profit contributions that wind up in political coffers are aware that this violates IRS law. Some of Barak's American contributors may have reason to be nervous at this time.

Another factor that the Israeli police and public want to know concerns the involvement of the Clinton Administration. The Israeli police want to know who was paying the bills for Barak's campaign advisor Tal Zilberstein, who is retained by Washington political strategists James Carville and Stanley Greenberg, the same team retained by Clinton. The Israel State Comptroller notes that Zilberstein was paid in foreign currency. From where? From private citizens? Or from funds traced to the Clinton Administration itself?

Stay tuned for an unprecedented Israeli police inquiry into the campaign of prime minister Ehud Barak in the Spring of 1999.

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This week, the Israeli government has been asked by the US state department and by the White House to dispatch representatives to talks that will take place somewhere near Washington, to meet with representatives of the Palestinian Liberation Organization's administrative prodigy, known as the Palestinian Authority (The PA).

On the agenda: Establishing the rudiments of a Palestinian state, no later than February 13, 2000.

On the face of it, what could Israelis possible have to fear from a neighboring mini-state, whose size would be half of Rhode Island?

Yet some of the practical and topographical considerations of having a Palestinian state next door are not lost on people in Israel who already feel the conseqences of this nascent entity.

The establishment of a Palestinian Authority in 1994 was meant to test the implications of having an autonomous entity nearby. The consequences have been tested in many ways:

Israelis who have had their cars stolen and driven into the PA-controlled areas have been helpless to get their vehicles back or to sue anyone to get their cars back.

The PA has consistently refused to hand over or indict criminals who have taken refuge inside the PA.

The PA has provided a sanctuary for 31 Arabs accused of murdering Jews who have taken refuge inside the PA.

Contrary to all agreements, armed PA officers have been patrolling Jerusalem.

Instead of cracking down on the Hamas and Islamic Jihad terror organizations, the PA has incorporated both groups inside the PA.

Instead of adopting a peace curriculum for the PA schools that would parelell the peace curriculum that has been running in Israeli schools for the past six years, the PA ministry of education has adopted a curriculum that prepares a new generation for a war to liberate all of Palestine.

Arafat's official PA radio and PA TV continue their daily tirade against Zionism that calls for the Palestinian Arab population to continue a holy war of Jihad, while the Friday sermons in PA-controlled mosques blare out calls for obliteration of the Jewish state.

3.5 million Arab refugees, disnfranchised by the PA and confined by the UN to the squalor of tranist camps inside the PA and in neighoring Arab countries for more than fifty years under the internationally supported premise and promise of the "right of return" to the cities and villages that they left in 1948, now prepare themselves to go back to thsoe cities and villages, even if they are now occupied by Israeli cities and collective farms.

Palestinian Arab refugees evoke the recent precedent of Kosovo refugees who took back their homes and villages from Serbians who had lived there for more than forty years.

Israeli and western intelligence agencies report that The PA police force that was supposed to comprise a lightly armed police force of 9.000 has evolved into fourteen units of a Palestinian Liberation Army of 50,000, trained by American military advisors. Small bands of PLA troops could at any time conduct guerilla attacks into any part of Israel and simply melt into the Palestinian population.

All these factors of a "Palestinian state next door" are known to the population of Israel, yet not often discussed or reported in the media.

Israelis simply do not take Arab plans and ambitions very seriously, and most Israelis would prefer to get on with their lives after more than sixty three years of continuous war in the land of Israel.

The consensus of all major political parties in the Knesset is that if the economy of the Palestinian entity is strong, then the Palestinian people will have little reason to engage in hostilities against Israel.

Yet study after study show that humanitarian aid and economic assistance to the Palestinian Authority has been squandered and embezzled by an elite circle of people around Yassir Arafat, with little "trickle down" effect to the Palestnian Arab population who blame Israel for imposing Arafat's regime on their people.

It would seem that Israel's neighboring state-in-the-making is more like having Beirut and Teheran next door than the Providence of a Rhode Island.

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Al-Quds [Jerusalem]
Al-Quds is the most widely distributed newspaper, read by 61.3% of the readers in the West Bank and Gaza Strip (according to a poll organized by Jerusalem Media & Communications Center (JMCC) in August 1998). It was established in 1951 and was published under the name "Al-Jihad" until 1967 which is when it was joined by "Al-Difa'a" to give it its present name "Al-Quds". Its owner and publisher is Mahmoud Abu-Zalaf. Its chief editor is his son, Waleed Abu-Zalaf.

Prior to the Intifada (uprising), the newspaper followed the line of Jordan, but after the Intifada there was an agreement between the administration of the newspaper and the PLO that the newspaper would follow only a Palestinian line and that the PLO would, in turn, support it financially.

After the coming of the PA, the placement of the censor's red lines was no longer so clear: a dispute between the PA and al-Quds over the number of people attending one of the Islamic Resistance Movement (Hamas) rallies occurred and resulted in General Ghazi al-Jabali, head of the Palestinian Police, blocking the distribution of al-Quds in the Gaza Strip for four days. Following this occurrence, a close relationship was forged between the administrative editor of al-Quds and Colonel Jibreel al-Rujoub, Head of the Preventive Security in the West Bank, which resulted in daily contact between the two parties with a view to agreeing firstly on what should appear on the front page of each edition and secondly on the content of articles criticising the Authority or one of its institutions.

For the PA's strategy to be executed perfectly and to avoid journalists wasting time, they are given instructions on how to write and edit articles and reports that are void of any critical analysis by the journalist himself. If a piece of news is deemed to be vital but criticizes the authority, it is published in an inconspicuous place within the paper and with a small heading. Thus the story in effect loses its importance. Moreover, when a piece mentions that a security organ has abused a citizen, the newspaper inevitably fails to give details of the name or age of the victim and fails to mention which security department has been responsible. If the matter involves criticism of high officials in the Authority, al-Quds does not publish anything on the matter until it has been dealt with by other papers. A journalist who works for al-Quds is on record as having said that "before publishing the report on corruption within the PA, I had to submit a draft copy of it: the newspaper did not publish it immediately. If it had done so, this would have constituted a precedent. After this episode, I stayed at home for a week not doing anything".

At times the newspaper is asked to delay publication of a report dealing with an error committed by the PA until the latter straightens things out. After this has been done, the newspaper publishes a report both on the error as well as on its rectification. On other occasions a journalist from the paper is asked to conduct an interview with someone who is on good terms with the owner of the paper whilst the paper refuses to publish anything on individuals that are on bad terms with the owner.

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Israel's military chiefs are urging their government to prevent Syria from obtaining US or Western aid that would allow Damascus to purchase strategic defence systems.

Israeli commanders are concerned that Syria, in the wake of any peace treaty with Israel, would obtain billions of dollars in US and Western aid that would allow Damascus to buy weapons systems that could significantly alter the military balance in the region.

"We are not threatening the Syrians," Israel air force commander Maj Gen Eitan Ben-Eliahu told Jane's Defence Weekly. "So, we don't see them needing anything more than they already have - particularly regarding weapons that can leave their borders." Gen Ben-Eliahu was referring to Syrian efforts to purchase the Almaz S-300 (NATO codename: SA-10 'Grumble') air defence system from Moscow. Negotiations have proceeded for two years, hampered by Syria's $11 billion debt to Russia and the insistence by Damascus on a long-term repayment plan.

Israeli commanders said the procurement of the S-300 would mark a major improvement in Syrian air defence and jeopardise Israeli deterrence. It would also mark the most important step in Syria's two-year effort in bolstering its military.

Aides to Israeli Prime Minister Ehud Barak said Israel would not oppose US military aid to Syria. They said Syrian dependence on the USA could help ensure any peace treaty between Damascus and Jerusalem.

Military sources said they could agree to US or Western deliveries of weapons that do not represent a significant improvement over what is currently in Syria's arsenal.

Israel's military intelligence chief Maj Gen Amos Malka said Syria under President Hafez Assad has in some cases caught up or even exceeded Israel in some areas of military prowess. "If Assad asks his chief of staff tomorrow morning what is the army's combat-readiness level, he will get an answer that the army is much more prepared than it was when he received it from the previous chief of staff two years ago," Gen Malka told a seminar at Tel Aviv University's Jaffee Centre for Strategic Studies on 17 January.

The reference, Israeli military sources said, was to Syria's anti-armour capability and electronic countermeasures. Gen Malka disputed a report by the Jaffee Centre's annual military balance that dismissed a Syrian military threat.

"The Syrian Army is not in the best shape," Gen Malka said. "Army-to-army the Israel Defence Force [IDF] stands out qualitatively over the Syrian Army and if war broke out between them the IDF would be victorious. But to jump to the extreme conclusion with significant ramifications that Syria doesn't have any military option and that its army is collapsing is too far-reaching and dangerous."

IDF chiefs are also urging Barak to ensure that Egypt, which signed a peace treaty with Israel in 1979, will also be denied certain US weapons. The IDF wants Washington to pledge that it will continue to ban any sale of the Boeing F-15 Eagle fighter to Egypt.

Egypt already has more than 200 F-16s. It is regarded as having the best navy and second-best air force in the Middle East - largely because of 20 years of US arms sales and training.

IDF commanders have pointed to a US pledge to maintain Israel's qualitative edge over its neighbours. "To maintain this edge, we should not have the F-15s sent to any other country except Israel," said Gen Ben-Eliahu.

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Washington, Jan. 31 -- Satellite photographs and American intelligence reports have shown that Iraq has in the last year rebuilt military and industrial sites damaged by American and British air strikes in late 1998, officials say.

The recent intelligence findings have raised concerns among Defense Department and other officials in the Clinton administration that in the prolonged absence of international weapons inspectors, whose job would be to search those structures, President Saddam Hussein's government has continued its pursuit of biological and chemical weapons.

Despite those concerns, the administration's policy has been allowed to drift, leaving the United States unable to force Iraq to accept a resumption of inspections even after resolving an impasse at the United Nations Security Council.

Iraq's refusal has now left the administration in a quandary over how to respond at a time when international support for its policy and for sanctions against Mr. Hussein is waning.

"There is concern in intelligence circles that he has begun to rebuild buildings that could enable him" to produce chemical or biological weapons, a senior administration official said. "He has had a lot of time to operate without inspections."

Although the intelligence reports have not provided concrete evidence that Iraq is producing chemical or biological weapons, the officials said, the reports have raised the possibility of renewed military confrontation, because the administration has repeatedly warned that any effort by Iraq to produce the weapons would prompt new American air strikes.

The concern has given urgency to the new inspection program created last month by the Security Council. But for the administration, the latest Iraqi defiance has been met with frustration, uncertainty over how to proceed and even fatigue.

In his State of the Union address on Thursday, Mr. Clinton devoted exactly six words to Iraq. The American representative to the United Nations, Richard C. Holbrooke, a diplomat noted for his tenacity, barely involved himself in the Security Council's negotiations over inspections, leaving them to his deputy, James B. Cunningham, who arrived in New York just last month.

Despite a policy of "containment," punctuated by American-led strikes in 1993, 1996 and 1998, Mr. Hussein remains as much a thorn as he was when Mr. Clinton took office. And Iraq's defiance comes in a year when any action by the administration would have political ramifications in the presidential campaign.

Nearly a year and a half after Iraq blocked the last team of United Nations inspectors, administration officials said that getting inspectors back into the country remained the best way to determine if Baghdad's weapons programs were continuing.

Last week, after months of diplomatic wrangling, the Security Council agreed to nominate Hans Blix of Sweden to lead a new inspection team in Iraq, having rejected a candidate supported by the United States, Rolf Ekeus, also of Sweden.

Russia and France vetoed Mr. Ekeus's nomination after consultations with Mr. Hussein's government, diplomatic officials said.

But while Iraq has been less hostile toward Mr. Blix, Iraqi officials have said they will not accept any resumption of international weapons inspections under the terms of the latest Security Council resolution.

Even if Mr. Hussein eventually relents and allows Mr. Blix's team to enter the country, it will take at least three or four months before inspectors can resume work inside Iraq. Administration officials expressed their concerns when asked to assess the state of Washington's policy toward Iraq. Some officials defended the administration's approach, but others, including Pentagon officials, criticized the policy out of concern that it has left the United States few viable options.

Thirteen months ago, the United States and Britain launched four nights of air and missile strikes to punish Mr. Hussein after he expelled the last team of weapons inspectors. At the time, senior commanders estimated that the operation had set back Iraq's ability to produce chemical or biological weapons -- and the missiles needed to launch them -- by one to two years.

"We're marching toward that point" now, a senior military officer said.

Pentagon and other officials declined to discuss the recent intelligence findings in detail, but they said Iraq had rebuilt many of the 100 installations damaged or destroyed in the American and British raids in December 1998.

Of those targets, 12 were missile factories or industrial sites that commanders said were involved in Iraq's efforts to produce weapons of mass destruction. The officials said significant reconstruction had been seen at those sites, including Al Taji missile complex north of Baghdad.

In the wake of the diplomatic wrangling, administration officials defended their policy toward Iraq. They said they remained determined to contain Mr. Hussein militarily while maintaining the economic sanctions first imposed when Iraq invaded Kuwait in 1990 and while supporting Iraqi opposition groups.

Officials emphasized that a new American attack did not appear imminent. They said they wanted to see if the new inspection program would eventually get off the ground before taking any action that could further erode international support for the American stance toward Iraq.

But the officials said there remained three "red lines" that the United States would not let the Iraqis cross: a threat against a neighboring country like Kuwait or Saudi Arabia, an attack on the Kurdish minority in northern Iraq or a reconstitution of nuclear, chemical or biological weapons programs.

Critics of Washington's handling of Iraq said the administration appeared to have no clear plan on how to force an end to Iraq's defiance. "There is no adult supervision of our policy," said Anthony H. Cordesman, a military analyst at the Center for Strategic and International Studies in Washington.

And despite American efforts to unify Iraqi opposition groups, factions remain. The administration has provided only a small part of the $97 million that Congress authorized to support those bent on overthrowing Mr. Hussein's government.

Also, international sanctions are fraying. To win Russian and French support for the new weapons inspection program, the United States and Britain agreed to offer Iraq an opportunity to end the sanctions. Under the new Security Council resolution, the United Nations will suspend sanctions if Iraq cooperates with the new inspectors.

But one reason for the continued Iraqi defiance may be that the sanctions are already leaking. Iraq is allowed to export $10 billion a year to buy food and other essential goods, and while the proceeds are closely monitored by the United Nations, the Iraqis have been able to divert some of the money, administration officials said.

Mr. Hussein's government has also been able to earn millions of dollars in smuggling. Since August, Iraq has steadily increased illicit shipments of oil from the Shatt al Arab waterway, much of it flowing through an installation near the port of Basra that American warplanes attacked and damaged in 1998, the officials said.

Last month, Iraq's illicit trade reached the highest level since the Gulf war. More than 130 ships, some of them Russian, left the port and skirted the Iranian coast, staying in Iran's territorial waters to evade American ships trying to intercept them. "The Iranians are at least tacitly involved in this," a senior administration official said.

In the same month, Navy warships boarded only 36 ships and seized only 4. According to American intelligence estimates, Iraq was able to smuggle out a record amount of 317,000 metric tons of oil, or more than 2.3 million barrels, in December alone. At today's price of about $27 a barrel, the shipments were worth more than $62 million.

A recent intelligence report concluded that the smuggling was undermining the sanctions. Pentagon and other administration officials say they increasingly worry that the proceeds may be intended to finance weapons programs.

But another senior Administration official said the amounts of illicit profit were not enough to allow Mr. Hussein to produce nuclear, chemical or biological weapons. "What's inside the buildings is much more expensive to put up than any walls and roofs," the official said.

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January 27, 2000

Martin Indyk, recently returned to Israel for his second tour as U.S. ambassador, told an Israeli television interviewer January 25 that he believes "that there is a real opportunity now on the Syrian, Lebanese and Palestinian tracks to achieve, not one agreement, but three agreements this year.

The U.S. goal "is to work with the Government of Israel to try to achieve what is an ambitious agenda, but one which, President Clinton agrees with Prime Minister Barak, is achievable this year."

[begin transcript]

U.S. Ambassador to Israel Martin S. Indyk's Interview with Israel TV Channel One Senior Correspondent Ehud Yaari January 25, 2000

Mr Yaari: Welcome to Israel, Mr. Ambassador.

Ambassador Indyk (In Hebrew): Thank you very much.

Question: It's quite unusual for an ambassador to return to the place he was serving in for a second round.

Ambassador Indyk: It feels quite unusual. It's like Rip Van Winkle waking up out of the dream and coming back to the place that's the same. Of course, it's changed, but I am delighted to be back; my family is also excited to be back, and we are looking forward to working with Prime Minister Barak and the government and people of Israel in an intensive effort to try to achieve a real peace -- a comprehensive peace and a secure peace for Israel -- this year.

Question: One of the previous Prime Minister's confidantes, Mr. David Bar-Ilan, is already attacking you publicly. I am asking you, was there any bad taste left last time when you left the job here to take up your position in Washington when Mr. Netanyahu was prime minister?

Ambassador Indyk: You know it's in the nature of Israeli society that people can't rest for long without attacking somebody, and I am a big target. I think that's unimportant. I am the ambassador of the United States to Israel -- that means to all of Israel. I certainly expect to have close working relations not only with the government but also with the opposition.

Question: Can Mr. Netanyahu expect an invitation to a dinner some time at the Ambassador's residence?

Ambassador Indyk: Of course. I would expect to pay a courtesy call on him as I would on Prime Minister Shamir.

Question: If I may, Mr. Ambassador, I would like to switch to something that Syrian official sources were leaking recently. They were saying, through their mouth-peace, a Lebanese newspaper by the name of "Al-Safir" that the peace team of which you were a prominent member . . .

Ambassador Indyk: I am a prominent member.

Question: I stand corrected . . . that the peace team: you, Dennis Ross and the rest of them are pro-Likud. That you were unofficial members quote unquote of the Israeli delegation to Sheperdstown. Why would they attack you?

Ambassador Indyk: Well, I don't think that's serious. It's in the nature of this business that I am or we are accused of being either pro-Likud or anti-Likud. In your two questions you have the two opposite positions. I think we have to do what we have to do, and that is to try to be honest brokers in a situation in which, of course, we have a close and strong relationship with Israel -- of which the present Secretary and the peace team are proud -- because we believe that that is the cornerstone for a comprehensive peace. It is impossible to achieve a real peace in which Israel has to take risks for peace and has to take painful decisions -- it is impossible for Israel to do those kinds of things unless it has the solid, secure, strong backing of the United States. Some people see that as somehow that has an impact on our ability to play the role of honest broker. I say the exact opposite. Because we have a relationship, a close relationship, a strong relationship of trust with the Government and the people of Israel, it gives us the ability to play an effective role in the peace process.

Question: Were you surprised by the size of the Israeli request for a military package?

Ambassador Indyk: No. We have known for some time that when it comes to a deal involving the Golan, that Israel's security requirements are going to be substantial. We are working hard on that request to refine it, to see how we can be responsive. But there is a basic underlying commitment that, if you remember, President Clinton made to Prime Minister Rabin in April of 1993. When then Prime Minister Rabin made his first visit to meet with the new President, President Clinton said: "Prime Minister Rabin, you have told me that you have a mandate to take calculated risks for peace, and I will tell you that my role is to minimize those risks."

Question: Tomahawk missiles -- is it a possibility? Tomahawk cruise missiles?

Ambassador Indyk: I am not going to get into details of the package we are looking at, at Israel's request. We obviously owe an answer to the Government of Israel and we will be talking to them about all of these things before we talk about them in public. Of course, we have a responsibility to work with the Congress to make sure that the Congress will be supportive of this also. So, there are a lot of steps that have to be taken before we can answer questions like that.

Question: Are you concerned because the Syrian technical team did not show up in Washington as expected?

Ambassador Indyk: No. I think that this is a timing or a scheduling issue and, as we understand it, we want the Israeli team to come first and the Syrian team will follow.

Question: Finally, Mr. Ambassador, do you think it's "doable?" That is: getting a framework with the Palestinians, getting out of Lebanon in an agreement and clinching a deal with Syria in the span of the few next months?

Ambassador Indyk: Well, as I said at the outset, our intention is to achieve a comprehensive peace in the coming year by working with the Government of Israel to do that. Whether it's achievable in the exact timetable as laid out now is not clear. But I certainly believe that there is a real opportunity now on the Syrian, Lebanese and Palestinian tracks to achieve not one agreement, but three agreements this year. That is the intention of Prime Minister Barak, and our intention -- President Clinton, Secretary Albright and myself as their representative here in Israel -- is to work with the Government of Israel to try to achieve what is an ambitious agenda but one which, President Clinton agrees with Prime Minister Barak, is achievable this year.

Question: Competitive simultaneity between the tracks -- is it helpful or is it damaging?

Ambassador Indyk: We have a word in English "symbiosis," which means that there is an interaction between the two, which produces a positive outcome. I have always felt that if it's possible to have all the tracks moving simultaneously, what develops out of that is that movement on one track helps to produce movement on another track. So, it has always been our objective to have all the tracks moving. That's why the Secretary of State is going to Moscow next week to re-launch the multilaterals at a ministerial level, because that track also can help to grease the skids on the other two tracks. So, we really would like to see all the tracks moving. It's my understanding that that's Prime Minister's Barak's intention as well.

Mr Yaari: Thank you very much, Mr. Ambassador.

[end transcript]

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