July 2007

07TELAVIV2280 2007-07-26 13:01 2010-11-28 18:06 SECRET Embassy Tel Aviv

DE RUEHTV #2280/01 2071352
P 261352Z JUL 07

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E.O. 12958: DECL: 07/13/2017

Classified By: Charge d’affaires Gene A. Cretz for reasons 1.4 (B/D).

¶1. (S) SUMMARY: Frances Fragos Townsend, Assistant to the
President for Homeland Security and Counterterrorism (AFHSC),
met Mossad Director Meir Dagan on July 12 for a general
discussion of regional security threats. On the Iranian
nuclear program, Dagan proved surprisingly optimistic about
the effects of United Nations Security Council (UNSC)
resolutions and their impact on Iranian elites. On most
other fronts, however, Dagan expressed deep skepticism
regarding any near-term solutions. Dagan believes that the
Syrians were emboldened by the Second Lebanon War, and argued
for a concerted international effort to enforce UNSC
resolutions in Lebanon as a means of removing Syria from
Iranian influence. In Dagan’s personal opinion, present
attempts to prop up the government of Prime Minister Salam
Fayyad will fail, and “an entirely new approach” with the
Palestinians is required. Dagan and Townsend surveyed
political developments in North Africa, Turkey, and the Gulf,
and shared concerns about Pakistan’s ability to withstand the
challenge of Islamic radicals. END SUMMARY.

Financial Sanctions Offer Hope on Iran

¶2. (S) Mossad Director Meir Dagan began his two-hour meeting
with Townsend by expressing satisfaction with sanctions
against Iran. Dagan said UNSC Resolutions 1737 and 1747
caught the Iranians off-guard, and were having an impact on
the Iranian elite and financial community. The resolutions
had been particularly successful through their indirect
consequences, explained Dagan, by stigmatizing Iranian
businesses and discouraging risk-averse Europeans from being
connected with Iran. Dagan praised ongoing GOI-USG
cooperation on this front, and added that domestic economic
problems were creating additional pressure on the regime.

¶3. (S) With regard to their nuclear program, Dagan said the
Iranians are attempting to convey a “false presentation” that
they have mastered the uranium enrichment process. The
reality is that they are not there yet, said Dagan, and they
are paying a heavy political price (sanctions) for something
they have yet to achieve. Dagan noted growing antipathy in
Russia towards Iran and its nuclear program, and said the
Iranians were shocked by Russian statements accusing them of
supporting terrorism against the United States. In Dagan’s
view, there is no ideological conflict within the Iranian
leadership (all wish to see the destruction of Israel), but
there is a growing divide on tactics with some supporting a
retaliatory position against the West and others favoring new
policies of moderation. Recognizing the growing strength of
the moderate camp, Dagan said that the militant followers of
President Mahmoud Ahmadinejad are now trying to target
supporters of Akbar Hashemi Rafsanjani as spies.

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Gulf States Await Action (From Others) on Iran
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¶4. (S) According to Dagan, Jordan, Saudi Arabia, and the Gulf
States all fear Iran, but want someone else “to do the job
for them.” Townsend and Dagan discussed the current state of
affairs in the Saudi royal court, where the Mossad Chief
accused Foreign Minister Saud bin Faysal of playing a “very
negative role.” He also pointed to the recent visit of the
Saudi King Abdullah to Jordan as a historical first and
turning point for relations between the two countries.
Townsend agreed, and said that the Saudi king has a sense of
urgency on the political front. Dagan characterized Qatar as
“a real problem,” and accused Sheikh Hamid of “annoying
everyone.” In his view, Qatar is trying to play all sides —
Syria, Iran, Hamas — in an effort to achieve security and
some degree of independence. “I think you should remove your
bases from there…seriously,” said Dagan. “They have
confidence only because of the U.S. presence.” Dagan
predicted, with some humor, that al-Jazeera would be the next
cause of war in the Middle East as some Arab leaders
(specifically Saudi Arabia) are willing to take drastic steps
to shut down the channel, and hold Sheikh Hamid personally
responsible for its provocations.

Syria Taking Dangerous Risks

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¶5. (S) Dagan echoed other reports that Syria expects an
Israeli attack this summer, and has raised its level of
readiness. Despite the fact that Israel has no intention of
attacking, said Dagan, the Syrians are likely to retaliate
over even the smallest incident, which could lead to quick
escalation. Dagan believes that Syria’s strategic alliance
with Iran and Hizballah has not changed, and that Assad views
these policies as both “successful and just.” There is a
tendency to assume that Syria can be separated from Iran,
said Dagan, and that this offers the key to weakening
Hizballah. Dagan argued that the opposite is true: by
enforcing UN resolutions on Lebanon and increasing efforts to
disarm Hizballah, the international community can remove the
glue that binds Iran and Syria. Enforcing the resolutions
would put additional pressure on Assad, who fears being tried
for the assassination of Lebanese Prime Minister Rafiq Hariri
above all else. The advantage of such an approach, continued
Dagan, is that the legal ground is already in place for
action by the UNSC. This credible threat could sufficiently
frighten Syria away from Iran and towards more natural allies
in the Arab League.

Deep Pessimism on Relations With Palestinians

¶6. (S) Departing from official GOI policy, Dagan expressed
his personal opinion that after more than a decade of trying
to reach a final status agreement with the Palestinians,
“nothing will be achieved.” Only Israeli military operations
against Hamas in the West Bank prevent them from expanding
control beyond Gaza, lamented Dagan, without which Fatah
would fall within one month and Abbas would join his
“mysteriously wealthy” son in Qatar. Offering what he
believed to be a conservative estimate, Dagan said that USD 6
billion had been invested in the Palestinian Authority since
¶1994. “What did it accomplish, other than adding a few more
people to the Fortune 500?” asked Dagan. Although he
expressed his personal faith in Salam Fayyad, Dagan said that
the Palestinian Prime Minister had no power base. Fatah as a
party would have to completely reorganize itself in order to
regain credibility, argued Dagan, but instead they have
turned once again to the “old guard.” The Mossad Chief
suggested that a completely new approach was required, but
did not provide Townsend any additional details.

Pakistan…and Other Regional Concerns

¶7. (S) Townsend and Dagan then embarked on an informal tour
of the region, comparing notes on countries critical to
combating terrorism. Dagan characterized a Pakistan ruled by
radical Islamists with a nuclear arsenal at their disposal as
his biggest nightmare. Al-Qaeda and other “Global Jihad”
groups could not be relied upon to behave rationally once in
possession of nuclear weapons, said Dagan, as they do not
care about the well being of states or their image in the
media. “We have to keep (President Pervez) Musharaf in
power,” said Dagan. In North Africa, Dagan contended that
Qaddafi needs to be pushed more in order to put Libya on the
right track. Qaddafi faces little domestic pressure, said
Dagan, but has traditionally responded to outside threats and
runs foreign policy based on his emotions. The only reason
Qaddafi moderated his position to begin with, said Dagan, was
that he feared that he was “in the crosshairs” for regime
change. Dagan viewed the situation in Algeria as more
serious, with the south of the country becoming increasingly
dangerous and the leadership uncertain as it faces radical
Islamic forces. Morocco is coping better with these issues
“in spite of the king,” said Dagan, who appears to take
little interest in governing. In Turkey, Dagan said that
Islamists there are not of the same cloth as others in the
region, but he does fear that they are slowly breaking down
the secular character of the state and could become more
radical over time. Dagan argued that if the Turkish military
received more direct support from the United States, it would
be better able to prevent the rise of Islamists.

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S E C R E T SECTION 01 OF 02 TEL AVIV 002281






Classified By: Charge daffaires Gene A. Cretz for reasons 1.4 (B/D).

1. (S) SUMMARY: Frances Fragos Townsend, Assistant to the President for Homeland Security and Counterterrorism (APHSCT) met with Israeli National Security Council (NSC) officials on July 12. Danny Arditi, Head of the NSC Counterterrorism Bureau, presented a plan to facilitate increased financial support for the Palestinian government of Prime Minister Salam Fayyad, while mitigating the risks of new funding for terrorists and the Hamas “government” in Gaza. The core of the proposal was the establishment of an active Palestinian Financial Intelligence Unit (FIU) with supervision from the United States or the European Union. NSC Chairman Ilan Mizrahi offered Townsend a broader analysis of regional threats, focusing on the specter of Iranian influence and what he viewed as the growing confidence of al-Qaeda-related groups. NSC officials additionally presented an action plan for disrupting Hizballahs terrorist operations through an aggressive legal strategy against the organizations international criminal network. END SUMMARY.


Terrorist Finance Controls Key to Gaza Policy


2. (S) Brigadier General Danny Arditi, a counterterrorism advisor to Prime Minister Ehud Olmert, presented Townsend with a plan for increased cooperation with the Fayyad government, facilitated by improved monitoring of the Palestinian financial system. Arditi said that the objective was to damage the Hamas government in Gaza financially without creating a humanitarian crisis, and to buy time for Fatah to rebuild support. In Arditis view, the current closure of Gaza border crossings is not sustainable, with several thousand Palestinians currently waiting to enter Gaza through the Rafah crossing. Arditi said that sooner or later the GOI would have to deal with Hamas. At the same time, said Arditi, Israel and the Fayyad government are in agreement that they cannot allow free movement into and out of Gaza without a mechanism for controlling the flow of money and goods to terrorists and the Hamas government. (NOTE: Arditi added that Israel and Fayyad are both willing to open the Kerem Shalom crossing through Israeli territory. Hamas has repeatedly rejected such a solution, preferring to hold out for reopening Rafah for people and Karni for goods. END NOTE.)

3. (S) Arditis proposal called for the creation of an external oversight system, with assistance from the United States and/or the European Union. The proposed system would include the creation of a strong Palestinian FIU based in the West Bank, and “the adoption of Financial Action Task Force (FATF) rules by the Palestinian banking system.” Without such oversight, Arditi expressed concern that Israeli banks would cut off their correspondent relationship with the Palestinians (reftel). Arditi said that Mossad Director Meir Dagan also advocates a new Palestinian “social security system” as an alternative to the Hamas Daawa system of charitable institutions, but Arditi remained skeptical on this point. Arditi asked Townsend who would be the right partner in the USG for the FIU plan, and inquired as to whether it would be well-received in Washington. Townsend recommended Under Secretary for the Treasury Stuart Levey as a natural counterpart, and suggested that the Israelis approach Deputy National Security Advisor Elliott Abrams on the question of support.

4. (S) Arditis presentation represented an attempt by the Government of Israel (GOI) to find a way forward in dealing with Hamas-controlled Gaza, but NSC officials admitted that the GOI does not yet have a coherent policy. The Gaza/West Bank split appears simple on the surface, said an aide to Arditi, but carries many inherent contradictions. “This is not the first time we have tried to help Fatah,” he noted. NSC officials told Townsend that the Israeli Cabinet remains concerned about Hamas influence in the West Bank, and many are skeptical about the ability of Abbas and Fayyad to “turn back the wheel.”


NSC Head Sees “Axis of Fear”


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5. (S) Chairman Ilan Mizrahi stressed that process, not events, affects the spread of terror in the Middle East. He pointed to three major factors in the region that create the conditions for terrorism: the weakness of Arab and Muslim communities and states that fail to join the advances of the modern world; the erosion of the secular state and the rise of ethnic politics, particularly in Iraq, the Palestinian territories, and Lebanon; and the rise of political Islam. Mizrahi also noted that the clash between Sunni and Shia Islam tends to bring out the extremists on both sides. He pointed out that both sides support terror groups that further their interests, including the Gulf States and Saudi Arabia, despite the fact that some characterize them as “moderate Arab states” or “good guys.” Mizrahi said that many Arab states would be better characterized as an “axis of fear,” because they share a fear of Iranian influence.

6. (S) There are few forces restraining radical Islam, said Mizrahi, particularly now that the United States and Israel are viewed as weakened powers. Supporters of radical Islam believe that their cause is ascendant, he continued, given what they perceive as successes in Iraq, Afghanistan, Somalia, North Africa, Iraq, and Lebanon — as well as growing militancy among Muslim communities in Europe and the Far East. Iran supports terrorism throughout the region, said Mizrahi, who asserted that Iran is currently sheltering two senior al-Qaeda operatives. Townsend agreed with Mizrahi that al-Qaeda-type groups were positioned for new strikes against the West, particularly originating in North Africa where al-Qaeda has gained from mergers with local organizations. Townsend said that terrorists were particularly determined to hit major oil facilities, and could potentially pursue a combination of big and small attacks over a period of time sweeping from Europe to the Middle East.


Linking Crime and Terror


7. (S) NSC officials made a presentation on current GOI efforts to pursue links between terrorism and criminal activity, including Hizballahs involvement in drug trafficking and money laundering. They thought criminal investigations could be used to disrupt Hizballahs operations, especially its financial resources. One NSC official working on the plan said that he was working with the New York District Attorney to prosecute criminal cases in that state. Mizrahi also contended that the professional level of criminality in North Africa, coupled with emigration to Europe, posed a real threat when combined with terror elements. Townsend added that given the visa waiver program with many European countries, this posed an additional threat to the United States. NSC officials queried Townsend on U.S. commitment to combating Hizballah, and received assurances that the organization remains a “tier 1 priority.”




8. (S) It is not clear to what extent the NSC proposal for a Palestinian FIU and international oversight is official GOI policy. Israeli officials themselves admit that a clear policy has yet to crystallize fully, especially with regard to Palestinian institutions in Gaza. There appear to be several camps within the GOI on the issue of financial links with Gaza, with some advocating for a complete banking quarantine. This current proposal originated in the Israel Money Laundering and Terror Financing Prohibition Authority of the Ministry of Justice (reftel), and represents a more measured approach. Arditi and others are looking for a balance between humanitarian concern for the Palestinian population and effective tracking of possible terrorist activity. Arditi and the NSC are likely seeking U.S. support to strengthen their position in internal GOI discussions.

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