Israeli Settlements in the West Bank: An Explainer

Last Thursday morning, I was perched and staring at Tel Aviv in the distance to my left, Haifa to my right, and the vast Mediterranean Sea that seemed to separate them. My crow’s nest view was from a lookout point from the Israeli settlement of Alfei Menashe, which is situated clearly inside the West Bank and guarded by the controversial barrier that separates Israel from the Palestinian territories (I had to chose my words carefully there — the Israelis call it a “security fence” and the Palestinians have far less PC terms for it. In the name of impartiality, I’ll go with “controversial barrier.”)

Israeli settlements in the West Bank have been a lightening rod for criticism and division. The major settlement push took hold under Menachem Begin, Israel’s prime minister from 1977-83, who supported Israeli construction in the West Bank and Gaza Strip as a way to consolidate Israel’s territorial gains in 1967’s Six Day War. In the present context, they’ve become a key issue as the Israelis and Palestinians negotiate peace — as Israelis continue to build new settlements or expand existing ones, it appears as though Israel’s government is interested only in tightening its grip on Palestinian territories, not giving them back.

Construction in and around Israeli settlements came to the forefront in George W. Bush’s 2003 “Roadmap for Peace,” which called for a “freeze on settlement expansion.” Ariel Sharon, Israeli prime minister at the time, suggested that such a freeze was impossible due to the need for settlers to build new houses and start families. The issue has remained controversial ever since.

Occasionally, this family issue has been falsely referred to as “natural settlement growth.” In reality, “natural growth” is completely different. Here’s how it works:  legal Israeli settlements are allotted a certain municipal boundary, but construction initially takes place on a small percentage of the designated land. “Natural growth” means that over time, the settlement expands to these full territorial boundaries. As construction continues, particularly for settlements deep on the West Bank, it certainly does look like an Israeli land grab.

In November, the Netanyahu government announced a 10-month moratorium on settlement construction, with an exemption for East Jerusalem. It’s due to be lifted in September.

The latest flare-up occurred during Vice President Joe Biden’s trip to Israel in March when the Israeli Interior Ministry announced the approval of construction of 1,600 new apartments in East Jerusalem. (NB: The Interior Ministry is headed by right-wing Shas Party member Eli Yishai, a rival to PM Netanyahu. The Interior Ministry’s announcement was likely designed to embarrasse Netanyahu during Biden’s visit.)

So, how do we sort this out? What’s the real concern with settlements, and how is the issue leveraged for political posturing?

The first thing to note is that certain settlement construction is more important (worrying) than others. Growth should only be highly controversial in settlement areas that will, one day, certainly be evacuated and turned over to Palestinian control.

If you look at a map of the West Bank, this includes the row of small settlements along the spine of the Jordan River and all those scattered in a seemingly random pattern throughout the heart of the territory. Jewish inhabitants in these locations number anywhere from a handful to a few thousand, and Israeli governments (yes, even those lead by Bibi) realize that they will not be part of Israel after a peace deal. Construction here in any form is unacceptable.

The biggest problem in this regard is Ariel, a settlement some ten miles behind the 1949 Green Line border. With about 80,000 Jewish residents living in relatively new apartment blocks that extend to its full municipal boundaries, both sides acknowledge moving them is probably more trouble than it’s worth. That’s why “new” construction in a place like Ariel technically isn’t that controversial–Ariel’s boundaries are firm, so construction won’t expand Ariel’s reach into the West Bank.  Most likely, Ariel will be walled off as a non-contiguous part of Israel (with some sort of a land-bridge to the “mainland”), just like Kaliningrad is separated from the rest of Russia. Or Alaska from the US. Furthermore, a Palestinian state will be compensated with land elsewhere for Ariel.

Moreover, construction in many — though not all — of the settlements in East Jerusalem is less of a big deal than it seems. Certain settlements, like Alfei Menashe in the first paragraph of this post, will very likely become part of Israel in a peace deal. Settlements in Jerusalem, like the Gilo settlement in the city’s south, may indeed be over the Green Line, but it, like Ariel, is a well-developed community that has been considered a regular Jerusalem suburb for decades. It’s clear to both sides that Alfei Menashe and Gilo — communities that have reached their allotted territorial capacity and have no more room for “natural growth”– will become permanent parts of Israel in a peace deal, and, critically, that the Palestinian state will be compensated with land elsewhere.

In other words, continued construction in a place like Gilo is controversial only because it is symbolic and plays well in the media. In reality, building a new apartment block right in the middle of a settlement technically violates the general construction “freeze,” but in reality isn’t a strategic expansion. Even so, Vice President Biden must severely object to these letter-of-the-law violations because they smack of Israeli tone-deafness to this political sensitivity.

That means that when we hear of construction in settlements, we have to be careful to separate the acceptable-but-tone-deaf construction from the strategically unacceptable. Greater understanding of the strategic and tactical realities of settlements would help diffuse an intense public sensitivity to a highly complex issue.

Brainwashed

“Flip-flopping” on major issues can be hazardous to your political health. “Flip-flopping” when you’ve branded yourself as a brave principled “maverick” can be especially dangerous. And “flip-flopping” on grounds that you were confused about the issue in question is really, really bad, particularly when you are on the far side of 70.

That’s why John McCain may have ended his long political career the other day when he responded to attacks by primary challenger J.D. Hayworth on his support for TARP (popularly known from the beginning as the “Wall Street Bailout”) by claiming he was misled by the Fed Chairman and the Treasury Secretary into thinking the bill was about the housing industry, not Wall Street:

In response to criticism from opponents seeking to defeat him in the Aug. 24 Republican primary, the four-term senator says he was misled by then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. McCain said the pair assured him that the $700 billion Troubled Asset Relief Program would focus on what was seen as the cause of the financial crisis, the housing meltdown.”Obviously, that didn’t happen,” McCain said in a meeting Thursday with The Republic’s Editorial Board, recounting his decision-making during the critical initial days of the fiscal crisis. “They decided to stabilize the Wall Street institutions, bail out (insurance giant) AIG, bail out Chrysler, bail out General Motors. . . . What they figured was that if they stabilized Wall Street – I guess it was trickle-down economics – that therefore Main Street would be fine.”

What makes this claim especially astonishing is that McCain was rather famously focused on TARP at the time. He suspended his presidential campaign to come crashing back into Washington to attend final negotiations designed to get enough Republican support for TARP to get it passed. He was, by all accounts, a very passive participant in these talks, but it’s not as though he wasn’t there. And you’d think his memories of the event would be reasonably clear, since it probably sealed his electoral defeat.

It’s not obvious how McCain can walk this statement back. And in terms of the political damage he inflicted on himself, it’s hard to think of a suitable analogy without going all the way back to 1967, when Gov. George Romney (father of The Mittster) destroyed his front-running presidential campaign by claiming he had been “brainwashed” by military and diplomatic officials into erroneously supporting the Vietnam War. He never recovered from that one interview line. (Sen. Gene McCarthy, who did run for presidential in 1968, was asked about the Romney “brainwashing” by David Frost, and quipped: “I would have thought a light rinse would have been sufficient.”).

McCain has a more sizable bank of political capital than George Romney ever did, but in a primary contest where he was already in some trouble, the suggestion that he was brainwashed by a Republican administration into fundamentally misunderstanding the central national and global issue of the moment–not to mention the central current grievance of voters with Washington–could be fatal. It doesn’t help that it will vastly reinforce Hayworth’s not-so-subtle claims that McCain is a fine statesman whose time has come and gone, and is now losing it.

This item is cross-posted at The Democratic Strategist.

A Five-Billion-Dollar Canary

Here in New York City, big numbers always dominate the local news. While it’s easy to talk about how Mike Bloomberg spent at least $90 million to squeak out a win in his race for a third term as mayor yesterday, these days the big number mentioned is $5.4 billion.

That’s the amount that local developer Tishman Speyer and investment powerhouse Blackrock spent to buy the huge Stuyvesant Town development in 2006, at the top of the real estate market. In turn, Tishman and and Blackrock turned around and packaged the promise of future rent flows from the complex as $4.4 billion in loans and commercial mortgage-backed securities (CMBS).

Since then, the Stuy Town project has been plagued by missteps. Promises to keep rates steady at rent-controlled levels — promises the joint venture had to make to get the city to agree to sell the property in 2006 — were almost immediately broken, with tenants being overcharged to the tune of $200 million. But with the downturn in the real estate market, defaults and late payments have risen at Stuy Town, endangering the new owners’ ability to meet their debt payments on the $3 billion in outstanding CMBS issued. People who claim to have looked at the finances claim Stuy Town only has enough liquidity to last through February. Even the eponymous Rob Speyer, co-chief executive along with his father, concedes the CMBS is going to require a restructuring.

In response, the Fitch ratings agency downgraded the CMBS bonds on Friday, and now says a default on the loans is likely.

While Stuy Town is unique in its size, it is not unique in its predicament. Real estate analysis firm Reis says the complex is indicative of the larger commercial real estate market:

About $26.64 billion of CMBS loans outstanding were 60 days or more past due last quarter, according to Reis. The default and delinquency rate rose to 4.52 percent from 0.8 percent a year earlier and 3 percent in the second quarter. Defaults may top 6 percent by year-end, the firm said.

This coming spike in defaults shows that even with the recent positive news — including last quarter’s 3.5% GDP growth — we’re not out of the woods yet. Most of that growth came from Recovery Act funds, including the “cash for clunkers” program and the increase in the first-time home-buyer’s credit. While this kind stimulus spending can provide an economic shot in the arm, it is not the basis for sustainable growth.

The collapse of the residential mortgage market (led by sub-prime mortgages losing value) was a big driver of the economic collapse of last year. The downturn that sends us into the second leg of a “W shaped recession” could be driven in part by the collapse of the commercial real estate market. Stuyvesant Town’s economic difficulties are a $5 billion canary telling us that things may get worse before they get better.