Created: 4/11/1968

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This estimate assesses Israel's situation with particular reference; lo Its centra] problem of security. Io the radically altered riruatioo aris-tnj from the June war, Israels security problems have two major(a) Its military capabilities compared to those of thend (b) the political, psychological, diplomatic, and ad/TuViistrativ* rjoes-Uonj involved In dealing with the occupied territories and with Its Arab neighbors in circumstances short of war.


A. Despite Its smashinghe7 war, Israelacceptance by its Arab neighbors continues to elude H. Asettlement Is out of the question, and the present stalemate,occupying large tracts of territory andillionprobably continueong -

rab terrorist activity It likely to increase, though Isreel wfU be able to keep It under control. Incidents along the cease-fire line* will also continue. Israel will retaliate oo occasion, aod this could develop Into heavy fighting. In the longer run. continued Israeli occupation win almost certainly leadew round of major hostilities.

C. Ia this ccnditioD of uneasy truce, Israel willilitary superiority over theiew to deterring them or. If war comes, defeating them quickly enough to prevent serious damage to Itself. This means modern weapons. Israel probably sees Franceot very reliable source of such arms, at least as long as de CauDc Is lo power, and will look increasingly lo the US. But It will also try to



L Al the beginning of to third decade ofvad hu woeCpifca andhe largest of lb) throe wars withb adghbon. brie] feels that this mitroeig potftioo to achieve In kxig sought objective* ef obliging the Arab)gnlie lb existence, lefctflj negotitb'ooi. and to maleo* with SL YetjB|lBII tefurtng to do uythicg of tbe luvd lo tbcien*eiIbijaK* broad courses ef action it caa Mow, ie, bohf out tor to auaiisuea demaeda,tbe aubrtaoo* of Itaecurity afcna without farAa) agrceuxvjt, or scale down toeturn for Arvbot,

1 LsrecTa leadennited country bej'tiod them onll thewhich affect tbe country's security. Tie country It anil dceJaalad byefEurop*uhube Mapalounger generaSoa, notify native Israeha,break the oldold oo power. For the snort part, the cbaBeogenworking within tbe Dew Israel Labor Party and ahare tbe Ooroertic viewsnydrrile socialism, devotion to maintaining high bringi detenrunatios le maintain tod toculcatt easeotialry Europcae valuesderplte laraeflhe Mrddle Fart and to growing ttvajortryof oriental origin. -'" " '

5 Compared to tbe Issue of security, loads docnerbc concerns, though troublesome, art scarcely critical lb economy, foe example, bar shows aav preidve growth aad bat broughttandard of bring compa/ible to thai of most of Wertero Europe, Bui the economy hat weaknesses of blgb coat and of strong orientatJoo toward bteroal consumption; these hinder the growth af exports. Ecooomic activity bat beco hetriry dependent onaod thli bat faflco ol wbeo tbe level of Imrmgvatioo etocIiDesbe above factors and ef government action to promote ciporta and control InRatJoo, IsraeTs grosi national product Increased Only about on*t against aa annual average of SS percent for the precedingears.

A Tbe governmeoil efforts to revive tbe economy wtQ probablyour to Eve percent growthbe oesl year or so. saeJa heariry



depmdtot for yean to coo* po foreignsupport Sucb tuppott hailo inarteory lo time* c/ Arab-Israeli tension tod has enabled Israel lo Increase Its foreign exchange reserves steadily over tbe pari half cozen years, deiralehjiI average trade rapOboa.7 var ra> suhed (aoct g* ui of atnflboo lo foreign eschangc (two-thirds of It frora theba war alio brought added foreign eachange costsd acqulrtog more modern equipment, especiallyo IbeoreigDaroblem for laraelery long nine to come, sloce Its appeal to soreign aeotimenl vffltal nry contirwe to ID la Deeds.

A Israel abo ba> tbe problem of totegraKng lews from tbe Near Eajf and Northaboutercent of tbe total Jewish poputiUon of tbea society onmlriated by European culturalbe high birthrate of tbe orient mllackening immlgiattoo from Europe, and Increased emlgrabioe by Israelis of European origin portend long-term social and cu'ttral beoda wbsch may eventually bring significant changes to tbe character of tbe Itraeb state. But ft wfJJ be Diary years before sucb changes substantially altnr the nature of ths gov-emmrol or its pobciea. Meanwhile, all theseill remainto the overriding questions of security,h tba Arabs, andi ultimate status to Ibe Near East


fundamental foreigno secure the broadest possiblefocli as the rightful occupant of Palestine. Israel's Ins jl-nce oo directand IU desireormat peace settlement steo> from Its dealraArabs tobinding acceptance of Israel legitimacy. Iaspecific femes. Israel wants secure transit of the Sue* Canal and thepermanent borders which give It certain piece* of Und Importantsod derrulitarbec! sones on tbe Arab ride of st lrait certain of tbeIt abo wants to retalo Eastto the Israeliiand reu'gioui reasons. )aaeU public opinion would not toleratethis area to Jordanian control sod the Israeli Government wfflnot do an. though It probably would aoocedc toote*supcrvbioo of Muslim and Chrbtiaa holy places.

Arab Stales regard Israeli Insistenceibcmermanent peace. d

they abow no sfgn of yielding to this de>nand. mcy oocertonal pressure, eapectally Lorn Ibe US, could male Israel brin| and rubttartc* of fts peace terms closer to Arab ootltiont

& Tbe gap between tbe twoery wide Ia tune, Israel might aba_xLn Pi Inititence oo direct legotistionsorma] settlement It Is unlikely sub-fUntlatly to reduce Its territorial demands or to withdrawSinai wflbout obtaining transit rights through the Suea Canal Though Israel bat reluctantly accepted the UNc-ovnunkationiffl strenuously resirt. powersediator to the UN or any other rhtcnoodiuy. Toe Arab Slates


vt little Indication of readiness eveo to edge aato discussions with Iviel Xa eseorms! peace settlement 'j out of the ejuettion, and progiess towardrailed sccoaimodatioo will al best be slow and halting.the Israelis are prepared to leep their forces deployed along the present ,.


talemate of this sort preseoti problems for Israel and could, toInternal differences concerning policies toward the Arabs. Tbedecide bow to cope with the population of the occupied lands,West Bank sodboutArabs fled from tbe West Bankduring and immediately- after the June war; tbe flowewand relatively few have been allowed to return. But even so,the newly occupied territory Into Israel wouldifliootbe population, of which tbey would then constitute ene-tbird. Almostwould regard this as an unacorpUbly high proportion. Anbe to give occupied Palestine some fores ef autonomy. But It wo-ddto get enough cooperation from PaltstinUo leaders to male such aMost of tbem would fear that tbe territory might later be turned "to Jordan or Egypt at partro-OW aeftlejnene, bi which case there .':

would be reprisals against tbcra for collaboration.

nother troublesome aspect of (be problem of Arab populationrefugees ofS-1M9 war. Camps cootaintrigfhave now eoroe under Israeli control Tbe Israelis havetome of tbem Id certain parts of tbe West Bank snd lh tbeof northern Sinai, but neither of these areas bat Inewa water" adequate for large agricultural or fndus(rialnd any eflcrtthe water wouWbe very expensive,,WeloC*a> the departure

. of IhcSc rcfugCCJ to Arsb LtodsV 0 so fie CrtCnt eoCOUrkgcdKAf-

ifo&'t*'nienC'thougb. Jt recognizes that wo/loVopinion'ass cspulsioo. Oa tbe whole, we doubt that the Israelis wJD male muchin reducing the numbers of camp-dwelling refugees.

IL Tbe present situation bar ccruiD advantages from tbe Israeli potrt ofbe cease-fireow aborts and mors defensible tbaa before tbe June War, and farther away boos major Israeli does and towns. loa eased rcvenoef from tourism and born erptofUtioe of SioaJ oO ofiset le some degree occupatson coats, whirh in any case areO mflboo annually. Israol feels that these territories art usefularf .lnlng counter.

U Oo the other hand, B* Irrae] coorUuea to occupy eoocptered tartlory Sor" as ertcoded period, say two lo three years, fit wfl]ncreasingly difficult to relinquish control Dornertlc pressures to establish Israeli paramflitary settle-meots to occupied areas would grow,ould be bardor to turn bad to the Arabs land whhh contained such settlements.

be coottnurd stalemate fa already encouragiag Ihe Atbe, especiallyto loot toes rasingly to terror Inneans of compellingbom occupied territory. The Syrians wfll probably continue totnrroririshe objectives of rWasrtng Israel andfor Htsasalss wh/Jc trying to avoid Israeli retaliation on Syria.sttivftses wfll probably be cerried out or instigated bom time to timePalestinianordan and elsewhere. Israeliwit continue tooo and to retaliate for border

frsodenb or sabotage. Such rcb'iatioo wiD sometimes becale wbsch could lead to heavy fighting

n the longer run, tbe frustration of the Arab States would almost certainly drive them to sock military means of compelling Israeli withdrawal For aome tune to come, Arab leaders wCJ probably not believe tbelr forces capable ofthe Israelis. But tbey wiu build up these forces and, to rime, will probably aeeVerge7 cVfcaL The Egyptians, to particulsr, may come to believehey could winlimited victory over the Israelis, eg, dulodgbg them from the East Bant of the Sues Canal Thef course,ucuced by their reading of the attitudes and commitments of the major powers, but whs [ever the precise course of events, cootinuod Israeli occupation wfl almost certainly leadc* round of major hostilities to the future.

naelose association with theery Important to Its own security aod would hesitate toourse that ll thought woold Jeopardize the relationship. Itdo thethe US would Dot permitoubstantial military defeat Ta further thisIsrael will continue to depict US and Israeli Interests in the area as Identicalil] stiejs that US Support wlU build up Israeltrong counter to the eitensIon of Soviet Influence to the region

u sell attitudes toward the Soviets are ambivalent Tbe Soviets provvSaupport for tbe Arab cause and are tbe rnatn source of arms for militant Arabsrael will continue to be ooncomed leal tba USSR'a eagerness te cultivate tbe Arabs might enoouraee the Utter toangerouslyattitude. Os the oOxr band, the USSR affiims Israel* right te edit and has advised the Arabs lo recognize Tarawa aurfsfence aod to use peaceful means of settling their disputes with it Moreover, the Soviethe home of twoalf mffliooemig-ants and potentialurges aodj'Ms. Accordingly, Israel wfll seel to beep Soviet -Israeli relation* asas circumstances will allow, but It wfll also continue to regard Moscow with rurpicioo and distrust

Tha Military .-

SO. Until the IQUOs, Israel bought most of Its military equipment from Euiopeaa sources; lb aircraft were almost exclusively from France, Its naval vessels sad newer tanls mostly from Crest Britain.he US has played aa So-creasing roleupplier, first with Kawt surface-to air mlsrfles, thee with medium tanls, more recently with tactical srtacl aircraft, Irsel has made fit clear that ft will continue to loot to the US for certain types of military ecpilp-ment, Including abcraft and probably armored vehicles. Israel *iD also coo tinto seel anoored vehicles from the UK.

tb The special relationship which France and Israel built up Taas been wealcnlng. In the wale of the June war, Paris placed aa embargo oournss to combatants. This has already been relaxed to some erf eat, andair chance that Israel will eventually get tbeircraft

II contractedime ago. though deliverylely to be further delayed. Iwacl bu ahead/ received from France the first of al Irart five ofnew claaloab whichrynch-developed Cabrfet cruise mluiie.France is not bae'y to bereliable aourot of rrlhlary equipment for bracl el least a> long as de CauQe remains in power.

tZ. Tbe uncrrtninb'rr of dependencefoirlgn suppliers It Impelling Israel toward Ihe manufacture of as much as potriblc of Irs own mibtary equipment.eady produces almost all Its imaO arms, rrvosl categories of ammunition, aoov* artifJeij. tome transport equipment, and even some mlntlcs and aircraft. Tb iBduftrla) base for the manufacture of heavy, tanVi,nd aophiitieatedeficient but improving, foe materiel le theseIsrael wiD continue to be dependent on ritcroalut ba aome types of advanced weapons, Israel bar the Incurhow aad ihe rowuci to supply

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