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Israeli PM Ehud Olmert has given an interview to the Financial Times and Independent Newspapers in which he defends his convergence plan as the only way forward to peace, and denigrates the Palestinian prisoners' document as an internal Palestinian affair. The document does not satisfy the internationally recognized requirements for a peace plan, he notes:

Itís the basic principles that were accepted by the international community, that your country and the United States and the UN defined. Itís not the ones that I would have defined. The Quartet principles is not Ė maybe I would have defined things that are entirely different. They defined it and I said fine, I am ready to abide by these principles. Stop and disarm the terrorist organisations. Do they talk about it in the letter of the prisoners? Not in the remotest.

So, what am I going to be: recklessly irresponsible for the future of my country and accept negotiations where every day there can be a bus exploding in the middle of Tel Aviv or Jerusalem. So, what will I say then to the public opinion? I am negotiating with Abu Mazen and itís not Abu Mazen who is exploding the buses, itís someone else among the Palestinians? So, I mean what is it all about?

Full transcript of interview with Ehud Olmert

Olmert heads to Europe

Q: You obviously had a very successful trip to Washington. Do you think you will get a tougher ride in Europe where they seem very keen on negotiations?

EO: I intend to say exactly the same thing to Prime Minister Blair and President Chirac, Prime Minister de Villepin as I said to President Bush: that I certainly want to have negotiations with the Palestinians on the basis of the fundamental principles that were outlined very, very accurately in the Road Map and the Quartet decisions. And I believe that this decision will be wholeheartedly accepted by Prime Minister Blair and by President Chirac. They want negotiations and I want negotiations. The question is what happens if, in the event, that negotiations canít take place. So, first of all one must remember that I did not create new demands or any new framework for negotiations which is not precisely the one that has been carefully defined by the international community.

Q: With some Israeli reservations?

EO: Not about the Quartet. Not about the Quartet decision. I talked to President Chirac and I was more than happy to hear him say time and again and repeat it in a most accurate and explicit manner that France will not talk to anyone that does not accept Israelís right to exist, that does not recognise all the agreements that were signed between Israel and the Palestinian Authority and implemented, not just hypothetically, but live by these agreements, and also without the practical disarming of the terrorist organisations. This is what Tony Blair said. This is what Jacques Chirac says, and I am entirely with them on these issues. Now, if there will be a partner who performs this, Iíll be the happiest man. In the event that there will not be a partner then the question is: whatís on? What do we want to do? Do we want to sit idle and do nothing, do we want to wait? For how long do we want to wait? One year, two years, three years, 10 years more? Or do we want to do something and then what is it that we want to do? This is something that Iíll certainly discuss with these leaders and this is precisely why Iím so anxious to go there. I want to hear their advice, I want to hear their observations, I want to be impressed with their priorities. But, one thing I know from them already: what are their preliminary conditions for starting negotiations and they are insistent that without these conditions there can be no meaningful process of negotiations.

Blair and the World Cup

Q: You spoke before the elections of your relations with Tony BlairÖ

EO: I like him very much. I think that he is a fantastic guy. And I like him. He has one big weakness that canít be ignored and this is that he is a big fan of the Magpies [Newcastle United] which is not my priority in British soccer.

Q: You support Man U?

EO: Yeah. I am a fan of Man U. But that is not because they are red. Because he [indicating aide] is a fan of a team in Israel which is a red team and Iím the fan of the yellow and black [Betar Jerusalem]. But I think that Tony Blair and myself are certainly wishing for Wayne Rooney to fully recover in order to represent the British national team. I heard Sven Goran Eriksson just say the other day that while everyone is important there is no one like Wayne Rooney and so I hope for Great Britain that he will recover fully and be able to represent Great Britain, so that Great Britain will have the most powerful team they can have to represent them for this challenge.

Q: We shall see.

EO: I can only say I regret the fact that Israel has not qualified for the finals because that would have changed everything in our lives here. Anyway I, as I said, like Tony Blair. I think heís a fantastic guy and I like talking with him, I like sharing with him my views, my desires, my expectations and my plans.

Q: Have you met Gordon Brown?

EO: I have met Gordon Brown. I am very friendly with Gordon Brown and Iím going to see him. Heís the minister of finance and we have many important bilateral economic issues that need to be examined and Gordon Brown has been very supportive and Iíd like to certainly discuss these issues with him. He was my guest here. I was his guest in Great Britain.

Israelís image

Q: Looking more widely at the situation of the Europeans vis-ŗ-vis the conflict, this week, today, is the anniversary of the í67 war 39 years agoÖ

EO: This is precisely the day.

Q: Thirty nine years ago in Britain it was difficult to find anyone who was not wholeheartedly behind Israel in that conflict. The situation now, is to say the least, somewhat more ambivalent.

EO: Yeah.

Q: Does Israel bear any responsibility for that shift in opinion and how has it come about and do you think that you can go some way towards resolving that on your visit?

EO: For me to say that Israel doesnít bear any responsibility whatsoever under any circumstance will be silly and not serious. Of course there is a certain responsibility. When you want to find out what has influenced this shift in public opinion in Great Britain over the years since 1967, 39 years ago, from the days when everyone was praying and crying for the safety of Israel: first of all that generation largely has disappeared.

And there is a new generation and this new generation doesnít remember that Israel was not in the territories altogether, that we never wanted to be in the territories, that we never really wanted to take over and occupy any territory and that it was imposed upon us by the aggression of the Palestinians and the Egyptians and the Syrians. And therefore for many of the younger generation the reality where Israel is administering the territories is the reality of life. And they donít know what lies in the background of it. So thatís one reason why there has been such a shift on the part of the people.

And I think that also it is sometimes quite harder to explain the complexities of the situation because Israel is known to be such a sophisticated, powerful, modern nation.

But, you know, so many of the people who look at the situation just do not remember that the Palestinians want Israel to return back into boundaries the width of which is 12 kilometres, that can be cut into pieces within minutes. And they are also not familiar enough with the historic facts to remember that the Palestinians brought it upon themselves when throughout history they always refused to make peace when peace was possible. So, indeed there is a shift in the public opinion and I hope that with the apparent desire of Israel to pull out of territories, to separate from the Palestinians and help create a two-state solution, that this attitude will change.

Palestinian referendum

Q: It was reported that Sundayís cabinet meeting had been very dismissive about the Palestinian prisonersí document and about the referendum as well.

EO: I still am.

Q: You donít think potentially if this were successful that it could turn Abu Mazen into a partner?

EO: Look, do you want to change the basic principles that were outlined by the Quartet in the Road Map, you want to change the Road Map? I think that if you start to walk on this road you soon enough will find yourself in deep danger. If you donít want to change it, then look at the letter of the prisoners. In there, they donít even mention the state of Israel, they donít even refer to the right of Israel to exist as a Jewish state. They donít say anything - Iím sorry - and they insist on the right of return which is the almost automatic, outright destruction of the state of Israel. So why should I accept something that challenges the very fundamental principles of Israelís existence to become a basis for some improvement? Why should I accept this?

Q: Many of your intelligence officials are reported to have said that it is pretty important in terms of Abu Mazen. Even on the right of return, itís pretty vague. It doesnít say the right of return to Jaffa or Tel Aviv?

EO: Why do they have to be more explicit than just say: right of return? Do you understand what right of return is? Do you think that they donít think that you understand it? So why do they have to go to be explicit?

First of all, I donít know of any intelligence, I didnít read any intelligence and itís my habit to read intelligence reports on a daily basis and I havenít seen it. But I will go further. You take the Hamas, the most extremist, fundamentalist, religious, radical organisation and you say that there is a document in which there are other factions that are somehow less extreme than Hamas. Itís not a context of comparison, you know, this is not a basis by which you measure and judge any improvement.

Itís the basic principles that were accepted by the international community, that your country and the United States and the UN defined. Itís not the ones that I would have defined. The Quartet principles is not Ė maybe I would have defined things that are entirely different. They defined it and I said fine, I am ready to abide by these principles. Stop and disarm the terrorist organisations. Do they talk about it in the letter of the prisoners? Not in the remotest.

So, what am I going to be: recklessly irresponsible for the future of my country and accept negotiations where every day there can be a bus exploding in the middle of Tel Aviv or Jerusalem. So, what will I say then to the public opinion? I am negotiating with Abu Mazen and itís not Abu Mazen who is exploding the buses, itís someone else among the Palestinians? So, I mean what is it all about?

Q: In practical terms, what would Abu Mazen actually have to do on the ground in order to qualify in your view for negotiations?

EO: To carry out the principles in a manner that was defined by the international community.

Q: Would that mean disarming Hamas, the elected government?

EO: Of course, of course, of course. This is the principle. This has been defined by you guys, I mean by your governments, and I am absolutely ready to subscribe to it.

Q: In Gaza at the moment, at every crossroad you have two Hamas guys on one side of the road and two Fatah people on the other. To ask Abu Mazen at this point to disarm them would mean fighting throughoutÖ

EO: So you want me what?

Q: But that is the reality.

EO: Reality depends on the determination of the Palestinians. They have to come to terms and have to come to grips with reality. What do they want in life? Look, you know in my speech in the US Congress I said in one sentence that I think was a key, I said this is what we will do, what we will try and do and this and that, but in the end it depends on them. We will not be able to do for them what they are not prepared to do for themselves.

Itís their responsibility, itís their ultimate responsibility of the Palestinians on what their priorities are. You know, yes, of course, when armed people from Hamas and armed people from Fatah are standing opposite each other there is more likely to be a confrontation amongst them. But you want me to what, to put on line the life of this country in front of people that are killing each other and that they openly and explicitly that they want to wipe Israel off the map? They donít recognise not only the existence of Israel but the right of Israel as such to exist. I must be crazy. And Iím not.

Q: It doesnít sound as if youíre going to be having many meetings with Abu Mazen.

EO: I want to research with him and to discuss with him what needs to be done to help him possess the powers needed to cope with the challenge of Hamas and the challenge of terrorists within the Palestinian community. I want to help him. I want to take all the necessary measures that can assist him in this direction.

Q: When do you think thatís likely to happen?

EO: Probably towards the end of this month.

Q: Is the referendum a factor in your timing?

EO: The referendum is an internal game between one faction and the other. It is meaningless in terms of the broad picture of chances towards some kind of dialogue between us and the Palestinians. Itís meaningless.

Q: It could be argued that if he called a referendum and he won, even though you donít accept the terms of the prisoners document, he would be strengthened somewhat.

EO: Look, everything that can strengthen Abu Mazen is favourable. However, at the end of the day he will have to make these basic principles that were outlined. So he will not be able to get away by saying I forced a referendum that accepted a programme which is far behind the basic principles that the international community defined anyway.

West Bank withdrawal plan

Q: You talked before the election about permanent borders resulting from what we now call realignment. You said in a Time Magazine interview that they might not be permanent but they would be pretty close. How negotiable with the international community are those borders?

EO: First of all, Iíll tell you what. You know itís a problem sometimes when you speak to journalists. They quote you and then they read what they wrote and then they even explain it. Itís dangerous. I donít retract on anything that was attributed to me. What I wanted to say and what I want to say now is I want to separate from the Palestinians Ė OK Ė into defensible borders that can provide security for the people of Israel, of course in consideration of demographic changes that took place in the territories since 1967 and to which the president referred in his famous letter of the 14th of April 2004 as you all recall, Iím sure.

Now, this is what I want. I want to separate from the Palestinians. I want them to have their independent, separate state on a contiguous territory and I want Israel to exist of course as a Jewish state in its own territory, as an independent state in its own territory. The Palestinian state, the Israeli state, separate. This is my dream. If we can, you know, negotiate specific borders that can be acceptable to achieve peace, better. That is why always I prefer an agreement and negotiations.

If, as appears at this time, there wonít be negotiations because the Palestinian are not ready, because they are not prepared to assume responsibility, because the extremist fundamentalist, religious radical government of Hamas is not prepared and Abu Mazen is too weak, then Iíll try and discuss this issue with the international community. I donít have in mind a specific border. Iím not going to come to Tony Blair or to Jacques Chirac or to Angela Merkel or to anyone Ė I didnít come to Bush Ė and say to them this is the line, take it or leave it, I am not going to negotiate it. No. We have a desire to separate from the Palestinians.

I believe this is desire is shared by most nations of the world that care for what happens in the Middle East that they want us and the Palestinians to settle it. Iím sure most of them want Israel to live in security in our country and not to be jeopardised by any future development. I am sure that they all want that the Palestinians will have their own independent and contiguous territory where they can establish their state. So there are many basic premises that are shared by all of us. The rest depends on circumstances, on negotiations and discussion.

If the Palestinians will be ready again, Iíd more than be happy to negotiate with them because I want to have another side accountable, with a clear address, that I can charge with responsibility for events that may take place in the future. What they say is if they donít come, if they are not ready, if all of us agree that they are not ready, what are we going to do? Wait forever? Waiting is the worst. Itís playing into the hands of the extremists that donít want any development and that are ready to sacrifice it with blood and terror. And I say, I am not playing into the hands of the extremists.

If you will not allow the more moderate Palestinians to take over and assume responsibility, then I move forward. But I move forward after talking to Tony Blair and to Jacques Chirac and to George W. Bush and to others and trying to prepare a framework that appears to me reasonable to the international community. And at any given time in the future, even the Palestinians will then be able to meet their requirements as posed by the international community, then we will continue to talk.

So it does not preclude any future negotiations with Palestinians. It will perhaps only reduce the scope of differences because if Israel pulls out from a large part of the population or of the territories, then much less will be left for any possible future discussions between us and the Palestinians. But at the same time itís also true that if they will not come and if we will withdraw into certain lines and if we will separate this with a big fence as we intend to do and that will be the practical border separating us from the Palestinians, it may last for many years. I donít know.

Q: You havenít given a huge amount of detail yet on the exact withdrawal. But I wonder if you could share a little bit more with us. I wonder, for example, if Hebron would be included.

EO: I am absolutely, absolutely - I understand the curiosity which you manifest and I am not certain that I want to satisfy all of your curiosity at this point.

Q: But at some stage you will have to tell the Israeli public what the plan is. They are concerned more than anybody with the exact location of this border.

EO: Until now, I was accused of being too explicit to the Israeli public opinion in an unparalleled manner. I have outlined my political plans before the elections at a most crucial time and everyone said this guy is crazy. Heís risking his support and heís spelling out specifically and accurately what his plans are. No one did it in the past, why should he do it? I did it because I wanted to have a clear mandate. Of course, I would have been much more comfortable if Iíd have had 33 or 35 mandates instead of 29. But at least the 29 that were elected know precisely ahead of time what the policy of the government would be and they are committed to support it and no one in the Israeli public opinion can complain that I have misled them by telling them exactly what it would be.

What would be the specific items and the accurate lines and exactly which settlements, where and so on and so forth, of course, when we will reach this point and we will conclude these negotiations we will outline the exact framework of this political plan and it will be submitted for approval in the party or in the Knesset or in the cabinet and of course we will discuss it openly. We are not going to hide anything from anyone. We are going to share it with the public opinion and precisely for this reason because we want the public opinion to join in supporting it and to give us the necessary moral foundation for what we want to achieve.

Coalition politics

Q: Do you think the Israeli political parties are as evolved and sophisticated as Israeli public opinion or do you think the inevitable coalition strains will start to tell? Is the present coalition capable of advancing this plan?

EO: I believe so. Yes. I believe that the coalition is strong enough. And, you know, donít take these, you know, little outcries that come from here and there to give you a wrong impression. This is, this Knesset is made out of relatively speaking many newcomers in comparison with what other Knessets were. And some rules and some of the adjustments are not completely understood by all participants. These are the signs that will disappear soon and I do believe that this will be a solid and stable coalition. However, I am sure that by the time that all of the specific plans will be on the agenda for approval by the Knesset that there may be much more vocal opposition to it than the ones that we have now Ė by Likud, by former supporters and present supporters of Likud and other parties. I absolutely believe with all my heart that the majority of the public opinion in Israel is going to be entirely in favour of this plan and I am going to do everything on line for this because nothing interests me and nothing is more important for me and nothing is more significant for me than achieving peace. So Iím sure I will be able to carry on with me the majority of the public opinion.

International support for realignment plan

Q: You are obviously very confident that you will get international agreement Ė European as well as American to do this.

EO: I donít know. I didnít say that I know. I just said I would do everything in my power to convince the Europeans and I want Tony Blair and I want Jacques Chirac and I want Angela Merkel, I want all of the other political leaders in Europe to understand that I care for what they say. I want to listen to them. I will seek their advice. I will seek their opinion. The days that Israel was separated from Europe are gone. There is a new basis for relations that I want to cultivate and to strengthen.

Q: More so than your predecessor [Ariel Sharon], perhaps.

EO: I think my predecessor started it. And had he carried on Iím sure that he would have done more and more about it. We used to discuss this issue a lot and he was entirely on my wavelength in terms of what needs to be done with Europe. And he did a lot to improve the relations with Europe. He did a great deal with Tony Blair. He did a great deal with Jacques Chirac. Iíll tell you something. He came back from France and he told me: you know, we didnít understand many things. He said Jacques Chirac is a great leader. And obviously he liked very much Tony Blair and there was trust built between the two of them. So I want to develop it, I want to broaden it, I want to strengthen it. I donít come with any fears and I come with open arms. I say to the Europeans: hey guys, why should you be cut out from the mainstream of politics in the Middle East? Why should it be only America? America will always to be primary power, thereís no question about it. But you guys can play a major role and we want you to play a major role and we are ready to join forces with you in order to allow you to play this role.

Q: Suppose the Europeans start to get very sceptical about realignment, maybe because they take the Palestinians slightly more seriously and they just say no. What will you do?

EO: I will just work harder. I donít believe that at the end of the day they would prefer a stalemate or a deadlock and a status quo forever. I believe in the understanding and the sophistication of the British and the French leaderships. At the end of the day, you know, they will have to ask themselves and answer it: what do we want here? Do we want things to remain like this forever or are we prepared to support someone who comes and says: I want to move things, I want to change the direction which is certainly acceptable to all. I want to change in the direction that will separate Israelis and Palestinians which will allow to create a contiguous Palestinian territory that will eventually become the independent Palestinian state and that, at the same time, will maintain the integrity of the state of Israel as an independent state.

Q: There are doubts in Europe about whether an independent Palestinian state is really possible given the facts on the ground at the moment.

EO: We are not talking about the facts on the ground at the moment. I am talking about changing these facts on the ground. I am talking about pulling out from territories. Donít tell meÖLook, I think that the position of the Palestinians is they want 100 percent of every bit of territory. Itís a negotiating position that will have to be discussed. Iím notÖI donít believe that there is one European leader, serious European leader, which would say that unless the Palestinians receive 100 percent of every demand of theirs, there can be no peace. Iím sure that the Europeans, with their experience, with their depth of understanding and historical memory which is so dominant in the minds of many European leaders, they know that territories were exchanged, that populations even moved sometimes, that territorial adjustments were made in order to create better circumstances for a peaceful solution. In one format or another, in one manner or another, at the end of the day we will have to find ways to do it here. And I donít believe there is a serious European leader that would say no, either we give the Palestinians accurately 100 percent of what they want or there will never be peace. This is childish and the Europeans are not children.

Q: If the Palestinians were to be a partner at sometime in the future do you think the settlement that you would reach would be along the lines of what Ehud Barak [former Labour prime minister] offered at Camp David [in 2000]?

EO: I donít think that Barak remembers what he offered. So how do you want me to comment on it?

Q: There were some parameters.

EO: Look, either I donít remember or I donít want to remember. In either case I would come up with the same answer: letís wait for negotiations to eventually take place and when that time will come, I hope the sooner the better. Itís too early now to go into those details and I donít want to bind myself to any position.

[Aide interrupts with news that Palestinian Authority Mahmoud Abbas has extended deadline for Hamas to accept prisonersí document before he calls a referendum]

EO: I just heard now that Abu Mazen postponed the ultimatum for another three days which is certainly going toÖ

Q: Strengthen Abu Mazen?

EO: No. It corroborates my argument. You know, you must understand something. The reason I feel confident is not because I think there is a superior wisdom here. Itís just that I come with clean hands and an open heart. Iím ready to sit down with Abu Mazen and tell him: Hey, my neighbour, what do you need so that I can assist you to establish your authority for which you want to speak? And if he doesnít possess this authorityÖLook, itís not a minor issue. You take, you know, you make negotiations on the most fundamental issues in the history of my nation. This is not something that can be easily discussed. I have to make sure that I am doing the right thing. I canít afford to make any mistake. This guy is actually unable to actually even exercise his authority. What shall I negotiate with him about? And now this is something that serious political leaders with a certain experience canít ignore, certainly not Tony Blair nor Jacques Chirac. They are very experienced people.

Q: During the election campaign, many of the electorate read your plan as something that would fix Israelís borders possibly within the four years of your first term. Now you seem to be talking more about a long-term interim settlement until such time as the PalestiniansÖ

EO: There is not a difference. Itís just a matter of, you know, sometimes we fall in love with specific definitions and we lose track of the main substance of what we want. And therefore, you know, donít rely on the phrasing that I use now in comparison to a few months ago or vice versa. What I want to say is this: we need to separate from the Palestinians into boundaries that can be defensible. Now, whether technically it will be called permanent or not permanent, if these boundaries will be satisfactory if they will be protected by the fence, if the international community will recognise Israelís right to have such boundaries, will appreciate at the same time that separation from the Palestinians and creation of a contiguous Palestinian territory in which a Palestinian state can be created, if all this will happen the basic objective will have been achieved. And thatís what I have in mind.

Q: Some Israelis, including the former head of Mossad, Efraim Halevy, have said Hamas is not going to go away and sooner or later Israel is going to have to talk to Hamas, which may have some resonance in London because of Britainís position towards Sinn Fein. Do you completely rule that out?

EO: You know, first of all I have to say with the utmost respect to Mr Halevy that this will not have been his first mistake in understanding the dynamics of this situation. But, the difference between Sinn Fein, for instance, and us, is that Sinn Fein ultimately wanted to accept a peaceful solution and agreed to the basic, some kind of basic principles that were outlined for such negotiations to take place. I donít see that Hamas Ė of course, the Hamas will disappear Ė but you know there is always a danger. You canít count on the other side and say, look, you always have to acquiesce with the more extreme elements because they will prevail.

If you accept that they will prevail, you help them prevail. And what I say is that there is a choice given to the Palestinian people. Is it indispensable, is it obvious that they can only choose the more extreme element amongst them or that there can be changes. I donít say that I expect all of the Palestinians to be different from Hamas but why do we have to accept from the beginning that the Palestinians will always be ruled by the more extreme elements such as Hamas instead of by more moderate elements that already compromised.

Palestinian humanitarian crisis

Q: Recently you were quoted as saying talk of a humanitarian crisis was propaganda.

EO: First of all, we will do everything in our power to assist the Palestinians to cope with the humanitarian needs in the territories irrespective of any formal obligations of one type or another. We will make sure that there will not be any humanitarian disaster in the territories. Full stop. Thatís because we donít want one child in any Palestinian place to suffer from the intransigence and the recklessness and the lack of responsibility by this leadership, At the same time, I have to say, knowing that all the basic foods are in abundance in Gaza that they have all the ingredients that they need for another three, four months. To say that there is a humanitarian crisis already. No. Itís a gross exaggeration which I donít have to accept. But Iíll do everything that I can to help them cope with whatever humanitarian demands there may be.

Q: On a more technical level, is the government trying to do anything to solve the problem that has arisen that banks are very reluctant to make legitimate transfers between Israel and the territories because they fear legal action in the US? As a result even Israeli businesses are losing out.

EO: Itís not convenient when you have terrorists. You have to make all kinds of adjustments and itís not always very, very convenient. What can we do? You know, there could be a much simpler solution. Just get rid of the terrorists and life will be simpler for everyone. So, you know, you asked me about the problem we created. American banks are not prepared to make any transfers or any legal transfers or any financial transfers through their banks and they will not cooperate with any bank that makes such transfers into what may turn out to be terrorist hands. And who am I to complain to the American banks? I respect them because they donít want to provide any opportunity to terrorists. Now, I talked to President Mubarak the other day, also a very impressive man, and he said to me: how can the Egyptian banks transfer money to Gaza? They will be blamed by the international banking community for cooperating with terror. This is an Arab leader. So, look, you know, the starting point is the Hamas is there. Letís get rid of what is there rather than change the entire universe to adjust to that which from the outset is totally unacceptable.

Q: Do you have any worries though that if the Palestinian Authority institutions do start to collapse that actually Israel will have to start to take responsibility again for providing services?

EO: Why, if the Palestinian administration will collapse as a result of their own inadequacies and failures, why will it become almost automatic that the responsibility of providing services will be Israeli? We want to separate from them. We are out of Gaza. I mean, that will not happen in the West Bank of course. It will happen in Gaza. But I remind you we pulled out of Gaza completely, we are not there. We are only helping them because the international community prefers these arrangements and we want to help them. So we still maintain the customs envelope. I donít need the customs envelope for Israel. They want that Israel will maintain the customs envelope because if Israelis will not collect the monies that are due to them, these monies will disappear in the private pockets of all the gangsters that control some of their institutions. So, we are ready to assist, we are ready to cooperate, we are ready to provide services, but we are not responsible for the failures of the Palestinian government and the extremists that dominate them to do what needs to be done for them.

Olmertís family

Q: Can I ask you a personal question that youíre probably sick of being askedÖ.

EO: Do I look sick?

Q: Öwhich is about your wife [left-wing writer Aliza Richter] and her slightly different political outlook. How influential is she on you?

EO: First of all, it so happens, you know, I know itís not common, but it so happens we have a happy marriage and I very much love my wife which is also rare because I have been married to her already almost 36 years next coming July. So, you know, when you have these two elements Ė you are married to your wife for 36 years and you love her all these years - there is always a danger that there will be some influence and there has been some influence by her because she has her opinions and I have mine and so that in many different ways I have influenced her also. But you guys donít care for what influences I had on her. Youíre more interested on the influences that she had on me.

So first of all, I admit, she did have a lot of influence on me and it certainly also is reflected in some of my present positions and Iím very proud about it. You know, to suggest that you live with a person for 36 years, you love him and he has no influence on you is to sound either arrogant or dumb and I donít believe that I am either of these. So of course she had influence on me and we discussed these issues and we discussed them maybe more than they were in other families because this was all my life. I mean I was involved, in 33 years of our 36 years of marriage I was a member of parliament, I was a mayor of Jerusalem, I was a minister in the cabinet and now I am prime minister of Israel. So obviously on the table of my family was discussed more often than of the average family. And the exchange was very lively and very open and very sincere. And it had influence and not only that I wonít deny it, I am proud to admit it.

Israeli economy

Q: If we could turn to the economy. There was great excitement over Warren Buffettís acquisition of Iscar.

EO: Yeah. Sure.

Q: And clearly that was an indication Israel was a country worth investing in. But in practical terms what did that particular deal mean?

EO: First of all, while Iím very proud of that deal and I was privy to the information ahead of time and I was very helpful in providing a ruling about the tax policy with regard to this deal, it is not the only major investment that we have recently. It was exceptional because Warren Buffett never invested outside of America. The first time he did it, he does it in Israel with such a giant, Iscar. $4bn is one of the largest investments he ever made any place. But, as you know, Intel invests in Israel at the present time close to $5bn also. And Oracle is investing and Microsoft is investing and IBM and Motorola and Lucent and Cisco and you name it. All of these companies, I think what it is that brings them to Israel is first of all the innovative, entrepreneurial spirit of Israeli business which is very attractive and very stimulating and I think is a source of great interest for many potential investors.

The Israeli economy is very stable. The growth last quarter was 6.6 percent, which is higher than any western country. All the parameters, you know, the reduction in the national debt is remarkable. The monetary discipline which was imposed and which I religiously protected over the last year since I became minister of finance has also been very impressive. So I think that what Warren Buffett saw there, and I didnít talk to him but Iím sure that when he will come to Israel and we will meet Iím sure he will admit when he talks to me, he saw the innovative spirit, he saw the sophistication and the modernity, he saw the stability of the Israeli economy in general and the specific political circumstances at the present time. And he saw the potential. Warren Buffett is interested first and foremost in making money for his shareholders. He reached the inevitable conclusion that this is the place where he can make big deals for his investors, shareholders. Thatís why he invested. I wish I had some of his money to be able to invest also Ė in Berkshire Hathaway when they invest in Israel because their share went up all the time.

Q: You talk about bilateral issues with the UK that you would discuss with Gordon Brown. What in particular?

EO: First of all we will discuss trade which is developing very rapidly and very nicely and which I already discussed with him several times in the last years. I particularly am interested in reaching an agreement with BG [British Gas] about a supply of gas from the Mediterranean that BG is involved with and which I think is the only possible practical option and I want to extend the basis of trade between Great Britain and Israel. And I think Gordon Brown can be very helpful about it.

Q: There have been some accusations by Israeli officials that they were acting in bad faith.

EO: Who? The BritishÖ

Q: That British Gas were.

EO: Ah, I donít come with the spirit of accusations. I come with the spirit of doing business. I will do business. I donít have time to fight, to accuse and to defend. Why do we need it? I want to do business with BG. Israel is a very big client. You have to understand we sell, I mean we buy from Great Britain more than any other Middle Eastern country. By far more. We almost buy like all of them together from the British market. The volume of trade between Israel and Great Britain is in billions of dollars every year and we buy from you unfortunately almost twice as much as you buy from us. So we are good clients. You know, Iím not talking charity here, Iím talking business, Iím talking investment. You know, hard currency. And I think that we can build it more and more and Britain is a great partner and itís a great economy. I donít have to tell you that many of Israeli companies are registered in the stock exchange in London, more and more now than ever before.

UK academic boycott

There is one issue that concerns me very much which I will certainly use this opportunity of my visit to appeal to the public opinion in your country and also to some of your leaders. This is the threat of some association of academics to boycott Israeli academics. I donít think that there can be a more explicit manifestation of intolerance and hypocrisy than that proposed of a boycott. There can be legitimate political discussions and differences between different organisations. But an academic organisation whose entire basis is established on academic freedom, they canít threaten boycott of academics regardless even of what their political traditions can be because of some political differences. Itís the highest degree of hypocrisy, narrow-mindedness and maybe even worse. I donít know that they would have done it in another country. The fact that they are doing it against the state of Israel, against us, I think smells of something that I prefer even not to call by its accurate name.

European reservations

Q: Returning to the Palestinian issue, I guess there is one suspicion in Europe, if I can put it that way, is that you once implied that unilateralism might bring greater territorial gains than negotiations are ever likely to do. And you also said that 25 years is the period after a unilateral withdrawal Ė the sort of thing you are envisaging Ė beforeÖ.

EO: Donít fall in love with everything that you may have read and everything that you may have heard from any political leader, including myself. I donít know, I donít want to argue even whether I said it or not. The point is very simple. The choice that we have, coming very soon, is either to negotiate with someone that doesnít want to negotiate with you or to protect the status quo for an indefinite period of time. I think there is a third option and this option is to move forward, to change the realities, to create a movement that in itself will be a trigger for positive developments. And thatís basically what I propose.

Now, if I would have withdrawn from 90 per cent or 91 per cent or 88 per cent of the territories, that it something that ought to be left for that stage when it will happen. The fact is that I am ready to pull out from most of the territories. Iím ready to change the demography, the Jewish demography in those territories to allow the establishment of an independent Palestinian state in contiguous territory. Why wait? Why postpone it forever instead of doing it right now? Why yield to the ultimatum of Hamas rather than face it with vigour and determination and change the realities. And that is what I propose.

Q: Some Europeans will feel that what you are doing west of the fence, around Jerusalem, will have a negative effect that somewhat offsets the positive effect of what would happen east of it.

EO: Listen, I could argue with these Europeans with effective arguments. They say why do we have to waste our energies now? What do you propose? Sit down and do nothing? What do you propose? That I sit with these terrorist killers and negotiate with them against the basic principles that you Europeans have outlined for us? What do you want me to do? I think we can leave on this question mark. Alright?

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