Bush cuts Israeli aid by $305m

The Bush administration is to reduce US loan guarantees to Israel by $305m (€258m) as a way of registering its disapproval of Israeli actions on the West Bank.

The cut will be made from $1.48bn (€1.26bn) in US guarantees due this year, the Israeli Embassy in Washington said.

The guarantees are designed to help the battered Israeli economy by making it easier for Israel to acquire loans at favourable rates.

No specific reason was given, but the cut was believed to reflect the administration’s displeasure with settlement activity and construction of a security barrier designed to screen out Palestinian terrorists.

The amount was fixed yesterday by the two sides in a White House meeting presided over by Condoleezza Rice, President George Bush’s national security adviser.

The State Department notified Congress last month that the guarantees would be reduced for “activities inconsistent” with understandings reached with the United States, but no amount was mentioned.

Daniel Ayalon, the Israeli ambassador, said he was satisfied that an agreement had been reached and “this will enable Israel to go ahead and raise the rest of the loan guarantees”.

He said the resolution “proves again the closeness of the relationship and the mechanism of close dialogue.”

National Security Council spokesman Sean McCormack said the agreement “acknowledges US policy concerns and US law regarding activities in the West Bank and Gaza and is a reflection of close and continuing consultations between our two governments”.