OLMERT-ABBAS MEETING: Saturday's two-hour meeting between Prime Minister Ehud Olmert and Mahmoud Abbas achieved modest, yet significant, results: Olmert promised to turn over $100 million of the $500 million in tax and customs revenue that Israel has been collecting on behalf of the Palestinian Authority. These funds have been withheld since Hamas took power in March. The funds to be transferred will go to Abbas, and not to the Hamas-controlled Finance Ministry. The prime minister also promised an infusion of $35 million to Palestinian hospitals in East Jerusalem. Olmert agreed to lift some of the roadblocks inside the West Bank and to speed up the process of making border crossings more efficient. The two sides agreed to reactivate several of the Israeli-Palestinian joint committees, including the four-way security committee, which also includes the U.S. and Egypt. They also agreed that the Palestinian Presidential Guard would be deployed along the Gaza-Egypt border and in the northern Gaza Strip.

On the symbolic level, this was the first time that Palestinian flags were hoisted inside an official Israeli institution, let alone the Prime Minister's Residence, in the heart of Jerusalem, side-by-side with Israeli flags. Olmert's aides explained that the warm reception and the raising of Palestinian flags alongside Israeli flags are intended to convey that there is no Israeli condescension or paternalism. "Abu Mazen," said sources close to Olmert, "was received at the Prime Minister's Residence like any other head of state."

At the cabinet meeting Sunday, Olmert reportedly also obtained the support of most of his cabinet for a small prisoner-release as a gesture to Abbas, even before Hamas releases the kidnapped Israeli soldier Gilad Shalit. (Yedioth Ahronoth, 12/24/06; Israel Radio, 12/24/06; Ma'ariv 12/25/06)

ISRAELIS RESENT U.S. PRESSURE: In the face of continued Israeli support for renewing negotiations with Syria - a poll published Friday by Yedioth Ahronoth showed that 67% of Israelis favor negotiations, Prime Minister Ehud Olmert bluntly explained that the Bush Administration's opposition to talks and political troubles is driving Israel's reluctance: "At a time when the president of the United States, Israel's most important ally, with whom we have a network of strategic relations - when he is fighting in every arena, both at home in America, in Iraq and in other places in the world, against all the elements that want to weaken him - is this the time for us to say the opposite?"

A Ha'aretz editorial titled, "Respond to Assad, Convince Bush," noted that "a disparaging reaction to the Syrian president does not accord with common sense." The editorial advocated that the Israeli government "attempt to persuade the administration in Washington to see the possibility of beginning a wise strategic process through dialogue with Damascus. Mossad chief Meir Dagan's comment that the Syrians no longer worry about a war with Israel is a reason to promote contact with Syrian President Bashar Assad, not to do the opposite. Instead, the prime minister has adopted the language of callousness and irrelevance. Whether Syria is turning toward peace or toward war, whether it is being deceitful or sincere, the response must be a cherished invitation to dialogue." Former Justice Minister Yossef "Tommy" Lapid wrote, "it is clear beyond any shadow of a doubt that the government must accept the Syrian invitation to negotiate. The question is only when."

Other commentators were not so polite. Prominent Israeli novelist Amos Oz called Olmert's response "astonishing," and sarcastically recalled that "there was a time when Israel still behaved like an independent state and not as an American protectorate." Oz asked, "Why is Israel meddling in the internal arguments between the hawks and doves in the United States? Why should Israel suspend one of its paramount national interests-peace with its neighborhoods-for the sake of the pleasantness or unpleasantness of its relations with a foreign government?" Oz then points out that "this is the first time that an Israeli premier has admitted and has even taken pride in the fact that a national Israeli decision of paramount importance has been forsaken to the hands of foreigners."

In Ma'ariv, under the headline, "A Vassal State," Ben-Dror Yemini [who is known for his right-wing views] writes that "For many years the U.S. has had a clear and outspoken policy: the settlements are not legal. This is not just mere policy. There have been crises over this. And Israel, wondrously, doesn't give a hoot about the U.S. A banana republic? Not at all. An independent state that does exactly what it thinks is the right thing to do. And not just [regarding] the settlements and the outposts: When the law was passed to annex the Golan Heights on December 14, 1981, the United States was incensed. It also took economic sanctions. Menahem Begin, then the prime minister, reacted in anger: `Are we your vassal state? Are we a banana republic?' And now, when it comes to the issue of Syria, the prime minister loudly declares that we have no position of our own. We are a vassal sate. `Bush doesn't want,' Olmert says, and time after time rebuffs calls from the Syrian direction. We've always said that our arms are extended in peace. That is, unless the Americans twist them..."

Yair Lapid, a columnist for Yedioth Ahronoth, wrote that "when George W. Bush's autobiography comes out, published by Harper Collins, a sentence will appear on page 352: and then the Israelis accepted my position. That is what our capitulation to American policy will boil down to in another five years. We will still be here, on the border, facing 1,000 missiles with VX nerve gas in their warheads. In return, we will get a footnote." But Lapid also added a positive note, "There is always something that can be done in America. You can recruit Congress. You can begin a campaign. You can at least begin to argue. After all, if there is one thing they instilled into world culture, it is that of being a `free people.'" (Ma'ariv, 12/20 &12/22/06; Forward, 12/22/06; Ha'aretz, 12/21/06, Yedioth Ahronoth, 12/19 & 12/22/06)

DOES ASSAD WANT PEACE? Last week Mossad director Meir Dagan expressed skepticism on the subject, telling the Knesset Foreign Affairs and Defense Committee that: "Every time international pressure is applied to Assad, he pulls the same rabbit out of the hat - willingness to enter into negotiations with us." But yesterday IDF Intelligence Research Department Director Brig. Gen. Yossi Baidatz told the same committee that "Syria's peace signals are genuine." General Baidatz explained that in the view of IDF Intelligence, "We think that Syria is interested in a peace initiative according to its understanding, which includes the entire Golan Heights, and is expressing this by means of reports, statements and interviews in the news media. That is Syria's way of conveying messages." He added that Syria is not willing to grant any concessions as a gesture, because it does not detect any willingness on the part of the United States or Israel "to make any move to accommodate Syria."

Committee members were reportedly confused by the Dagan-Baiditz disagreement. Knesset Member Danny Yatom (Labor), himself a former Mossad chief, said that Olmert should sit the two men down in one room and demand that each explain "how he interprets the exact same intelligence material in the opposite fashion - and then make a decision." In Olmert's place, added Yatom, he would accept Military Intelligence's interpretation. Also testifying before the same committee, Nimrod Barkan, the director of the Foreign Ministry's Center for Policy Research said that "Syria is ready for negotiations and there are sources in the Arab states who believe that Syria will ally itself to the Western bloc headed by the United States and Britain."

A senior security source was quoted by Ha'aretz saying, "There is no doubt that there is a movement within Syria that is interested in talks with us. The only way to gauge their level of seriousness is to talk to them. But Olmert is inflexible on the issue at the moment - he is more driven by political considerations regarding American reservations [on the issue of talks] than by renewing contacts with Damascus." (Ha'aretz, 12/25 & 12/26/06; Ma'ariv, 12/26/06)

NEW WEST BANK SETTLEMENT: Defense Minister Amir Peretz has authorized the habitation of an abandoned military outpost in the northern Jordan Valley. The move allows for the construction of 30 residences at the site. The new settlement, called Mashkiot, lies east of the West Bank security barrier, and will be initially settled by settlers who were evicted from Gaza in 2005. (Peace Now, 12/26/06; Israel Radio, 12/26/06)

RESPECT FOR THE LAW: Israeli Attorney General Menachem Mazuz today ordered a criminal investigation against government officials who transferred funds and other resources to settlers in illegal West Bank outposts. Mazuz's decision follows a formal petition submitted by Peace Now. At the same time, an aide to Mazuz indicated that the investigation would be limited: "We do not feel that the phenomenon in its generalness, despite its gravity, is befitting of a criminal investigation, with the exception of a few specific aspects, which will be investigated." An aide to Mazuz was also quoted explaining that the Attorney General has taken a hard line against illegal outposts, noting that "the high of this activity came during the evacuation of Amona and the Hebron market."

Speaking of which, a family of settlers has returned to live in the wholesale market of Hebron. Nine families had been living in the site illegally until they agreed to leave in January, just before an ultimatum posed to them by the IDF expired. Now, one family has returned and has begun legal maneuvers to fight an eviction order. In the northern West Bank, 1500 demonstrators disobeyed Israeli army orders to visit the demolished West Bank settlement of Homesh earlier this month. In order to evade authorities, 100 members of the group clashed with IDF soldiers near the eastern gate of the settlement of Shavei Shomron, which served as a staging ground, while the remainder moved to the other gate of the settlement to begin the two-and-a-half hour hike to Homesh. In the course of the hike, the demonstrators had to repeatedly veer into nearby olive orchards to avoid the IDF.

In an effort to stop IDF collusion with illegal settlement activity, Knesset Member Ophir Pines has introduced a bill forbidding the call-up of reserve soldiers to serve in outposts, unless it is to evacuate them. "The IDF's reservists are called up all the time to do reserve duty in illegal outposts," Pines wrote. "This, basically, means guarding illegal activity. It is unthinkable the IDF soldiers be called to reserve duty to guard outposts whose establishment and whose very existence blatantly break the law." The bill includes a provision allowing the defense minister to waive the law in exceptional situations. (Ma'ariv, 12/19/06; Yedioth Ahronoth, 12/20 & 12/21/06; Ha'aretz, 12/26/06; MSN News, 12/22/06)

HAMAS TRIAL BALLOON: A Hamas delegation headed by Dr. Ahmed Yousef, political adviser to Prime Minister Ismail Haniya, prepared, in talks with European officials, a draft for a five-year hudna agreement between the Hamas government and Israel, titled, "Proposal for Creating Suitable Conditions for Ending the Conflict." Research institutes that are linked to the governments of Switzerland, Britain and Norway participated in the drafting of the plan.

The plan talks about a "hudna" agreement for five years, during which Israel would withdraw to an agreed-upon line in the West Bank, the Palestinians would commit themselves to stage no attacks against Israel or Israelis anywhere in the world, and Israel would commit itself not to attack the Palestinians. Israel would not build in the settlements and not pave roads in the West Bank, and would also commit itself to enable free movement inside the West Bank, between the West Bank to East Jerusalem, between Jerusalem, the West Bank and the Gaza Strip-and free passage to Egypt and Jordan. "Political" prisoners would be released, including those involved in terrorist activity. According to the plan, an international force led by the Quartet states and Turkey, and reporting to the UN Security Council, would supervise the implementation of the agreement.

The draft states that beyond the five-year period, the Palestinian vision is to establish a Palestinian state that will extend over all the territories occupied in 1967 with East Jerusalem as its capital. The Palestinians will also demand to realize the right of return, but the draft does not state whether this refers to return to their state or to Israel within the Green Line.

Commenting on the draft, Nahum Barnea notes the recognition of Israel implicit in the draft, noting that while it "does not talk about explicit recognition of Israel by Hamas," that "every article in it says recognition and cooperation, in theory and in practice. In the document Hamas appears like a shy version of Fatah, having intimate relations with Israel while remaining a virgin, like in the advertisements which offered women a brassiere which would make them feel as though they were not wearing one." Barnea's analysis concludes with a sour note: "If there were any connection between the contents of this document and what Haniya and Mashal are saying in public, one could say that Hamas had begun proceedings for conversion to Judaism. The paper could have formed the basis for intensive negotiations between the Israeli government and the Hamas government, and after that for five years of paradise. But in the meantime there is no such connection."(Yedioth Ahronoth, 12/22/06)

HEDGING BETS: Egypt will transfer 1,900 rifles and about two million bullets to the Palestinian Presidential Guard, which is loyal to President Mahmoud Abbas. The transfer is being carried out in coordination with Israel and is part of a broader plan for strengthening the forces loyal to Abbas, who wishes to increase the number of Presidential Guard members from about 7,000 to 10,000. Israel has already given Jordan its approval for transferring some 3,000 rifles to forces loyal to Abbas in the West Bank. In addition to the arms transfer from Egypt and Jordan, the Israeli security establishment also recommends strengthening Abbas from a financial standpoint, especially given the assistance that Hamas receives from Iran.

A leaked Israeli intelligence report warns that the Egyptians fear that Hamas could win again in the next Palestinian election, possibly even ousting President Abbas. According to the report, the Egyptians are concerned that if they support Abbas exclusively, they will find a Hamas-dominated state hostile to them on their northern border. Therefore, assess Israeli officials, the Egyptians have decided to conduct talks on the future of the PA with senior Hamas members, in addition to their continued coordination with Abbas. A top Egyptian official took issue with this report, saying: "Whoever wrote this intelligence report, if such a report even exists, understands nothing about Egypt's actions: our representatives have been working for many months in Gaza to bring about a cease-fire between the Palestinian factions and to maintain the cease-fire. Those who say otherwise apparently want to weaken Abu Mazen and to damage his standing by means of false reports." (Yedioth Ahronoth, 12/24 & 12/25/06)

EUROPEAN-ISRAELI RELATIONS: The European Investment Bank, the foreign aid agency of the European Union, is to renew its activity in Israel and will provide loans totaling NIS 1.5 billion (about $350 million), on highly preferential terms, to the Israeli economy. The loans will be targeted to environmental quality facilities and to the business sector. When the European Investment Bank last operated in Israel, it did so on a much smaller scale. That activity was broken off ten years ago due to a crisis in relations between Israel and the European Union. An Israel Foreign Ministry source said: "Today Israel has an excellent dialogue with the Europeans. In effect we receive the most preferential treatment which it is possible to obtain from Europe. There is no doubt that the resumption of the activity of the European Investment Bank in Israel will aid our economy and is very welcome, and it is an expression of the rapprochement in the political relations between Europe and Israel." In related news, Israel is being considered for Commonwealth membership, because Palestine had been under British Mandate rule. Commonwealth officials have reportedly set up a special committee to consider membership by several Middle Eastern and African nations, including Israel and the Palestinian Authority. (JTA, 12/19/06; Ma'ariv, 12/22/06)

TOLERANCE, NOT A MUSEUM: Sheiks from the Islamic movement in Israel published a notice criticizing holocaust denial, while rabbis from the national-religious movement published a notice condemning the damage to a Muslim cemetery inflicted to build the new Museum of Tolerance in Jerusalem. Both statements were issues at the conclusion of a conference between Israeli Jewish and Islamic religious leaders organized by a group called Kedem.

Sheikh Kamel Riyan, the Muslim director of Kedem sees a model that could solve the Israeli-Palestinian conflict: "In the past we thought that we have nothing to talk about with the Israeli religious right. But we've learned that they are willing to compromise on everything that they don't see as a religious decree. I know rabbis in settlements who accept a Palestinian state in the 1967 borders."Ron Kronish, the Jewish director of Kedem is less ambitious: "We recognize that today it is not possible to reach agreement on the macro issues, but there is much to do at the macro level." Among other things, Kedem is acting to establish Muslim prayer rooms in Israeli hospitals.

In related news, Israel Airports Authority (IAA) Director-General Gabi Ophir last week instructed the management of Ben-Gurion International Airport to set up a small mosque. The roughly 20-square-meter room will be erected in the airport's main terminal. A water trough for washing feet and hands and a bench will be placed at the entrance to the room. The room will also be carpeted and will have a delineated alcove that faces Mecca. The mosque will also include a collection of copies of the Quran. In order to improve relations with Arab Israelis, the IAA has also launched an Arabic-language Web site and is establishing a special team that will be in charge of providing customer service to Arabic-speaking passengers.

In another first, a delegation of about a dozen Jordanian educators participated in a seminar about the Holocaust at Yad Vashem several months ago. During the seminar, the teachers learned about the Holocaust, anti-Semitism, European history, and about non-Jewish victims of the Nazis. A special section was devoted to studying the role of Muslims who helped Jews escape the Nazis. The seminar was organized by the Yad Vashem School for Holocaust Studies, with the help of the Foreign Ministry. (Ha'aretz, 12/17 & 12/21/06; Yedioth Ahronoth, 12/21/06)