Danny Rothschild believes that time is running out for Israel, that demographics are working against it and that it must reach out to moderate Arab states to facilitate any deal with the Palestinians. He also believes the country needs to take radical measures to secure its future, among them uprooting and resettling tens or even hundreds of thousands of settlers from the West Bank. The former coordinator of government activities in the territories, who is also the head of the Council for Peace and Security, was recently named as chairman of the the Herzliya Conference, a move that could be seen as a major shift, given his starkly opposing views to those of his predecessor, Uzi Arad, now Prime Minister Binyamin Netanyahu's national security adviser. But Rothschild, whose resumÃ© also includes a spell as deputy head of Military Intelligence, dismisses the notion brusquely. "My intention is to bring the best speakers to the conference. I guess that was his intention too, so I don't see major changes in the conference," he says when asked if his appointment has a broader significance. The Herzliya Conference has been dubbed the "Davos of the Middle East" and is Israel's foremost strategic symposium. Maj.-Gen. (res.) Rothschild, met with The Jerusalem Post at the Institute for Policy and Strategy, a think tank based at the Lauder School of Government, Diplomacy and Strategy at the Interdisciplinary Center Herzliya ahead of the 10th annual gathering of the forum, which takes place at the IDC from January 31 to February 3. While the list of participants has yet to be released, speakers in previous years have included Nicolas Sarkozy, Jimmy Carter, Condoleezza Rice, as well as Israel's political, economic and academic elite. Rothschild is a man who gets straight down to business. "Look," he replies to the suggestion that transplanting a large percentage of the settler population would be tantamount to suicide, "for anyone with their eyes wide open and a vision that doesn't end at the end of the budget year, for anyone who looks 10-15 years ahead and analyzes the situation in Israel and the Middle East as a whole, then the only possible solution is not to sit between the Mediterranean Sea and the Jordan River, but to sit in an area which has a majority of Jewish people. That means absorbing those settlers, who as part of any peace process it will be decided that they will have to leave the area of the West Bank. Otherwise, in 10-15 years from now we either will not be a democratic state or we will not be a Jewish state. Those are the two options." Referring to the demographic balance between Jews and Arabs, Rothschild adds, "If the situation between the sea and the river, say 15-20 years from now, will be 50-50, from that moment onward you have to make a decision. Either you want to be a democratic state which means everyone votes - one man, one vote - and in that sense we will not be a Jewish state. Or not to let them vote, and then we will not be a democratic state. And I don't see any other option." Is Netanyahu's settlement freeze then a step a right direction or is it just political maneuvering, I ask him. Rothschild, however, doesn't want to talk about himself or his views. "We're here to deal with the conference. Let's deal with the conference." SO WHAT are the issues that will dominate this year's parley. "The main theme that we decided upon is to analyze the global situation a year after [Barack] Obama took office, a year after Bibi Netanyahu took office and a year after the economic crisis," Rothschild explains. These issues, he says, have a lot to do with Israel's security. "Like Iran, like what will happen in the region after US troops leave Iraq, US foreign policy in the area, Israel's place in the global economy." Among the other issues on the conference's extensive agenda are Jewish peoplehood; branding Israel in the world and how to use new media to achieve that; changes in international law to facilitate the fight against terrorism; the green economy and alternative energy sources; and the consequences of Israel being accepted as a member of the OECD. Once again though, one of the main issues on the agenda will be how to handle Iran's nuclear ambitions and the mullahs' aspirations for regional influence, issues that Rothschild's predecessor said kept him awake at night. "That should keep every one of us awake at night," agrees Rothschild. "Because that's a real strategic threat to the existence of the State of Israel. If there is an existential threat to the State of Israel, it is Iran attaining nuclear capability. The combination of a nuclear device and a decision-making process that we know very little of is something that worries me. There are other states in the world that have nuclear capability, but they have adopted rules and a decision-making process that assure the rest of the world that their device is in good hands. Nobody knows the situation in Iran and what is the decision-making process that may bring them to use such a device. And that should worry everyone at night." Arad said specifically that Israel has mishandled the issue. "I'm not sure that Israel has mishandled the issue, although I do think we could have done some things better. But I think the fact that Israel sent a clear-cut message to the world, that it's not only an Israeli problem but a problem for Europe, for NATO, for the US, for the whole free world - and not to speak of the Arab countries and the other countries that are Iran's neighbors. I think that was the right policy. We can be the bull in the china shop, but I'm not sure that's the case this time. "We will be bringing in experts on the nuclear arena, on Iranian foreign policy, and others on the best way to deal with threat. As you know, there are quite a few ideas walking around. We're going to deal with them all." Another issue on the agenda is how to empower moderates and at the same time weaken radicals. "Radicalism is one of the biggest threats to the free world today. Not only for Israel. Look at what's going on in Europe. Look at what's going on in our neighboring countries. The moderate, secular leadership in the Middle East is threatened by radicals. Their aim is to replace the secular leadership with an orthodox leadership that will obey Islamic law. The way to deal with this is to first recognize the problem, and I'm not sure that everyone is ready to confess that there is a problem. That's certainly the situation in Saudi Arabia. "So we will be raising the problem and analyzing the problem. We will be looking at the workings of the whole Islamic apparatus, which aims to change regimes in the Middle East and not only in the Middle East. It has to do a lot with a poor socioeconomic situation that they are taking advantage of and that is the case in all our neighboring countries. That is the case in Gaza, in the West Bank, in Lebanon, in Egypt, in Saudi Arabia, everywhere. "The way they are working is by providing the average man on the street with what he expects his government to provide him with and what his government fails to provide, either because of lack of resources or because of corruption. Or, in the case of the Palestinian Authority, both. So they are providing the guy with his needs and afterward they are cashing in politically. "Some Western countries are putting pressure on Middle Eastern countries to hold democratic elections. The Western countries see elections as equal to democracy, but they are making a naive mistake. That's what happened with Hamas in Gaza, that's what happened with Hizbullah in Lebanon and that's what happened with the Muslim Brotherhood in Egypt. It happens all over the Middle East. But it's not only in the Middle East, it's in Europe too. I guess phase one is to understand how they are working. Phase two is to do something to counter the way those Islamic movements are working and unfortunately I'm afraid we are not doing enough." What can Israel do to combat radicalism in its backyard, in Gaza and the West Bank? "Israel can take a set of measures that will show the Palestinian people in Gaza that their brothers in the West Bank are living much better, much more secure [lives]. That's something that Israel can do - economically, releasing prisoners, putting pressure on Gaza. Those are things that we are doing, but I'm afraid that we are not doing enough." Rothschild takes affront at the suggestion that Israel has allowed radicalism to grow in its own backyard, a view he sees as a common misconception. "That's a big mistake. It's a common mistake. One has to understand the way Hamas works, the way Hamas makes its capital in order to understand that our hands were tied. For Hamas, Hizbullah and all the other Islamic radicals, the amount of resources - money, manpower and efforts - going toward what they call the dawah, the civilian way of gaining the support of the people, is about 90 percent of their efforts. Only 10 percent goes to terror. "Now, it's very difficult for democracies to fight and to hinder such efforts. What are you fighting against, an orphanage? Are you going to destroy the orphanage? Are you going to stop them from distributing milk powder in refugee camps? Are you going to stop them from distributing blankets in the winter? That's the way they work and we did very little because those are humanitarian things that we would have been much happier if the PA had done them, but they didn't, and Hamas did. "So people are blaming us for helping them - we didn't help them, but we didn't stop them and the world would not have understood us. What are you fighting - someone that is building a school? What are you destroying, a clinic? That's the way they work, that's the way they invoke the support of the people. Look, it's the same with Hizbullah. Over the past 10 years, and rightly so, we have been very busy with the military/terror capabilities of Hizbullah, but at the same time Hizbullah has built a state within the state of Lebanon, which was a civilian state. They built a civilian organ which we didn't care about but the end result is taking over the regime, taking over the leadership, and that's what happened. The world would not have tolerated any action by us against Hizbullah's civilian efforts to get the support of the people. The same as the world would not have let us fight with military means against Hamas building clinics or orphanages." Should we engage with extremists? Is there any possibility of engagement? "I don't feel that we should, or that we can deal with Hamas." ON THE issue of the peace process, Rothschild speaks of the need for a general regional agreement rather then separate deals. And that we need to reach out to moderate Arab states. "Well, the situation is that they reached out to us and as a matter of fact we refused. But yes, I think that the only way today that we can get some sort of deal, a bilateral deal, whether with the Syrians or with the Palestinians, is by a multilateral, pan-Arab initiative - call it the Saudi initiative or the Arab initiative or whatever. "I say this for various reasons. To begin with, when negotiating with the Palestinians, we are the strong side and they are the weak side; we are giving, they are taking. We are not getting anything. Once you broaden the scene, it's not only that we are giving, we can also get something - not from the Palestinians but we can get from the Arab world and that's something that can be used to explain to the Israeli public that we are not only giving, we are also getting benefits from the peace process. "Beyond that, there are some issues concerning the peace process that the Palestinians will not be able to decide upon by themselves. First of all, there is the issue of Jerusalem. The issue of Jerusalem has two layers. Firstly, the municipal layer, which is a Palestinian issue, and it's up to them to agree to whatever will be agreed upon between Israel and the Palestinians. The second is the Holy Basin issue. The Holy Basin issue involves the Islamic sites over which the Palestinians cannot take a decision by themselves because the Arab League or the Islamic League has decided that any decision on the Holy Basin is not for the Palestinians themselves but for the king of Morocco, who is called the king of Jerusalem, and the king of Saudi Arabia, who is called the king of the two holy sites, i.e. Mecca and Jerusalem, and the king of Jordan, which was responsible for Jerusalem before 1967, and the Palestinians. Those four have to take a decision. "The other issue is the issue of refugees. There is a consensus in Israel that there will be no return to the State of Israel. And the Palestinians I guess deep in their mind understand that is the situation. From that moment onward there are two possible solutions for the refugees - either to come back to the Palestinian state or to remain where they are now with a different status. In order to reach an agreement, you need to have the participation of the host countries. "Furthermore, the leaders of the countries hosting the refugees since 1948 have said very loudly, 'We have had an economic burden for the last 60 years; we need compensation. It's not only personal compensation, we want to be part of the deal.' So in that sense also, the Palestinians will not be able to take unilateral decisions. "Thirdly, and no less importantly, the Palestinians understand today that they face tough decisions and that they will not be able to get everything they want. If they will be able to show their people that they reached [a deal] in agreement with the Arab world, which means that the Arab world tolerates and supports it, then it will be easier for them to take those decisions. Otherwise they will go to the extreme. It's in our benefit. We need it as much as they need it. So from every angle that you look at the broader Arab peace initiative is important for us." Does Rothschild see a possibility of a third intifada? Is there is no progress on peace talks? "The people in the West Bank are in a different place today. I'm not saying that we cannot face terror, but I don't see them at the moment going toward some sort of a civilian intifada. I don't think the mood today is such that it will bring them back to the street." Rothschild was very vocal in support of the disengagement from Gaza. Do he feel that was the right decision and would he support similar unilateral moves in the West Bank if a similar scenario of violence were to unfold there? "I think that it was the right decision at the time, but think we didn't miss a mistake in carrying it out. I think that the fact that it was done unilaterally and without coordinating it with the Palestinian Authority, with the Fatah, with the local police and without handing the ground to them first, that was the biggest mistake we made. I don't think that to remain in Gaza in the situation that developed in Gaza at that time is something that the Israeli public could have lived with. "The situation in the West Bank is totally different in almost every aspect that you look at. Gaza is very tense, very difficult to control, a lot of refugee camps. It is actually one refugee camp after the other. It's very difficult to isolate places. That's not the situation in the West Bank, so one cannot compare the two. The other mistake that we made in Gaza is not to retaliate from day one." Should Israel pay the price for Gilad Schalit? "Unfortunately we will have to pay the price. But the day after I think that we will show Hamas or Hizbullah, or whoever may kidnap a soldier, that from now on we are changing the rules of the game in all aspects. And I will say no more."