Prime Minister Ehud Olmert has seen better days. His Palestinian partners are proving immovable, his countrymen are irascible, and his polls are abysmal. Never mind. A 75-minute conversation (in English) with the prime minister on Wednesday, a year to the day since he won the 2006 elections, finds him neither apocalyptic, apologetic, defeatist, nor even particularly angry. Granted, he has his bones to pick - with the state comptroller, with his political rivals, with journalists and with the country's penchant for "exaggerated self-criticism." But there was a distinctly Yitzhak Shamir-like quality to Olmert on Wednesday. Not the Shamir of "sit and do nothing," but rather the Shamir of "Tov, things are not so bad; they've been worse; relax; keep things in proportion." Indeed, keeping things in proportion is the prime minister's underlying message. Keeping things in perspective regarding the Second Lebanon War, the diplomatic process with the Palestinians, and the seemingly endless stream of scandals and alleged corruption. No, Olmert asserted, the war in Lebanon was not a mistake; the diplomatic process with Palestinian Authority Chairman Mahmoud Abbas was not at a dead end; and the scandals and allegations of corruption were not leading the country to the dogs. Olmert looked tired, but seemed comfortable and relaxed as he sat in the study of his official Jerusalem residence and fielded one question after the next on a wide range of issues. His petulant streak barely surfaced. Indeed, the prime minister's mood - cautiously upbeat, verging on the optimistic - seemed better than that of much of the nation. And considering what Olmert is facing, that in itself is no small achievement. A week ago last Sunday, after the establishment of the new Palestinian government, the cabinet decided that it would limit its contacts with Abbas to talks about security and humanitarian issues. That was March 18. Then Condoleezza Rice comes here and says what she says about a "political horizon." The Foreign Ministry is spinning [the agreed bi-weekly meetings between you and Abbas] as meaningful talks about the contours of a Palestinian state. What changed in those 10 days? Nothing has changed. The whole idea of meeting bi-weekly with Abu Mazen was my idea. I proposed it to Abu Mazen and I asked Condi Rice on Sunday night to raise it again with him. I said [from the start] that the meetings would mainly focus on two major issues. One is improvement of the quality of life of the Palestinians - namely access and movement, the crossing at Karni, humanitarian assistance and so forth. And two, from their side, the benchmarks for the implementation of the war against terror and the end of hostilities. And, of course, Abu Mazen's commitment to release Gilad Schalit. These will be the main things. We agreed not to have negotiations on final status issues. But we agreed that we would talk about political horizons. So, if your interpretation is that "political horizons" means final status issues, it does not. Final status is only borders, refugees and Jerusalem? Yes. And "political horizons" is everything else? If you want, yes. I am very interested to understand how are they going to build a Palestinian state - we want it [the state], and this is not something that we have ever concealed from anyone. We want to know how the legal system will be built, how the economic system will be established, how the government administration will be operating and so on. These are serious questions that can come under the cover of political horizons which are of great consequence for the future, but which do not relate to [the final status] issues that I don't think can be resolved at this time. If we deal with these [final status] issues, we will explode the process, rather than build it up properly. On Sunday, you were openly critical of Abu Mazen's not having delivered. That's right. Can he deliver on anything that you're talking to him about now? I don't know, but this is precisely what I want to check. And that's why I didn't want to bypass these issues and start talking about final status issues. I don't ignore the importance of all these final status issues, but it's not the right time. The right time now is to create benchmarks for the implementation of his initial commitments. Let's see if he can do it. Haven't we seen that he can't? Up until now he didn't. This is for sure. Let's see. Is there something psychological here? In other words, that we don't want to be seen to be closing the door to dialogue? That we want to show moderate people on the Palestinian side that there is someone to talk to? Is that something the Americans were very concerned about? There was no confrontation between us and the Americans. Let's make that very clear. If it appeared in the press that I vetoed or something like that, it's ridiculous. It's not the nature of our relations with Condi Rice or with the president. The question was how things will be presented in order to encourage Arab countries and the Palestinians that there is a horizon to go forward, without bypassing those issues which for us are essential, because we don't go into business with someone that ultimately can't deliver anything. You know, Europeans, Americans and definitely Palestinians don't quite understand why I bang on the table every time I meet with them and talk about Gilad Schalit. What I say to them is, first of all, according to Jewish tradition, he who saves the life of one person saves the whole world. This is something very, very important in the Jewish psyche. [I say to Abu Mazen:]"Hey, you promised me! You said here three weeks ago or a month ago, in front of Condi Rice and myself, that you will not establish a national unity government before Gilad Schalit is released. Now, is your promise worth something? Keep it. Keep it. You can't release him? Then don't form a national unity government. A national unity government is important for Hamas? Then tell them to release Schalit." So I insist on these issues. I do want to have a link to the Palestinians. I do want to talk with Palestinians. I don't want to get stuck in a corner and be lost forever. This is not the interest of Israel. We are interested in moving forward. We don't need reminders that it is in the interest of Israel that things improve with the Palestinians. It's my interest. It is my interest, however, subject to very strict definitions of what we do; what time frame we set for it; what are the phases; and basically this is according to the road map. We don't want to change that. Did Secretary Rice suggest to you that maybe you should start talking final status issues with Abbas? No, no, no. There was full agreement from the outset that there would not be final status issues in the talks now. Not between them [the Americans] and us, and not between us and the Palestinians. Do you see any sign that the Palestinian public is moving away from Hamas, regretting its choice? I don't know, but I know one thing, and that's why I'm optimistic: I believe that within five years there is a good chance to make a comprehensive settlement. I think the Palestinians are coming close now to a point of historical decision. They are coming to a point where they will have to decide on their future in a very significant way. There is a chance that when they come to that point, they will make the historic choice that they can't carry on with these Islamic fundamentalist extremists who are destroying every chance for a Palestinian future. They are starting to move forward, and I want to play a role - quietly, tacitly, smartly - to help create the environment that will help the Palestinians make the right decision. And that can't be done without talking to them. Looking back at the history of the conflict, why do you believe that they're going to make the right choice now? I certainly hope so and I want to help it happen, because I don't want to live with Palestinians forever. I don't believe that living with three million Palestinians, entangled with them in the way we are, will help the Jewish state any better. I don't think - if we continue to be right but to be engaged in a violent confrontation with them - that in the long run we will have the world on our side all the time. And my question is: What do I want Israel to be? That was the philosophy of the realignment plan. That's right. The philosophy hasn't changed at all. What has changed are the political circumstances. Exactly a year ago, on the 28th of March, the last elections, I believed that we could hopefully move forward, even if the Palestinians would not cooperate. The circumstances of this last year - not so much Lebanon, by the way, but rather Gaza - proved that maybe a unilateral process has its weaknesses, not just its advantages. I found out, and I have to be realistic, that maybe the weaknesses [revealed by] the unilateral action in Gaza [show a need for] greater caution. If there's still a chance to establish a viable address on the other side that will take charge and that will themselves protect from continuing terror, it's worthwhile to do it this way. But the philosophy hasn't changed. And if there is no such Palestinian address, you would reconsider...? Come to interview me again when it doesn't happen. In other words, you're giving another chance for negotiation...? Yes, you'll remember when you asked me about this before the elections, I said that first I'd give negotiations a chance. Only if I reached the conclusion that negotiations were not getting us anywhere would we then pursue unilateral action. So, in a way, I can say I haven't yet concluded that negotiation is not working any further. We'll see. Is that the point of these negotiations now? To see whether with this [PA government] constellation there's something to do, or maybe we have to do it on our own? If I'm ready to meet bi-weekly with Abu Mazen, then I'm still giving it a chance. If they'd invited you to Riyadh, would you have gone? I'd have taken the first flight. Was this considered? Were there contacts? No one proposed it to me. If it is proposed, I will not hesitate. On the basis of the current Arab peace proposal? I'll speak to them. I'm not going to agree [to anything] without a reasonable basis. What's the danger? Can't you see the merits of my being invited to Riyadh if it were possible? I don't think it is, by the way, I don't give it any chance. But had it been done, can't you see the merits of my being invited to Saudi Arabia to sit in a meeting with all the Arab nations? That in itself would be an act of recognition of great significance. Again, I say, I don't believe it will happen, but had it happened, I would have answered immediately. Is the 2002 proposal, as it stands, something on which you could begin to talk? We have to define what we're talking about. I'm talking about the Saudi initiative. I'm not talking necessarily about what they now call the Arab initiative as it was formulated in Beirut in 2002, because there are differences. The Saudis don't speak at all about resolution 194 [on the refugees]. The Saudi initiative looks better in this respect than the Arab initiative. Not that I agree with the Saudi initiative in all of its aspects. Do you accept the Clinton parameters from 2000 on the refugees? No. I will not agree to accept any kind of Israeli responsibility for the refugees. Full stop. It's a moral issue. It's a moral issue of the highest standard. I don't think that we should accept any kind of responsibility for the creation of this problem. Full stop. What role should or could we play in solving the refugee problem? What solution is acceptable? Would you rule out...? ...Any refugee coming to Israel. Full stop. Out of the question. Not for family reunification? Are you talking about family reunification, or are you talking about a solution for the refugees? Refugees, no way. Family reunification we have now to some degree. Even now it's becoming more of a problem than a solution. But this is not the solution to the refugee problem. And I'll never accept a solution that is based on their return to Israel, any number. Our understanding of the Clinton parameters was that it involved a certain recognition by Israel, in principle, of a right to return, but that Israel would have the sovereign right to deny them a return. That was accepted by the Barak government. Is that acceptable to you? No. Turning to Iran and your speech to AIPAC [two weeks ago, when you cautioned against a premature exit from Iraq], there's a striking disconnect between the American Jewish attitude to Iraq, which is largely that "we shouldn't be there" ... Excuse me, if I may, what exactly is the connection between the Reform movement and the foreign policy issues of America? I was surprised that the Reform movement decided to make a statement about the presence in Iraq. If they wanted to make a statement, I think I have the full moral authority at least to say to them how it may impact the security interests of the state of Israel. That was basically my purpose when I talked to AIPAC. I'm not going to enter the political divide in America between the supporters of Bush and the opponents of Bush, and I don't feel that it is my duty to advise them how to behave on these issues. This is purely an American issue. But when someone says he cares for the security of Israel - when someone says that the future of the state of Israel is of the greatest significance for him - I think I have the right to just advise him that, from the point of view of the security of Israel, if America pulls out weaker from Iraq, it will be a lot harder for America to face Iran, which is for us a matter of life. I don't care about politics in America. All I suggest is that those who care for the state of Israel and the security of the state of Israel and the future of Israel should remember what is the enormous significance of American success in Iraq for the American ability to face Iran. But you are entering into American politics. The argument of some of those politicians who want to speed up the exit from Iraq is that they can better deal with Iran if they are out of Iraq. You're saying, however, that "if you want to confront Iran effectively, you have to hang tough in Iraq, and you have to ensure that Iran is not emboldened by the exit from Iraq." I don't have anyone else but America to lead these efforts against Iran. I can't afford to make a mistake and to give America, or those who support the security of Israel, advice which might be wrong. Because if it is wrong, who else will be there to fight for Israel, to protect the interests of Israel vis-a-vis Iran? Who? Who will be there? They're probably going to ignore you anyway. Whoever leads America next is probably going to expedite the pullout from Iraq. How do you know that? Do you know already who is going to lead America next? Do you think that, for instance, Giuliani will pull out from Iraq immediately? Let us word the question differently. If America does expedite the pullout from Iraq, as many of the would-be presidents would do, how damaging is that for the struggle against Iran? There's genuine danger that a premature pullout of America from Iraq might strengthen the extremist fundamentalist Shi'ites. And that is not going to be the kind of outcome that America wants or that will better serve American interests. So, in this respect, there can be a collapse that will damage dramatically the political space that America needs in order to carry out an effective campaign against Iran. Since the future of Israel will largely depend on this effort, I look at it as an obligation of mine to remind those who care for the security of Israel... I'm not talking to Republicans or to Democrats, to the political opponents in America. I'm talking to those who say, "We care for the security of Israel." So, if you care for the security of Israel, here is what you need to know about our assessment of what is important for our security. Then you make up your mind. Given those implications for Israel, why do you think the American Jewish community is so against the war in Iraq? Maybe they don't quite understand the possible ramifications and something needs to be explained to them. And maybe some Jews became a little bit weary of these repeated [verbal] attacks - that America got involved there in the first place because of the Jews and Israel, as some suggested. So I just want to say, "Hey, you didn't get involved because of us. We are against it. But, listen, we are not children. We are mature people. The question of whether or not American should have entered Iraq in the first place is an important historical issue, but this issue has been resolved long ago because America entered Iraq. You may have been against the American involvement in Iraq in the first place. But now that a lot of expectation has been developed, now that there's a serious danger that the radicals will be stronger as a result of an American pullout and will upset the balance in some of the most important countries in the world, you may say I wouldn't have entered in the first place, but once I'm there, I will carry on now, because it's important for our interests." How confident are you now that Iran can be stopped short of military action? Six months ago, you said to us that, one way or another, President Bush would be able to stop Iran. I still think that there is a good chance that it will be stopped without any need for violent action. It depends on the international community. The economic sanctions, the political and diplomatic measures are starting to be felt in Iran. Additional efforts would be very helpful. Are the Russians helping now? Yes. The Russians voted two times with the majority in the Security Council. Forget about what you heard people say about them. Forget what some other countries criticize them for. The fact remains that both times they voted against Iran, and also they cancelled their deal on the reactor at Bushehr. They don't supply them with nuclear fuel. So if you measure them by performance and not by statements, you can also see the upside. How about the Saudis? Do you think the Saudis want Iran to go nuclear? They are doing it their way. They are not a member of the AIPAC organization. They have aligned the moderate Arab axis to be against Iran. During the fighting in Lebanon, they made statements in favor of the Israeli attack or against Hizbullah. Is that not something, in the context of the Arab countries? There is now an attempt to build up a united front of major moderate Arab countries that will go with the United States - with the West - against Iran. Is that bringing warmed ties for Israel with countries with which we had no relationship in the past? Informal contacts with countries that in the past we didn't have any kind of contacts with is growing and is very impressive. It is behind the scenes. You can't name the countries, and you can't talk about the specific contacts we have. I can only say we are at the crossroads, where many, many forces are interested to talk with us. What will it take to get the Saudis to cross the line? I am not an analyst of the Saudis, [but] I think that the leadership is serious. I think that King Abdullah is a remarkable person. The Saudi initiative, which he initiated when he was the crown prince, was very interesting. It indicated a greater sense of responsibility that Saudi Arabia is prepared to take in the politics of the Middle East. "Remarkable" - that's quite a word. What makes him remarkable? For many years, they were not there. For many years, they were on the other side, perhaps on the extreme. And now they start to understand that Israel is a reality, that Israel is maybe not such a negative reality. And considering that Saudi Arabia is the most important Arab country, with enormous influence on everyone, don't take it lightly. You'd like to meet with him? I would have loved to meet with the king of Saudi Arabia, but I don't think such meetings are being scheduled.
Turning to Lebanon, do you share the stated assessment by Amos Malka to the Winograd Committee that you were let down by the IDF, given an exaggerated sense of what could be achieved from the air?
Many good things were achieved. It's time we stopped this, I don't want to say self-hatred, but this kind of hysteria about the army. The army is a great army, most likely the greatest, most unique, most courageous army in the world. And it delivered in many different ways during the fighting in Lebanon. There were some failures, largely as a result of the fact that for six years they were not training for this kind of war.
Yesterday I visited the army in the North and a battalion commander, a very impressive guy, told me about the lack of preparations. He took me to his command truck, and said it hadn't been used for six years. So, as a result of the lack of training, the army had certain gaps which were manifested in the fighting.
But even considering this, when I know what's going on today in the south of Lebanon, I tell you, there is a dramatic change. There are 26,000 soldiers. Of them, 12,000 are effective UNIFIL forces. The European units, which are the majority, are very effective, and they are involved in changing realities in southern Lebanon on a daily basis. They have dramatically reduced the threat to Israel's security.
The situation is not ideal. I'm not trying to tell you that the Syrians are not trying to smuggle arms into Lebanon or that the fact Hizbullah is still quite influential in the political system is something I like. I don't like it. But to ignore the enormous achievements of the army in the south of Lebanon, as a result of which there is not one single Hizbullah person who can surface with a gun in this entire area? One of the generals of the Israeli army told me yesterday, "The time from August until now is the quietest, the most comfortable, that we had in the south of Lebanon or the north of Israel for the past 40 years."
So I do not think it would be fair to sum up the war by saying that the army let down the government.
The major decisions that the government adopted over the period of the fighting, starting a lot before the 12th of July, because I knew there would be an abduction of a soldier - I didn't know the date, but I knew there would be an ambush; I knew they would shoot all across the North. It was just a matter of time. Therefore, we had long discussions about what would be the pattern of our reaction once it happened. And everything we did on the 12th of July we had contemplated, considered and analyzed before. And I am very happy with these decisions, for two reasons: We changed the equation in south Lebanon, and we gave ourselves the opportunity to examine our shortcomings and cope with them before it was too late.
I saw the training yesterday. I have approved the entire plan for training that will take place in the near future. And I saw the enthusiasm, the level of commitment of the soldiers. And, thank God, I'm telling you we have a strong army. We don't have to worry.
You don't regret not having sent ground forces as far north into Lebanon as was necessary to get to the Katyushas?
Not at all.
Because you think the losses would have been heavier?
For two reasons. Considering the performance, the failure that we have gone through, you can imagine how a lot more difficult it could have been had we started with ground forces going all the way...
Number two, the rockets were shot at Israel from across the Litani. So, to have to go through all of this - to lose so many soldiers, and then to reach the Litani only to find out that they keep shooting Katyushas at Israeli settlements even from across the Litani - for a longer period of time [would have been] a mistake. The desire to take over all of this territory was based on the conception which characterized Israeli wars from the beginning: that we move the war into enemy land. But we live in a different period. You don't move the war into the enemy's land as long as they have the capacity of shooting rockets and missiles that will reach your settlements anyway.
So, from the outset, the ambition was not to take over a territory or to cross the area. The strategy was to establish pressure that would create the involvement of international forces to force the army of Lebanon to take over the South. That was the purpose of the war. Look at the statement I made on the 17th of July, and the cabinet announcement of the 19th of July. From the beginning, we were not interested in the typical knock-out kind of victory which doesn't exist when you fight against terrorists. [The aim] was the arrangement that had to be approved by the Lebanese government, and to be drafted and phrased properly by the United States and the members of the Security Council. And that's what we did.
Would you consider replicating the UNIFIL model elsewhere - in Gaza, the West Bank...?
An international force? It's too early to judge the overall outcome of the use of the international force in Lebanon in order to see whether it's applicable. I'm happy, by the way, with the performance of UNIFIL. It's far better than we had anticipated. They are everywhere. Hizbullah doesn't have the flexibility and freedom to act that it would have wanted.
Are you confident there won't be another significant flare-up in hostilities on that front?
I am not confident about anything. In this part of the world, everything is volatile and everything is unpredictable. I think the chances are reduced, not so much because of UNIFIL - although UNIFIL is very effective - but because of Hizbullah's fear that they would go through something they don't want to, because they have fresh memories from the war in Lebanon, and they know how devastated they were in the war.
Is Israel asking the international community to take concrete steps to keep the smuggling from Syria into Lebanon at bay?
[Yes, we want] the presence of an international force on the border.
Similar to the type of force in southern Lebanon?
Is there a chance of that?
I don't know. There's a better attitude towards it than there was before. Because people know that they are smuggling arms, and people know that it endangers the stability in Lebanon and also may require, at some point, Israeli intervention.
Did UN Secretary-General Ban Ki-moon seem open to this?
I can't speak for him.
You've got these terribly low popularity ratings. Do you think you can regain public trust and support?
Yes. I saw political leaders who were high in the polls and low in the polls and went up again. My first year in government reminds me of the first year of [Ariel] Sharon and the first two years of Bill Clinton in the White House. Both of them moved dramatically up, after being very down for a very long time - similar to my position, maybe slightly better, but not very much. Eventually, they went up again, as did so many other politicians. When I pray every morning, I don't pray for the polls. I pray that God will give me the wisdom to take the right decisions. As long as I take the right decisions, I'll be all right in the polls.
You may not pray for this, but you must hope that further corruption scandals won't emerge.
It's not something in my control. You have a state comptroller who is a very, very different phenomenon. Something that should bother every decent Israeli citizen. We are not talking about a normal phenomenon. Something very strange.
I've been in public life for 33 years and now, in one year, there are, what - 15, 17 different investigations by the State Comptroller?!
The degree of scrutiny is different because you are the prime minister.
What does that have to do with what I did in the [Jerusalem] Municipality, or in the Ministry of Health or in the Ministry of Industry? He should - people should -scrutinize what I am doing in the Prime Minister's Office. There is not one single complaint against any of my performances in the Prime Minister's Office. It's all history. Is it not strange...?
You're not asserting that if you had done something that was corrupt or illegal in the past, it should be ignored because it's not from your current...?
Who talked about illegal? I'm talking about the creations of a very tortured imagination of a person who set out for himself the target to remove the prime minister, on a personal basis. This is what we are talking about. He said this is his mission: To hit me. Like an asteroid.
Why would the State Comptroller want personally to get you out of office?
I don't know. You must inquire with him.
You know I [just] got a report from him. I get every day a report about something. So there is a cover letter which says, "I'm sending this draft. It has to be reviewed and we expect your comments."
And then it says, "This is top secret. Any leakage of this will be punished by law."
So my natural desire is to answer him, "Of course I will not leak it. Because if I leak it, what will you do? You're going to leak it, like you leak everything."
You've lived in this country long enough to remember other state comptrollers. You've never seen anything similar to this. This is very sad. But this is not something that I am going to allow to distract me from my responsibilities and my priorities. I work every day. I wake up in the morning and I go to work. And I work longer and harder than most other prime ministers in the past. And I do my job. And I know that, finally, it will be understood by the public.
The people will ask themselves, "If [things are] so bad, how come the economy of Israel has grown so rapidly in the last couple of years? If it is so bad, how come unemployment is the lowest in 10 years?"
When I took over as minister of finance, a year and eight months ago, unemployment was about 10 percent. It's now 7.7%, and, according to the Bank of Israel and Stan Fisher, 6.5% is full employment. So we are only 1.2% off full employment. This is a dramatic development.
Last year, we had the highest ever foreign investment in Israel. We had the lowest inflation rate - minus 0.7. We had the highest growth - 5.1 percent. We had the biggest surplus, of over $6 billion, in our balance of payments.
I mean, hey, it all works! Government is working. And also, for the first time, the number of people living below the poverty line has gone down - 4,000 families less. That doesn't come from nowhere. It comes from the right decisions, effective controls, a sense of responsibility. And this was 2006, in which we fought for 33 days. In spite of this fighting, all the investments came in, which is a show of confidence, not just for the economy. It's a show of confidence for the government. The international community thought that we handled things in a responsible manner, and so they can continue investing billions and billions and billions of dollars. And what does the low prime rate of interest mean? That many families are paying less for their mortgages and less for their bank accounts. This is the beginning of a certain process, which is the main social agenda of this government.
We are investing, in the new, 2007 budget, $2.8 billion in the social agenda, on top of natural growth. This has never been done before. We are investing hundreds of millions of dollars to deal with children of risk. We are investing hundreds of millions of dollars to deal with people with disadvantages and limitations. We are going to invest a lot more in education than ever before. We are going to deal now with children from birth to 6 who were never dealt with by government on a comprehensive basis. We are not going to close the Tipat Halav nurseries, which were going to close... There is a whole social strategy.
(The second and final part of this interview will appear in Sunday's Jerusalem Post.)