One on One: On borrowed time

Washington attache Ron Dermer says he's using the final stretch of his unexpectedly shortened tenure to receive what he hopes will be Israel's last 'welfare check' and to promote divestment from Iran.

dermer 298 (photo credit: Ariel Jerozolimski)
dermer 298
(photo credit: Ariel Jerozolimski)
Two years ago, in an op-ed entitled "Why I left the America I love", Jerusalem Post columnist Ron Dermer wrote of his native United States that it had "armed [him] well for the difficult struggles ahead... convinced [him] that good can triumph over evil and that a free people, united in a common purpose, will never be defeated by tyrants and slaves." Dermer, who coauthored Natan Sharansky's The Case for Democracy (the book that earned him this year's Presidential Medal of Freedom from George W. Bush), had been in a dilemma. Offered the post of minister of economic affairs in the Israeli Embassy in Washington by then finance minister Binyamin Netanyahu, Dermer - who made aliya from Miami Beach (where his father had been mayor, and his brother currently is) - was faced with a tough choice: refuse the appointment or revoke his American citizenship. He opted for the latter. Though his term was officially due to end next month, it was extended. As a result, the 35-year-old married father of three young children was gearing up to settle down again for at least another year. Suddenly, however, he was informed that Finance Minister Avraham Hirchson would not be renewing his contract. Though Dermer is not technically a political appointee, his dismissal - particularly at a crucial juncture in US-Israel discussions on the upcoming aid package and loan guarantees - has caused a few eyebrows, both at home and abroad, to be raised. In Israel on personal business last week, Dermer told The Jerusalem Post that he hasn't had time to contemplate what he will do when he returns in the spring, focusing instead, he said, on "what I can do, in my little neck of the woods, to help increase economic pressure on Iran." You became famous for revoking your American citizenship in order to become minister of economic affairs at the Israeli Embassy in Washington. That was two years ago. Your term was supposed to end next month, and then it was extended. Now you're being told that your contract isn't being renewed. Why? I had worked under former finance ministers Binyamin Netanyahu and Ehud Olmert, and, to the best of my knowledge, both were very happy with my work, as was outgoing Director-General Yossi Bachar, who wanted to extend my contract before he left. But it is the finance minister's prerogative to decide whether to extend somebody's contract - in this position, which is professional, not political - and Avraham Hirchson made the decision in my case not to. My original intention was to stay until the summer of 2008. My predecessors all served at least four years. So, even my original plan to serve just over three would have been relatively rare. As long as I remain there, I'll do the best job that I can for the State of Israel. What has been the main focus of your job? When I arrived in Washington, I knew that the 10-year aid agreement we had signed in 1998 was going to run out on my watch. That agreement came in the wake of a speech Netanyahu gave when he was prime minister to a joint session of the US Congress, in which he said, "Thank you very much for the support you've given us, but we're economically strong enough to stand on our own two feet, and we want to phase out economic aid." By the time the bureaucrats got around to signing the deal a couple of years later, Israel was receiving $1.2 billion in economic aid and $1.8 billion in military aid. Every year since then, its economic aid has been reduced by $120 million, and its military aid has increased by $60 million. This means that next year - the final year of the agreement - Israel will receive $2.4 billion in military aid and no economic aid. This past budget year, we were supposed to receive $120 million in economic aid, but because of the changeover of Congress, it got postponed - and Israel will be receiving it shortly. It will be the last economic aid Israel receives. Indeed, one of my goals when I took this job was to be the last economic attache to receive economic aid. I think it's the right move for Israel. Unfortunately, military aid is not something that in the foreseeable future can be reduced, because the strategic-threat environment Israel faces today is far more severe than it was when we signed the 10-year agreement. At that time, Israel had its forces in Lebanon, and Hizbullah was a small guerrilla force; on the Palestinian front, the Oslo process was still going on; and Iran was only in the early stages of its nuclear program. Today, Hizbullah essentially dominates southern Lebanon and has a strategic missile capability; Hamas is in charge - de facto and now maybe de jure - of the Palestinian Authority; and Iran is in the final stages of its nuclear program. So, not only can we not decrease military aid, we're going to have to increase it and invest more of our resources in defense. What about the issue of loan guarantees? One of the things the US has been very successful at in the last few years is helping Israel's economy recuperate from the collapse that occurred in the beginning of the so-called intifada in 2001 and 2002. What the Americans did was to give us a loan guarantee program that was linked to economic, rather than political considerations. They basically said: "We'll give you $9 billion in loan guarantees, which will let you borrow on our dime, but you're going to have to get your economic house in order." It was conditional and required a number of different constraints on spending, pushes for privatization, reductions in taxes, etc. Then finance minister Netanyahu was all too happy to accept these conditions, because he believed that such reforms were necessary. Indeed, there have been more changes in Israel's economy in the last three or four years than probably any period in its history. This has enabled the economy to go from negative to positive growth. And this is in spite of all the problems, such as political instability in the wake of [Ariel] Sharon's collapse, the rise of Hamas, a less stable coalition after the elections and then a war, during which 4,000 missiles landed on the country. No one could have imagined the economy going over all these hurdles as though they were mere speed bumps. But it did. This is especially relevant right now, because it is also a great achievement for the United States. It was American support, coupled with the internal reforms, that helped stabilize the economy. Which is why the last thing one would want is for Israel's defense needs to undermine it. Israel is engaging in discussions with the US right now on this very issue. Israel's case is very clear. I think it's a common Israel-US interest to increase support for Israel's defense in a way that won't undermine its economy. I look forward to the talks ahead, and I believe that once the US recognizes the strategic situation, it will also recognize that it is in its own interest to support Israel on this. In other words, to wean itself of economic aid, Israel received loan guarantees in order to "get our house in order." Explain to the layman what it means to borrow money in order to be weaned of it? Economic aid, for lack of a better term, is a welfare check. Loan guarantees, on the other hand, allow Israel to borrow on the credit rating of the US. It's like your having a wealthy uncle who co-signs your bank loan. The US is the guarantor. But borrowing money isn't the only thing the guarantees allowed for. Because of the strings attached - reforms - Israel was basically forced into getting its house in order. And if it hadn't been for the war last summer, Israel's budget would even have been in surplus, believe it or not. In the last couple of years, we've been able to go to the "bank manager" - the credit markets - on our own dime, without the guarantees. Though we were supposed to use up the $9 billion guarantees within three years, we used only half. Two months ago, Congress gave us an extension until 2012. So we still have more than $4 billion in guarantees from 2003 that we haven't even used. You say that Israel was forced into getting its house in order. Does this mean that if the US hadn't "attached strings" to the loan guarantees, Netanyahu would not have been able to institute the reforms for which he is given credit - or blamed? No. But instituting the kind of far-reaching reforms Netanyahu undertook requires a number of things. The first is the vision, which he had for a long time. Another is the political power. And there was a unique constellation at that time: Shinui - a real free-market party - was in the government with the Likud; and though the Likud, historically, was not a free-market party, most of its [Knesset] members were anticipating Netanyahu's soon-to-be holding another position in the cabinet - perhaps prime minister - who'd be giving them their future jobs. So, many of those who might otherwise have been openly opposing his reforms and engaging in populism were relatively quiet. [Avigdor] Lieberman, another free marketeer, was also in the coalition. In other words, at that moment in time, there was a free-market coalition. And Netanyahu had the will to confront all the forces in the country that were against him: the banks, the ports, the unions. The loan guarantees gave him added external backing - another bit of gas with which to accelerate them. Look what happens in France. The second some announcement about reform is made, a few people take to the streets, and all of a sudden the government backs down. Netanyahu didn't back down, and he paid a huge political price for it. What price? Look at the results of the last election and see. Didn't that have more to do with the fact that he remained in the government until the very last minute before the disengagement from Gaza, and then went to the US to raise money for his campaign, rather than to Gush Katif to express support for the settlers whose side he was supposedly on? No. You're referring to the Right on war-and-peace issues. He paid a price among his natural constituency, the traditional Likud voters, who were much more interested in government largesse than other sectors of society. These are the ones who, during the elections, said to Netanyahu: "You were the one who took away our child allowances." What do you plan to do when you return to Israel? I haven't had much time to contemplate this, because we are in the midst of an aid-request process. I have also been focusing on what I can do, in my little neck of the woods, to help increase economic pressure on Iran by getting people to stop investing money there. You, Ruthie Blum, are today investing in Iran. Really? How? You have a pension fund. It is diversified, which means it has money in various things. Some of it - though maybe only a small fraction - is in the European Stock Exchange. This means that your pension fund is invested in something that's invested in a company in Europe - like Total or P&P - and they're invested in Iran. So you're investing in companies that are investing in Iran. We, the free world - led by the United States - have to do is take the lead in terror-free investment. The free world has to put its money where its mouth is and deal with this problem not only politically and militarily, but also use all of its economic power to pressure companies not to do business with Iran. If we do this, the internal forces in Iran, in such a pressure cooker, could create a dramatic change in a very short amount of time. Isn't it difficult to monitor fund activities? Not really. We know there are a little more than 400 publicly traded companies which invest in Iran. Would this require legislation? Well, there are measures pending now in six states in the US commanding divestment of their state pension funds. If they get the mandate to move, it could have a huge effect on the market.There are measures pending in 25 states on the issue of divestment from Sudan, and I see no reason why it shouldn't be Sudan and Iran - you know, one is committing genocide and the other is inciting to genocide. Put together, this could create a huge coalition of people from all sides of the political spectrum sending a clear message that we're not going to spend a dime to support those who are killing us, and woe to those who threaten our existence. Can Israel be doing that as well? Israel should be doing it. If we're going to go around telling other countries to take their money out of Iran, we have to first set an example at home. I think we should do this both through government legislation and by persuading our fund managers to to engage in terror-free investing. This wouldn't require much. It might mean screening out only two or three companies that are easily substituted. Doesn't this involve persuading Hirchson? Yes, well, I plan on doing just that. And hopefully, I'll get the opportunity in the foreseeable future. There are others in Israel who are focusing on divestment. Netanyahu is one. Prime Minister [Ehud] Olmert, too, has spoken of it. But now, we have to translate the idea into action. It's going to require a bit of vision. Somebody's going to have to step in the water and establish a terror-free fund. With initiative and education on this issue, we can work together to find a solution - and it doesn't have to take more than a few months. For the sake of argument, let's say we manage to divest from Iran. Let's say my pension fund no longer indirectly invests there. What good will that do if we continue to pay money directly to Iran-sponsored terrorism in the Palestinian Authority? No comment.