In what Israelis are calling a sign of things to come if the growing schism between the government and American funders worsens over efforts to reform Jewish Agency governance, both Prime Minister Binyamin Netanyahu and Diaspora Minister Yuli Edelstein have canceled their appearances at next week's meeting of the agency's Board of Governors in Jerusalem. The move apparently marks the first time since Israel's establishment that the prime minister has not spoken to the Jewish Agency's policy-setting gathering. For the government, the issue is American delegates' refusal to guarantee the election of Natan Sharansky as agency chairman. For the Americans, especially leaders of the UJC, the umbrella of American Jewish federations which funds a large portion of the Jewish Agency's budget, it is about diminishing the influence of the Israeli political system on the agency's leadership and operations through weakening the decades-old link between the agency and the WZO. The Israeli decision was made after a Monday night phone call between Jewish Agency board chairman Richie Pearlstone and Netanyahu. According to government sources, the prime minister asked Pearlstone to agree to the Sharansky nomination ahead of the planned passage of the governance reform next week, but Pearlstone refused to do so. Netanyahu replied that this would lead to a "harming of relations" between the agency and the government. Passions run high in the government over the Sharansky appointment, with Diaspora Minister Yuli Edelstein vowing to dismantle the historic ties between the agency and the government if the Sharansky appointment fails to pass, while MK Ze'ev Elkin has promised to personally present legislation for this to the Knesset "the day after." Such a move could mean a loss of part of the estimated $130m. invested by the government in Jewish Agency programs, which Edelstein warns the government could invest with "more efficient partners." Moreover, say Sharansky supporters, their candidate does not reject the reforms as such, but they believe these reforms should be passed after consultation with the government and approval of the current prime ministerial candidate for agency chairman. The public threats have not cowed some of the American campaigners for the governance change, however. Some have wondered if the Jewish Agency isn't in better hands without Israeli political bickering over it. They point to the negotiations in Israel over Sharansky's chairmanship, in which Kadima representative MK Eli Aflalo and Labor's MK Shalom Simhon are refusing to instruct their factions in the WZO to support Sharansky until they receive the chairmanship of the Jewish National Fund from the Likud. "The agency wants this reform," said a senior American organizational lay leader. "They have worked on it for two-and-a-half years. The Israelis have a hard time believing the reform is so important to the agency, but it is." The refusal to guarantee the prime minister's choice is not intended as a personal insult to Netanyahu, said the lay leader, nor does it mean there is another candidate waiting in the wings, as some have charged. If the Americans or agency officials wanted a non-Netanyahu chairman, they could have chosen him immediately after Ze'ev Bielski's resignation to join the new Knesset in February. "Then they wouldn't have had to ask the prime minister, because there wasn't one yet. But they didn't do this. That shows that it's really about the reform." Furthermore, according to Pearlstone, Sharansky could still become chairman, but would simply need to pass through the new governance procedure - a 10-person nominating committee composed of WZO and overseas funders' representatives. It is unclear what his chances would be, however, since the new reform calls for a nine-to-one majority in order to elect the chairman. Insiders expect the reforms to pass fairly easily, but the wrangling over Sharansky will not. Rabbi Richard Hirsch, chairman of the Zionist General Council of the World Zionist Organization, has presented a resolution that will delay selection of the WZO chairman from Thursday to next Tuesday, so that a possible Sharansky win in the WZO won't torpedo his chances in the agency if the reform passes disconnecting the two leaderships. Similarly, some are expecting the Board of Governors next Tuesday to fail to appoint a chairman, and to let the agency continue leaderless until the formal end of Bielski's term at the 2010 Zionist Congress.