Switzerland is situated in the heart of Europe, surrounded by Germany, France, Austria and Italy. But unlike these EU-member countries, the Swiss are neutral in international affairs. And under cover of neutrality, Swiss President Hans Rudolf Merz, who is both chief of state and head of government, met Mahmoud Ahmadinejad last night over dinner in Geneva. The Iranian leader is in town to attend the Durban II "anti-racism conference," which opens today. Israel's Deputy Foreign Minister Danny Ayalon told Army Radio that the Merz-Ahmadinejad meeting "caught us by surprise." It shouldn't have. The Swiss have their interests. Swiss businessmen with ties to Pakistan's A.Q. Khan have been implicated in selling, on the black market, blueprints for a compact nuclear weapon. The Swiss trading company EGL is doing billions of dollars' worth of (technically legal) business with Iran. When Foreign Minister Micheline Calmy-Rey was granted an audience with Ahmadinejad last year, the feminist politician, eager not to offend, donned a head-scarf. THE SWISS Foreign Ministry explains that Berne has a "long-term strategic rationale" for its actions. Some of that rationale was already on display during World War II, in Switzerland's erratic policies toward Jewish asylum seekers. When it looked like Germany would win the war, Switzerland, for the most part, kept Jewish refugees out; but when it appeared the Allies might win, the Swiss reversed course. In the final weeks of the war, they even demanded that the Nazis stop deportations altogether. Back in 1938, when Berlin was ascendant, the Swiss requested that Germany and Austria mark the passports of their Jewish citizens with a "J" so that Berne could distinguish between "genuine political refugees" and fleeing Jews. A Swiss police captain named Paul Gruninger who allowed thousands of Jews to cross the border illegally was thrown off the force. But when it suited Swiss "rationale," Jews were allowed in - from The Netherlands and Belgium in 1941; from Italy in 1943. And in 1944, 1,684 Jews were permitted to enter from Bergen Belson as part of the Rudolf Kastner-Adolf Eichmann deal. All told, perhaps 30,000 Jews managed to reach Switzerland during the Shoah. All along, Eduard Von Steiger, who was in charge of Switzerland's refugee policies, claimed that "the boat is full." He would later explain that had he known the Nazis were systematically slaughtering Europe's Jews on the other side of the Swiss border, "we might have widened the bound (sic) of what was possible." That alibi has more holes than a piece of Emmental cheese. By May 1942, Swiss army intelligence had photos of Jews who had been asphyxiated by the Nazis at the Russian front. In fact, the Swiss leadership knew exactly what the Nazis were doing - from their own diplomats and businessmen, from the Brazilian ambassador and from German sources. Hugo Remuad, of the Swiss Red Cross, argued that genocidal anti-Semitism was simply a consequence of there being too many Jews. Or as Swiss judge Eugen Von Hasler put it: "It is also in our own interest that the greatest thing of all [the destruction of Europe's Jews] is coming to pass, and our hearts beat as one with the young white men who, dog-tired, forge onward to the East as [defenders] of European culture." Meanwhile, Swiss banks raked in their spoils both by collaborating with the Nazis over pilfered Jewish cash and gold, and - later - by retaining some 36,000 bank accounts, valued at $1 billion, belonging to murdered Jews. This wealth lay dormant until 2004, when a class-action suit (and the resultant Volker Committee) forced Swiss banks to begin returning the money to the estates of the murdered. IN 1995, former Swiss president Kaspar Villiger apologized for his country's treatment of the Jews. And yet his successor, Merz, met last night with Ahmadinejad even as the Iranian leader puts the finishing touches on his atom bomb, swears that the Holocaust never happened, and calls for the extermination of of the "filthy [Zionist] bacteria." While Swiss leaders shamelessly fete Ahmadinejad, we Israelis are heartened by the decision of the United States, the Netherlands, Canada, Australia and Italy to boycott the Durban II circus, along with its various sideshows.