Israeli newspaper website Haaretz reported on Thursday that the United States administration planned to cut about $1 billion from the balance of its loan guarantees to Israel because of its investments in the settlements. The balance stood at $4.6 billion.

Washington did not officially inform Jerusalem of the cut. The assumption was that the announcement, and the decision over the exact extent of the cut, would come only after Barack Obama was sworn in as president next Tuesday, according to Haaretz.

The paper said that the loan guarantees arrangement specified that the U.S. would reduce the guarantees by the amount the Israeli government spends on settlements in the West Bank. The U.S. embassy in Tel Aviv monitored that spending and the administration informed Jerusalem of the amount it would hold back from the guarantees.

Prime Minister Ehud Olmert considered asking President George W. Bush to absolve all or part of the reduction, but no such request was made in the end, partly because Washington did not inform Jerusalem about a reduction in the guarantees, Haaretz reported.

The assessment now is that the Obama administration would weigh the political situation carefully before deciding on a cut to the guarantees, and it may try to link the cut with Israeli measures beyond the Green Line, the paper concluded.

-NOW Staff