Israel (12/98)

For the most current version of this Note, see Background Notes A-Z.


State of Israel

Area: 20,325 sq. km.1 (7,850 sq. mi.); about the size of New Jersey.
Cities: Capital--Jerusalem.2 Other cities--Tel Aviv, Haifa.
Terrain: Plains, mountains, desert, and coast.
Climate: Temperate, except in desert areas.

1Including Jerusalem
2Israel proclaimed Jerusalem as its capital in 1950. The United States, like nearly all other countries, maintains its embassy in Tel Aviv.

Population (1997): 5.9 million.
Annual growth rate (1997): 1.9%.
Ethnic groups (1997): Jewish 4.7 million; non-Jewish 1.2 million.
Religions: Judaism, Islam, Christianity, Druze.
Languages: Hebrew, Arabic, Russian, English.
Education: Years compulsory--11; Literacy--Jewish 97%, Arab 90%.
Health (1995): Infant mortality rate--7.4/1000. Life expectancy-- 79.5 years (female), 75.5 years (male).
Work force (2.1 million): Manufacturing--20%. Commerce--13%. Education--12%. Other business services--10%. Health and social services--9%. Construction--7%. Other--6%. Transportation--6%. Public Administration--6%. Hotels and restaurants--4%. Banking and finance--4%. Agriculture--2%. Electricity and water--1%.

Type: Parliamentary democracy.
Independence: May 14, 1948.
Constitution: None.
Branches: Executive--president (chief of state); prime minister (head of government). Legislative--unicameral, Knesset. Judicial--Supreme Court.
Political parties: Likud-led bloc, Labor Party, and various other secular and religious parties, including some wholly or predominantly supported by Israel's Arab citizens. A total of 13 parties--constituting blocs of smaller parties--are represented in the 14th Knesset, elected May 29, 1996.
Suffrage: Universal at 18.

Economy (1997)
GDP: $98 billion.
Annual growth rate: 1.9%.
Per capita GDP: $16,800.
Natural resources: Copper, phosphate, bromide, potash, clay, sand, sulfur, bitumen, manganese.
Agriculture: Products--citrus and other fruits, vegetables, beef, dairy, poultry products.
Industry: Types--food processing, diamond cutting and polishing, textiles and clothing, chemicals, metal products, transport equipment, electrical equipment, high technology electronics.
Trade: Exports--$22.5 billion: polished diamonds, citrus and other fruits, chemical and oil products, electrical and electronic products, textiles and clothing, processed foods. Tourism is also an important foreign exchange earner. Imports--$29.0 billion: military equipment, rough diamonds, oil, chemicals, machinery, iron and steel, textiles, vehicles, ships and aircraft. Major partners--U.S., EU, India, Hong Kong, Japan, South Korea.

Of the approximately 5.9 million Israelis in 1997, about 4.7 million were Jewish. While the non-Jewish minority grows at an average rate of 4.9% per year, the Jewish population has increased by more than 27% since 1989 as a result of massive immigration to Israel, primarily from the republics of the former Soviet Union. Since 1989, nearly 841,000 such immigrants have arrived in Israel, making this the largest wave of immigration since independence. In addition, almost 20,000 members of the Ethiopian Jewish community have immigrated to Israel, 14,000 of them during the dramatic May 1991 Operation Solomon airlift.

The three broad Jewish groupings are: the Ashkenazim, or Jews who came to Israel mainly from Europe, North and South America, South Africa, and Australia; the Sephardim, who trace their origin to Spain, Portugal, and North Africa; and Eastern or Oriental Jews, who descend from ancient communities in Islamic lands. Of the non-Jewish population, about 75% are Muslims, 16% are Christian, and about 9% are Druze and others.

Education between ages 5 and 16 is free and compulsory. The school system is organized into kindergartens, 6-year primary schools, 3-year junior secondary schools, and 3-year senior secondary schools, after which a comprehensive examination is offered for university admissions. There are seven university-level institutions in Israel.

With a population drawn from more than 100 countries on 5 continents, Israeli society is rich in cultural diversity and artistic creativity. The arts are actively encouraged and supported by the government. The Israeli Philharmonic Orchestra performs throughout the country and frequently tours abroad. The Jerusalem Symphony, the orchestra of the Israeli Broadcasting Authority, also tours frequently as do other musical ensembles. Almost every municipality has a chamber orchestra or ensemble, many boasting the talents of gifted performers recently arrived from the countries of the former Soviet Union.

Folk dancing, which draws upon the cultural heritage of many immigrant groups, is very popular. Israel also has several professional ballet and modern dance companies. There is great public interest in the theater; the repertoire covers the entire range of classical and contemporary drama in translation, as well as plays by Israeli authors. Of the three major repertory companies, the most famous, Habimah, was founded in 1917.

Active artist colonies thrive in Safed, Jaffa, and Ein Hod, and Israeli painters and sculptors exhibit and sell their works worldwide. Haifa, Tel Aviv, and Jerusalem have excellent art museums, and many towns and kibbutzim have smaller high-quality museums. The Israel Museum in Jerusalem houses the Dead Sea Scrolls along with an extensive collection of Jewish religious and folk art. The Museum of the Diaspora is located on the campus of Tel Aviv University. Israelis are avid newspaper readers. Israeli papers have an average daily circulation of 600,000 copies. Major daily papers are in Hebrew; others are in Arabic, English, French, Polish, Yiddish, Russian, Hungarian, and German.

The creation of the State of Israel in 1948 was preceded by more than 50 years of efforts by Zionist leaders to establish a sovereign nation as a homeland for Jews. The desire of Jews to return to what they consider their rightful homeland was first expressed during the Babylonian exile and became a universal Jewish theme after the destruction of Jerusalem by the Romans in 70 A.D. and the dispersal that followed.

It was not until the founding of the Zionist movement by Theodore Herzl at the end of the 19th century that practical steps were taken toward securing international sanction for large-scale Jewish settlement in Palestine--then a part of the Ottoman Empire.

The Balfour declaration in 1917 asserted the British Government's support for the creation of a Jewish homeland in Palestine. This declaration was supported by a number of other countries, including the United States, and became more important following World War I, when the United Kingdom was assigned the Palestine mandate by the League of Nations.

Jewish immigration grew slowly in the 1920s; it increased substantially in the 1930s, due to political turmoil in Europe and Nazi persecution, until restrictions were imposed by the United Kingdom in 1939. After the end of World War II, and the near-extermination of European Jewry by the Nazis, international support for Jews seeking to settle in Palestine overcame British efforts to restrict immigration.

International support for establishing a Jewish state led to the adoption in November 1947 of the UN partition plan, which called for dividing the Mandate of Palestine into a Jewish and an Arab state and for establishing Jerusalem separately as an international city under UN administration.

Violence between Arab and Jewish communities erupted almost immediately. Toward the end of the British mandate, the Jews planned to declare a separate state, a development the Arabs were determined to prevent. On May 14, 1948, the State of Israel was proclaimed. The following day, armies from neighboring Arab nations entered the former Mandate of Palestine to engage Israeli military forces.

In 1949, under UN auspices, four armistice agreements were negotiated and signed at Rhodes, Greece, between Israel and its neighbors Egypt, Jordan, Lebanon and Syria. The 1948-49 war of independence resulted in a 50% increase in Israeli territory, including western Jerusalem. No general peace settlement was achieved at Rhodes, however, and violence along the borders continued for many years.

In October 1956, Israel invaded the Gaza Strip and the Sinai Peninsula at the same time that operations by French and British forces against Egypt were taking place in the Suez Canal area. Israeli forces withdrew in March 1957, after the United Nations established the UN Emergency Force (UNEF) in the Gaza Strip and Sinai. In 1966-67, terrorist incidents and retaliatory acts across the armistice demarcation lines increased.

In May 1967, after tension had developed between Syria and Israel, Egyptian President Nasser moved armaments and about 80,000 troops into the Sinai and ordered a withdrawal of UNEF troops from the armistice line and Sharm El Sheikh. Nasser then closed the Strait of Tiran to Israeli ships, blockading the Israeli port of Eilat at the northern end of the Gulf of Aqaba. On May 30, Jordan and Egypt signed a mutual defense treaty.

In response to these events, Israeli forces struck targets in Egypt, Jordan, and Syria on June 5. After 6 days of fighting, by the time all parties had accepted the cease-fire called for by UN Security Council Resolutions 235 and 236, Israel controlled the Sinai Peninsula, the Gaza Strip, the Golan Heights, and the formerly Jordanian-controlled West Bank of the Jordan River, including East Jerusalem. On November 22, 1967, the Security Council adopted Resolution 242, the "land for peace" formula, which called for the establishment of a just and lasting peace based on Israeli withdrawal from territories occupied in 1967 in return for the end of all states of belligerency, respect for the sovereignty of all states in the area, and the right to live in peace within secure, recognized boundaries.

In the 1969-70 war of attrition, Israeli planes made deep strikes into Egypt in retaliation for repeated Egyptian shelling of Israeli positions along the Suez Canal. In early 1969, fighting broke out between Egypt and Israel along the Suez Canal. The United States helped end these hostilities in August 1970, but subsequent U.S. efforts to negotiate an interim agreement to open the Suez Canal and achieve disengagement of forces were unsuccessful.

On October 6, 1973--Yom Kippur (the Jewish Day of Atonement)--Syrian and Egyptian forces attacked Israeli positions in Golan and along the Suez Canal. Initially, Syria and Egypt made significant advances against Israeli forces. However, Israel recovered on both fronts, pushed the Syrians back beyond the 1967 cease-fire lines, and recrossed the Suez Canal to take a salient on its west bank, isolating Egyptian troops, who eventually surrendered.

The United States and the Soviet Union helped bring about a cease-fire between the combatants. In the UN Security Council, the United States supported Resolution 338, which reaffirmed Resolution 242 as the framework for peace and called for peace negotiations between the parties.

The cease-fire did not end the sporadic clashes along the cease-fire lines nor did it dissipate military tensions. The United States tried to help the parties reach agreement on cease-fire stabilization and military disengagement. On March 5, 1974, Israeli forces withdrew from the canal, and Egypt assumed control. Syria and Israel signed a disengagement agreement on May 31, 1974, and the UN Disengagement and Observer Force (UNDOF) was established as a peacekeeping force in the Golan.

Further U.S. efforts resulted in an interim agreement between Egypt and Israel in September 1975, which provided for another Israeli withdrawal in the Sinai, a limitation of forces, and three observation stations staffed by U.S. civilians in a UN-maintained buffer zone between Egyptian and Israeli forces.

In November 1977, Egyptian President Anwar Sadat broke 30 years of hostility with Israel by visiting Jerusalem at the invitation of Israeli Prime Minister Menachem Begin. During a 2-day visit, which included a speech before the Knesset, the Egyptian leader created a new psychological climate in the Middle East in which peace between Israel and its Arab neighbors seemed a realistic possibility. Sadat recognized Israel's right to exist and established the basis for direct negotiations between Egypt and Israel.

In September 1978, U.S. President Jimmy Carter invited President Sadat and Prime Minister Begin to meet with him at Camp David, where they agreed on a framework for peace between Israel and Egypt and a comprehensive peace in the Middle East. It set out broad principles to guide negotiations between Israel and the Arab states. It also established guidelines for a West Bank-Gaza transitional regime of full autonomy for the Palestinians residing in the occupied territories and for a peace treaty between Egypt and Israel.

The treaty was signed on March 26, 1979, by Begin and Sadat, with President Carter signing as witness. Under the treaty, Israel returned the Sinai to Egypt in April 1982. In 1989, the Governments of Israel and Egypt concluded an agreement that resolved the status of Taba, a resort area on the Gulf of Aqaba.

In the years following the 1948 war, Israel's border with Lebanon was quiet, compared to its borders with other neighbors. After the expulsion of the Palestinian fedayeen (fighters) from Jordan in 1970--and their influx into southern Lebanon, however, hostilities on Israel's northern border increased. In March 1978, after a series of clashes between Israeli forces and Palestinian guerrillas in Lebanon, Israeli forces crossed into Lebanon. After passage of Security Council Resolution 425, calling for Israeli withdrawal and the creation of the UN Interim Force in Lebanon peace-keeping force (UNIFIL), Israel withdrew its troops.

In July 1981, after additional fighting between Israel and the Palestinians in Lebanon, President Reagan's special envoy, Philip C. Habib, helped secure a cease-fire between the parties. However, in June 1982, Israel invaded Lebanon to fight the forces of the Palestine Liberation Organization (PLO).

In August 1982, the PLO withdrew its forces from Lebanon. With U.S. assistance, Israel and Lebanon reached an accord in May 1983 that set the stage to withdraw Israeli forces from Lebanon. The instruments of ratification were never exchanged, however, and in March 1984, under pressure from Syria, Lebanon canceled the agreement. In June 1985, Israel withdrew most of its troops from Lebanon, leaving a small residual Israeli force and an Israeli-supported militia in southern Lebanon in a "security zone," which Israel considers a necessary buffer against attacks on its northern territory.

By the late 1980s, the spread of non-conventional weaponry--including missile technology--in the Middle East began to pose security problems for Israel from further afield. This was evident during the Gulf crisis that began with Iraq's August 1990 invasion of Kuwait.

When allied coalition forces moved to expel Iraqi forces from Kuwait in January 1991, Iraq launched a series of missile attacks against Israel. Despite the provocation, Israel refrained from entering the Gulf war directly, accepting U.S. assistance to deflect continued Iraqi missile attacks.

The coalition's victory in the Gulf war opened new possibilities for regional peace, and in October 1991, the Presidents of the United States and the Soviet Union jointly convened an historic meeting in Madrid of Israeli, Lebanese, Jordanian, Syrian, and Palestinian leaders which became the foundation for ongoing bilateral and multilateral negotiations designed to bring lasting peace and economic development to the region.

On September 13, 1993, Israel and the PLO signed a Declaration of Principles (DOP) on the South Lawn of the White House. The declaration was a major conceptual breakthrough achieved under the Madrid framework. It established an ambitious set of objectives relating to a transfer of authority from Israel to an interim Palestinian authority. The DOP established May 1999 as the date by which a permanent status agreement for the West Bank and Gaza Strip would take effect. Israel and the PLO subsequently signed the Gaza-Jericho Agreement on May 4, 1994, and the Agreement on Preparatory Transfer of Powers and Responsibilities on August 29, 1994, which began the process of transferring authority from Israel to the Palestinians.

Prime Minister Rabin and PLO Chairman Arafat signed the historic Israeli-Palestinian Interim Agreement on the West Bank and the Gaza Strip on September 28, 1995, in Washington. The agreement, witnessed by the President on behalf of the United States and by Russia, Egypt, Norway, and the European Union, incorporates and supersedes the previous agreements and marked the conclusion of the first stage of negotiations between Israel and the PLO.

The accord broadens Palestinian self-government by means of a popularly elected legislative council. It provides for election and establishment of that body, transfer of civil authority, Israeli redeployment from major population centers in the West Bank, security arrangements, and cooperation in a variety of areas. Negotiations on permanent status began on May 5, 1996 in Taba, Egypt. As agreed in the 1993 DOP, those talks will address the status of Jerusalem, Palestinian refugees, Israeli settlements in the West Bank and Gaza Strip, final security arrangements, borders, relations and cooperation with neighboring states, and other issues of common interest.

Israel signed a non-belligerency agreement with Jordan (the Washington Declaration) in Washington, DC, on July 25, 1994. Jordan and Israel signed a historic peace treaty at a border post between the two countries on October 26, 1994, witnessed by President Clinton, accompanied by Secretary Christopher.

The assassination of Prime Minister Rabin by a right-wing Jewish radical on November 4, 1995 climaxed an increasingly bitter national debate over where the peace process was leading. Rabin's death left Israel profoundly shaken, ushered in a period of national self-examination, and produced a new level of national consensus favoring the peace process. In February 1996 Rabin's successor, Shimon Peres, called early elections. Those elections, held in May 1996 and the first featuring direct election of the prime minister, resulted in a narrow election victory for Likud Party leader Binyamin Netanyahu and his center-right National Coalition and the defeat of Peres and his left-of-center Labor/Meretz government. Despite his stated differences with the Oslo Accords, Prime Minister Netanyahu continued its implementation, signing the Hebron Protocol with the Palestinians on January 15, 1997. The Protocol resulted in the redeployment of Israeli forces in Hebron and the turnover of civilian authority in much of the area to the Palestinian Authority. Since that agreement, there has been little progress in the Israeli- Palestinian negotiations. A crisis of confidence developed between the parties as the parties had difficulty responding to each other and addressing each other's concerns. Israel and the Palestinians did agree, however, in September 1997, to a four-part agenda to guide further negotiations: security cooperation in the fight against terror; further redeployments of Israeli forces; a "time-out" on unilateral actions that may prejudge the outcome of the permanent status talks; and acceleration of these talks. The U.S. sought to marry continued implementation of the 1995 Interim Agreement with the start of the accelerated permanent status talks. In order to overcome the crisis of confidence and break the negotiating impasse, President Clinton presented U.S. ideas for getting the peace process back on track to Prime Minister Netanyahu and Chairman Arafat in Washington in January 1998. Those ideas included all aspects of the September 1997 four-part agenda and would allow for the start of accelerated permanent status negotiations. The Palestinians agreed in principle to the U.S. ideas.

The U.S. continued working intensively with the parties to reach agreement on the basis of U.S. ideas. After a 9-day session at the Wye River Conference Center in Maryland, agreement was reached on October 23, 1998. The Wye agreement is based on the principle of reciprocity and meets the essential requirements of both the parties, including unprecedented security measures on the part of the Palestinians and the further redeployment of Israeli troops in the West Bank. The agreement also permits the launching of the permanent status negotiations as the May 4, 1999 expiration of the period of the Interim Agreement.

Israel is a parliamentary democracy. Its governmental system is based on several basic laws enacted by its unicameral parliament, the Knesset. The president (chief of state) is elected by the Knesset for a 5-year term.

The prime minister (head of government) exercises executive power and has in the past been selected by the president as the party leader most able to form a government. In the May 1996 elections, Israelis for the first time voted for the prime minister directly, in accordance with recent legislation. The members of the cabinet must be collectively approved by the Knesset.

The Knesset's 120 members are elected by secret ballot to 4-year terms, although the prime minister may decide to call for new elections before the end of the 4-year term. Voting is for party lists rather than for individual candidates, and the total number of seats assigned each party reflects that party's percentage of the vote. Successful Knesset candidates are drawn from the lists in order of party-assigned rank. Under the present electoral system, all members of the Knesset are elected at large.

The independent judicial system includes secular and religious courts. The courts' right of judicial review of the Knesset's legislation is limited. Judicial interpretation is restricted to problems of execution of laws and validity of subsidiary legislation. The highest court in Israel is the Supreme Court, whose judges are approved by the president.

Israel is divided into six districts, administration of which is coordinated by the Ministry of Interior. The Ministry of Defense is responsible for the administration of the occupied territories.

Principal Government Officials
President--Ezer Weizman
Prime Minister--Binyamin Netanyahu (Likud)
Foreign Minister--Ariel Sharon (Likud)
Ambassador to the United States--Zalman Shoval
Ambassador to the United Nations--Dore Gold

Israel maintains an embassy in the United States at 3514 International Drive NW, Washington DC, 20008 (tel. 202-364-5500). There are also consulates general in Atlanta, Boston, Chicago, Houston, Los Angeles, Miami, New York, Philadelphia, and San Francisco.

From the founding of Israel in 1948 until the election of May 1977, Israel was ruled by successive coalition governments led by the Labor alignment or its constituent parties. From 1967-70, the coalition government included all of Israel's parties except the communist party. After the 1977 election, the Likud bloc, then composed of Herut, the Liberals, and the smaller La'am Party, came to power forming a coalition with the National Religious Party, Agudat Israel, and others.

As head of Likud, Menachem Begin became Prime Minister. The Likud retained power in the succeeding election in June 1981, and Begin remained Prime Minister. In the summer of 1983, Begin resigned and was succeeded by his Foreign Minister, Yitzhak Shamir. After losing a Knesset vote of confidence early in 1984, Shamir was forced to call for new elections, held in July of that year.

The vote was split among numerous parties and provided no clear winner leaving both Labor and Likud considerably short of a Knesset majority. Neither Labor nor Likud was able to gain enough support from the small parties to form even a narrow coalition. After several weeks of difficult negotiations, they agreed on a broadly based government of national unity. The agreement provided for the rotation of the office of prime minister and the combined office of vice prime minister and foreign minister midway through the government's 50-month term.

During the first 25 months of unity government rule, Labor's Shimon Peres served as prime minister, while Likud's Yitzhak Shamir held the posts of vice prime minister and foreign minister. Peres and Shamir switched positions in October 1986. The November 1988 elections resulted in a similar coalition government. Likud edged Labor out by one seat but was unable to form a coalition with the religious and right-wing parties. Likud and Labor formed another national unity government in January 1989 without providing for rotation. Yitzhak Shamir became Prime Minister, and Shimon Peres became Vice Prime Minister and Finance Minister.

The national unity government fell in March 1990, in a vote of no-confidence precipitated by disagreement over the government's response to U.S. Secretary of State Baker's initiative in the peace process.

Labor Party leader Peres was unable to attract sufficient support among the religious parties to form a government. Yitzhak Shamir then formed a Likud-led coalition government including members from religious and right-wing parties.

Shamir's government took office in June 1990, and held power for 2 years. In the June 1992 national elections, the Labor Party reversed its electoral fortunes, taking 44 seats. Labor Party leader Yitzhak Rabin formed a coalition with Meretz (a group of three leftist parties) and Shas (an ultra-Orthodox religious party). The coalition included the support of two Arab-majority parties. Rabin became Prime Minister in July 1992. Shas subsequently left the coalition, leaving Rabin with a minority government dependent on the votes of Arab parties in the Knesset.

Rabin was assassinated by a right-wing Jewish radical on November 4, 1995. Peres, then Deputy Prime Minister and Foreign Minister, once again became Prime Minister and immediately proceeded to carry forward the peace policies of the Rabin government and to implement Israel's Oslo commitments (including military redeployment in the West Bank and the holding of historic Palestinian elections on January 20, 1996).

Enjoying broad public support and anxious to secure his own mandate, Peres called for early elections after just 3 months in office. (They would have otherwise been held by the end of October 1996.) In late February and early March, a series of suicide bombing attacks by Palestinian terrorists took some 60 Israeli lives, seriously eroding public support for Peres and raising concerns about the peace process. Increased fighting in southern Lebanon, which also brought Katyusha rocket attacks against northern Israel, also raised tensions and weakened the government politically just a month before the May 29 elections.

In those elections--the first direct election of a prime minister in Israeli history--Likud leader Binyamin Netanyahu won by a narrow margin, having sharply criticized the government's peace policies for failing to protect Israeli security. Netanyahu subsequently formed a predominantly right-wing coalition government publicly committed to pursuing the peace process, but with an emphasis on security first and reciprocity. His coalition included the Likud party, allied with the Tsomet and Gesher parties in a single list; three religious parties (Shas, the National Religious Party, and the United Torah Judaism bloc); and two centrist parties, The Third Way and Yisrael b'Aliyah. The latter is the first significant party formed expressly to represent the interests of Israel's new immigrants. The Gesher party withdrew from the coalition in January 1998 upon the resignation of its leader, David Levy, from the position of Foreign Minister.

Israel has a diversified modern economy with substantial government ownership and a rapidly developing high-tech sector. Poor in natural resources, Israel depends on imports of oil, coal, food, uncut diamonds, other production inputs, and military equipment. Its GDP in 1997 reached $98 billion, or $16,800 per person. The major industrial sectors include metal products, electronic and biomedical equipment, processed foods, chemicals, and transport equipment. Israel possesses a substantial service sector and is one of the world's centers for diamond cutting and polishing. It is also a world leader in software development and is a major tourist destination.

Israel's strong commitment to economic development and its talented work force led to economic growth rates during the nation's first two decades that frequently exceeded 10% annually. The years after the 1973 Yom Kippur War were a lost decade economically, as growth stalled and inflation reached triple-digit levels. The successful economic stabilization plan implemented in 1985 and the subsequent introduction of market-oriented structural reforms reinvigorated the economy and paved the way for its rapid growth in the 1990s.

Two developments have helped to transform Israel's economy since the beginning of the decade. The first is the wave of Jewish immigration, predominantly from the countries of the former U.S.S.R., that has brought some 841,000 new citizens to Israel. These new immigrants, many of them highly educated, now constitute some 16% of Israel's 5.9 million population. Their successful absorption into Israeli society and its labor force forms a remarkable chapter in Israeli history. The skills brought by the new immigrants and their added demand as consumers have given the Israeli economy a strong upward push.

The second development benefiting the Israeli economy is the Mideast peace process begun at the Madrid conference of October 1991, which led to the signing of accords between Israel and the Palestinians and a peace treaty between Israel and Jordan. The peace process has helped to erode Israel's economic isolation from its neighbors and has begun a process of regional economic integration that will help to stabilize the region. It has also opened up new markets to Israeli exporters farther afield, such as in the rapidly growing countries of East Asia. The peace process has stimulated an unprecedented inflow of foreign investment in Israel, as companies that formerly shunned the Israeli market now see its potential contribution to their global strategies.

Israeli companies, particularly in the high-tech area, have recently enjoyed considerable success raising money on Wall Street and other world financial markets; Israel now ranks second among foreign countries in the number of its companies listed on U.S. stock exchanges.

Economic growth slowed considerably over the last 2 years, to 4.4% in 1996 and only 1.9% in 1997. Per capita income fell slightly in 1997 for the first time in the previous 10 years. The slowdown is generally attributed to setbacks in the peace process, the waning of the beneficial effects of immigration, labor shortages in high-tech industries, tighter fiscal and monetary policy, and the Asian financial crisis which began in late 1997.

The United States is Israel's largest trading partner; two-way trade totaled some $12.6 billion in 1997. The principal U.S. exports to Israel include computers, integrated circuits, aircraft parts and other defense equipment, wheat, and automobiles. Israel's chief exports to the U.S. include diamonds, jewelry, integrated circuits, printing machinery, and telecommunications equipment. The two countries signed a free trade agreement (FTA) in 1985 that progressively eliminated tariffs on most goods traded between the two countries over the following ten years. An agricultural trade accord was signed in November 1996, which addressed the remaining goods not covered in the FTA. Some non-tariff barriers and tariffs on goods remain, however. Israel also has trade and cooperation agreements in place with the European Union and Canada, and is seeking to conclude such agreements with a number of other countries, including Turkey and several countries in Eastern Europe.

In addition to seeking an end to hostilities with Arab forces, against which it has fought five wars since 1948, Israel has given high priority to gaining wide acceptance as a sovereign state with an important international role. Before 1967, it had established diplomatic relations with a majority of the world's nations, except for the Arab states and most other Muslim countries. While the Soviet Union and the communist states of Eastern Europe (except Romania) broke diplomatic relations with Israel in the 1967 war, those relations were restored by 1991.

Today, Israel has diplomatic relations with some 153 states. Following the Madrid conference in 1991, and as a direct result of the peace process, Israel established or renewed diplomatic relations with 62 countries. Most important are its ties with Arab states. In addition to full diplomatic relations with Egypt and Jordan, Israel now has ties of one kind or another with Morocco, Tunisia, Oman, Qatar, and Bahrain.

On October 1, 1994, the Gulf States publicly announced their support for a review of the Arab boycott, in effect abolishing the secondary and tertiary boycotts against Israel. Israel has diplomatic relations with 9 non-Arab Muslim states and with 32 of the 43 Sub-Saharan states that are not members of the Arab League. Israel established relations with China and India in 1992.

Israel's ground, air, and naval forces, known as the Israel Defense Force (IDF), fall under the command of a single general staff. Conscription is universal for Jewish men and women over the age of 18, although exemptions may be made on religious grounds. Druze, members of a small Islamic sect living in Israel's mountains, also serve in the IDF. Israeli Arabs, with few exceptions, do not serve. During 1950-66, Israel spent an average of 9% of GDP on defense. Real defense expenditures increased dramatically after both the 1967 and 1973 wars. In 1996, the military budget reached 10.6% of GDP and represented about 21.5% of the total 1996 budget.

In 1983, the United States and Israel established the Joint Political Military Group, which meets twice a year. Both the U.S. and Israel participate in joint military planning and combined exercises, and have collaborated on military research and weapons development.

Commitment to Israel's security and well-being has been a cornerstone of U.S. policy in the Middle East since Israel's creation in 1948, in which the United States played a key supporting role. Israel and the United States are bound closely by historic and cultural ties as well as by mutual interests. Continuing U.S. economic and security assistance to Israel acknowledges these ties and signals U.S. commitment. The broad issues of Arab-Israeli peace have been a major focus in the U.S.-Israeli relationship. U.S. efforts to reach a Middle East peace settlement are based on UN Security Council Resolutions 242 and 338 and, under the Clinton Administration, have been based on the premise that as Israel takes calculated risks for peace, it is the role of the United States to help minimize those risks.

UNSC resolutions provided the basis for cease-fire and disengagement agreements concerning the Sinai and the Golan Heights between Israel, Egypt, and Syria and for promoting the Camp David accords and the Egyptian-Israeli Peace Treaty. They were also the foundation for President Reagan's September 1982 peace initiative and Secretary Shultz's January 1988 initiative aimed at stimulating conditions to bring Jordan and representative Palestinians into the Middle East peace process.

The landmark October 1991 Madrid conference also recognized the importance of Security Council Resolutions 242 and 338 in resolving regional disputes, and brought together for the first time Israel, the Palestinians, and the neighboring Arab countries, launching a series of direct bilateral and multilateral negotiations. These talks were designed to finally resolve outstanding security, border, and other issues between the parties while providing a basis for mutual cooperation on issues of general concern, including the status of refugees, arms control and regional security, water and environmental concerns, and economic development.

On a bilateral level, relations between the United States and Israel have been strengthened in recent years by the establishment of cooperative institutions in many fields. Bilateral foundations in the fields of science and technology include the Binational Science Foundation and the Binational Agricultural Research and Development Foundation. The U.S.-Israeli Education Foundation sponsors educational and cultural programs.

In addition, the Joint Economic Development Group maintains a high-level dialogue on economic issues. In early 1993, the United States and Israel agreed to establish a Joint Science and Technology Commission. In 1983, the United States and Israel established the Joint Political Military Group, which includes joint military planning and combined exercises. In 1996, reflecting heightened concern about terrorism, the United States and Israel established a Joint Counterterrorism Group designed to enhance cooperation in fighting terrorism.

Principal U.S. Officials
U.S. Embassy
Ambassador--Edward S. Walker, Jr.
Deputy Chief of Mission--Richard Roth
Political Affairs--John Scott
Economic Affairs--Deborah Schwartz
Administration--Matthew Burns
Consular Affairs--Marsha von Duerckheim
Public Affairs (USIS)--Peter C. Deshazo
Commercial Affairs--Michale Benefiel
Science Attache--William Crane
Defense Attache--Col. John McNabb, USAF

The U.S. embassy in Israel is located at 71 Hayarkon Street, Tel Aviv (tel. 03-519-7575).

U.S. Consulate General
Consul General--John E. Herbst
Deputy Principal Officer--Gerald M. Feierstein
Chief, Consular Section--Suzanne Lawrence

The U.S. consulate general in Jerusalem has offices at 18 Agron Road (tel. 02-622-7230) and on Nablus Road (tel. 02-622-7230). The consulate general in Jerusalem is an independent U.S. mission, established in 1928, whose members are not accredited to a foreign government.