Israel radio on Monday, July 13, reported that Israeli Prime Minister Benjamin Netanyahu met secretly with seven cabinet ministers for the third time on Sunday, to develop a “strategic policy” for dealing with the Arab Israeli population. The secret committee, including intelligence and security officials, reportedly determined that a “tough hand” may be needed to handle an increasing fanatical and fundamentalist tendency among the Arab Israelis, who comprise roughly 18 percent of Israel’s population.

Israel is feeling pressure from the Palestinians, neighboring Arab states, and even the United States, and is preparing for trouble. Egypt has effectively abandoned Israel and the United States over the impasse in the peace process, and Jordan this weekend also suspended relations with Israel. Jordan’s Petra-JNA news agency reported that Jordanian Senator Dhawqan al-Hindawi, head of the Jordanian delegation to the Arab-European Parliamentary Dialogue conference in Damascus, said in a speech to the conference that, “Jordan is currently freezing, without announcement, its dealings with Israel regarding issues stipulated in the peace treaty with Israel until the latter changes its current anti-peace policy and resumes the peace process on the Palestinian, Syrian, and Lebanese tracks.”

Jordan’s action further paves the way for an Arab summit that has been in the works for the past few months. Syria announced on Monday that it was opposed to an Arab summit until Arab states freeze all ties to Israel and reactivate the Arab economic boycott. Syrian Vice President Abdel-Halim Khaddam told the London-based Arabic newspaper “Al-Quds al-Arabi” that the 1996 Arab summit in Cairo had “adopted secret binding resolutions, stipulating a freeze in the normalization with Israel if Prime Minister Benjamin Netanyahu continues his expansionist policies, the construction of settlements, and the destruction of the peace process.” With relations with Egypt and now with Jordan souring, Israel is running out of friends in the region.

The United States is also not hiding its frustration with Israel. On Monday, Netanyahu said Israel only awaited Palestinian adoption of commitments on Israeli security before it would accept the U.S. plan for troop withdrawal from the West Bank. Furthermore, he claimed, “In the recent days, we have made a significant progress in our understanding with the United States.” But responding to the Prime Minister’s comments, U.S. State Department spokesman James Rubin said, “The ball is not in the Palestinian court. The ball is in the court of the Israelis to try to work with the Palestinians and work with us…” In a meeting following Netanyahu’s speech, the Prime Minister and his security cabinet once again postponed a decision on withdrawal from the West Bank.

In a last ditch effort to forge an agreement, the United States has called for direct Israeli-Palestinian talks, and has reportedly threatened to abandon its role as mediator if talks do not show positive results. Both sides have agreed to hold a meeting, but the Palestinians have refused to reopen negotiations on the scope of the Israeli withdrawal. The Palestinian position is that the current U.S.-backed plan to turn over 13 percent is a compromise, and if negotiations are reopened, they will begin with their stated desire for control of 40 percent of the West Bank.

The London-based Arabic newspaper “Al-Zaman” reported on July 10 that ten days of secret Israeli-Palestinian talks had concluded in a European city, perhaps Oslo, and had ended in failure. The Israeli side, which supposedly included an advisor to Netanyahu and the deputy head of Mossad, reportedly turned down Palestinian compromise offers of 12 or 11 percent Israeli withdrawal from the West Bank, and instead held firm to an offer of only a nine percent withdrawal. If this report is true, the prospects for talks later this week are grim.

Egyptian Foreign Minister Amr Moussa on Monday said that the planned talks were a “waste of time.” He told the UAE newspaper “Al-Ittihad” that “matters are at such a dangerous point they cannot be saved by negotiations here or there.” He told the newspaper “Al-Hayat” that he did not expect a solution to the West Bank situation by the end of July, and that the “general feeling” among members of the Clinton administration was that Washington would abandon the negotiations with Israel at the end of the month, whatever the result.

Finally, Radio Monte Carlo reported on Sunday that a group of 1,000 Islamic Jihad members met July 11 in the Gaza Strip refugee camp of Shati. At the meeting, Sheikh Abdullah al-Shami, a senior Islamic Jihad leader, reportedly called for renewed suicide operations against Israel.

As its plans for dealing with Arab Israelis reveal, Israel is scared. It is losing the support of Egypt, Jordan, and the United States, and its Arab neighbors are drawing closer together, preparing for a summit to devise a common Arab response to the stalled peace process. Parallel to plans for an Arab summit are hints of an “Arab NATO.” Meanwhile, the potential for another Intefadeh is increasing, and radicals are preparing for a suicide bombing campaign.

The revelation of Israeli planning for internal trouble says a number of things. First, it is a signal to Arabs that Israel will take a very hard line against a renewal of violence within Israel. But moreover, the existence of Netanyahu’s secret committee reveals a rush to address the country’s strategic weaknesses. As we wrote in our June 30 Red Alert (http://www.stratfor.com/services/gintel/region/stories/063098.html), Israel is undergoing a fundamental strategic review. Israelis have long prepared for medium to high intensity warfare–armor and air battles. They now appear to be shifting to a U.S.-like, two-pronged strategy of deterrence combined with unconventional, low intensity conflict. Israel’s plans to purchase submarines capable of launching missiles with nuclear warheads is the deterrent side. Preparations for the Intefadeh are the other side.

Israel can not stand another six months of news footage of soldiers firing plastic bullets at stone-throwing children. It can not tolerate suicide bombers destroying buses and markets. The question is, how can Israel stop it? Israel can attempt a total lock-down of the occupied territories, but can Israel also detain 18 percent of its population? It can attempt a decapitation attack, arresting or killing the leaders of the Palestinian unrest, but complete success at this strategy is nearly impossible, and new heads grow. It can attempt to infiltrate and disrupt the new Intefadeh, also a difficult and possibly futile task. Or, Israel can return to the table.

However the negotiations go, Israel is in a rush to revise its strategic doctrine to meet reality. Yes, Israel is scared, but Israel’s advantage is that, when it panics, it takes action to rectify the situation. Still unknown is whether Israel can complete preparations ahead of the Arabs.

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