U.S. Department of State
Background Notes: Israel, December 1998

Released by the Bureau of Near Eastern Affairs 


Official Name: State of Israel 

PROFILE 

Geography 

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

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

People 

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%. 

Government 

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.

PEOPLE 

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. 

HISTORY 

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. 

GOVERNMENT 

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. 

POLITICAL CONDITIONS 

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. 

ECONOMY 

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. 

FOREIGN RELATIONS 

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. 

DEFENSE 

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. 

U.S.-ISRAELI RELATIONS 

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. 

TRAVEL AND BUSINESS INFORMATION 

The U.S. Department of State's Consular Information Program provides Travel 
Warnings and Consular Information Sheets. Travel Warnings are issued when the 
State Department recommends that Americans avoid travel to a certain country. 
Consular Information Sheets exist for all countries and include information on 
immigration practices, currency regulations, health conditions, areas of 
instability, crime and security, political disturbances, and the addresses of 
the U.S. posts in the country. Public Announcements are issued as a means to 
disseminate information quickly about terrorist threats and other relatively 
short-term conditions overseas which pose significant risks to the security of 
American travelers. Free copies of this information are available by calling the 
Bureau of Consular Affairs at 202-647-5225 or via the fax-on-demand system: 202-
647-3000. Travel Warnings and Consular Information Sheets also are available on 
the Consular Affairs Internet home page: http://travel.state.gov and the 
Consular Affairs Bulletin Board (CABB). To access CABB, dial the modem number: 
(301-946-4400 (it will accommodate up to 33,600 bps), set terminal 
communications program to N-8-1 (no parity, 8 bits, 1 stop bit); and terminal 
emulation to VT100. The login is travel and the password is info (Note: Lower 
case is required). The CABB also carries international security information from 
the Overseas Security Advisory Council and Department's Bureau of Diplomatic 
Security. Consular Affairs Trips for Travelers publication series, which contain 
information on obtaining passports and planning a safe trip abroad, can be 
purchased from the Superintendent of Documents, U.S. Government Printing Office, 
P.O. Box 371954, Pittsburgh, PA 15250-7954; telephone: 202-512-1800; fax 202-
512-2250. 

Emergency information concerning Americans traveling abroad may be obtained from 
the Office of Overseas Citizens Services at (202) 647-5225. For after-hours 
emergencies, Sundays and holidays, call 202-647-4000. 

Passport Services information can be obtained by calling the 24-hour, 7-day a 
week automated system ($.35 per minute) or live operators 8 a.m. to 8 p.m. (EST) 
Monday-Friday ($1.05 per minute). The number is 1-900-225-5674 (TDD: 1-900-225-
7778). Major credit card users (for a flat rate of $4.95) may call 1-888-362-
8668 (TDD: 1-888-498-3648) 

Travelers can check the latest health information with the U.S. Centers for 
Disease Control and Prevention in Atlanta, Georgia at 
http://www.cdc.gov/travel/index.htm. A hotline at (877) 394-8747 gives the most 
recent health advisories, immunization recommendations or requirements, and 
advice on food and drinking water safety for regions and countries. A booklet 
entitled Health Information for International Travel (HHS publication number 
CDC-95-8280) is available from the U.S. Government Printing Office, Washington, 
DC 20402, tel. (202) 512-1800. 

Information on travel conditions, visa requirements, currency and customs 
regulations, legal holidays, and other items of interest to travelers also may 
be obtained before your departure from a country's embassy and/or consulates in 
the U.S. (for this country, see "Principal Government Officials" listing in this 
publication). 

U.S. citizens who are long-term visitors or traveling in dangerous areas are 
encouraged to register at the U.S. embassy upon arrival in a country (see 
"Principal U.S. Embassy Officials" listing in this publication). This may help 
family members contact you in case of an emergency. 

Further Electronic Information: 

Department of State Foreign Affairs Network. Available on the Internet, DOSFAN 
provides timely, global access to official U.S. foreign policy information. 
Updated daily, DOSFAN includes Background Notes; Dispatch, the official magazine 
of U.S. foreign policy; daily press briefings; Country Commercial Guides; 
directories of key officers of foreign service posts; etc. DOSFAN's World Wide 
Web site is at http://www.state.gov. 

U.S. Foreign Affairs on CD-ROM (USFAC). Published annually by the U.S. 
Department of State, USFAC archives information on the Department of State 
Foreign Affairs Network, and includes an array of official foreign policy 
information from 1990 to the present. Contact the Superintendent of Documents, 
U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. To 
order, call (202) 512-1800 or fax (202) 512-2250. 

National Trade Data Bank (NTDB). Operated by the U.S. Department of Commerce, 
the NTDB contains a wealth of trade-related information. It is available on the 
Internet (www.stat-usa.gov) and on CD-ROM. Call the NTDB Help-Line at (202) 482-
1986 for more information. 

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