On January 21, six days into the US air war against Iraq, Israeli Finance Minister Yitzhak Modai took advantage of Washington’s praise for Israel’s “restraint” in the face of 11 Scud missile attacks to drop a bombshell of his own. Before the assembled Jerusalem press corps, he advised visiting Deputy Secretary of State Lawrence Eagleburger that Israel would require an additional $13 billion dollars from the US at the conclusion of the war, $3 billion as “compensation” for the bombing and $10 billion in loan guarantees for the anticipated immigration of Soviet Jews.
If one is searching for an event to mark the birth of the present conflict between the Bush administration and the state of Israel, that would appear to be it. Pro-Israel lobbyists and Israel’s friends in Congress, whose funding agreements are usually made far from the public spotlight, acknowledged the bad timing of Modai’s request. Jewish organizations and Israeli consulates around the country were flooded with phone calls complaining about the potential damage of the Modai maneuver. Coming at a moment when US soldiers were perceived to be risking their lives in the Gulf while Israelis were sitting it out on the sidelines, one Jewish political activist commented that “it makes us Jews look like chazzers (pigs) with our hands out.” 
Modai’s demands, though, were taken seriously by both the pro-Israel lobby and Congress. Within days a nationwide campaign, unprecedented in scope, was underway to get Israel the money. The first contest would be for the war “compensation.” Israel reduced its demand to $1 billion, and asked its friends in Congress to add the figure to President Bush’s $15 billion Emergency Gulf War appropriation.
The president balked. Congress had already awarded Israel a $700 million weapons bonus in October. Douglas Bloomfield, a former pro-Israel lobbyist and now a columnist for the Washington Jewish Week, wrote on February 28 that pro-Israel senators reported “stiff opposition and even the threat of a presidential veto.” 
Bush, apparently fearing that his veto might be overridden, had Secretary of State James Baker offer Israeli Ambassador Zalman Shoval $500 million in cash and another $400 million worth of Patriot missile batteries and other military equipment. The ambassador balked. Israel needed the money more than the missiles, and there was the $700 million drawdown in US Army stocks still to be claimed.
A compromise arranged by AIPAC, the American-Israel Public Affairs Committee, set the stage for September’s confrontation: Israel would receive $650 million in cash immediately and AIPAC promised that neither it nor the Israeli government would come to Congress for more money, specifically the $10 billion in loan guarantees, until after Labor Day.
AIPAC’s compromise was less than what Israel and pro-Israel members of Congress wanted. “Israel opposed concessions,” wrote David Twersky in the Jewish weekly Forward (March 15), “believing it could muster the votes to withstand the veto. While no less committed to securing the aid, AIPAC was also interested in maintaining its ties to the administration,” which, according to many pro-Israel Democrats, were much too close.
On March 7, Congress approved the $650 million appropriation overwhelmingly, 397-24. Israel and the pro-Israel lobby were confident that the loan guarantees would be made available quickly come September.
The lobby was not taking any chances, however. Frequent complaints by both Bush and Secretary of State Baker about Israel’s continuing settlement activity were taken as a warning that the administration, despite promises to the contrary, might seek to link the loan guarantees to a settlement moratorium. An earlier bill providing $400 million in loan guarantees, passed in 1990, had been held up for 11 months by the Bush administration until Prime Minister Shamir agreed that the money would not be used to settle Soviet Jews on the West Bank. After giving such assurances and getting the guarantees, Shamir went ahead with the settlements at an unprecedentedly high rate.
The solution was to give the loan guarantee a different “spin,” to make it a “humanitarian” project sponsored by American Jews on behalf of their brothers and sisters in the Soviet Union. Israel was merely the vehicle for their benevolence. “If some of the most influential members of the Jewish community have their way,” wrote Allison Kaplan and Keren Neubach in the Washington Jewish Week (May 23), Ambassador Shoval’s announcement that Israel would ask for the $10 billion in guarantees in September, “will be the last public pronouncement on the subject of loan guarantees from a representative of the Israeli government.”
By June 1991, Jewish organizations initiated a campaign that would become the most massive lobbying effort they had ever undertaken on any issue, under the auspices of the Conference of Presidents of the Major American Jewish Organizations.
An internal memo of the organization called on Jewish “organizations, local community relations councils and Jewish community centers” to initiate a grassroots mobilization effort among their members — letter-writing to Congress, calls to the White House public comment line, op-ed columns and letters to the editor — “to help create a positive climate.” The memo stressed the importance of framing the request in humanitarian terms. 
To reassure the public that the loan guarantees would not come at the taxpayers’ expense, the lobbyists were urged to emphasize Israel’s “perfect” record in repaying US loans, but not Public Law 98-473, passed by Congress in 1984, which stipulates that “the funds provided…Israel shall not be less than the annual debt repayment from Israel to the United States.”
By early July, the campaign in Washington was proceeding smoothly. Sens. Daniel Inouye (D-HI) and Robert Kasten (R-WI) were drafting legislation to prevent the president from interfering with the release of the guarantees, as he had done in the case of the $400 million. The lobbying efforts were to surface on September 12, “National Leadership Action Day,” when an estimated 750 Jewish activists from 40 states would descend on Congress.
The lobby had underestimated its own strength. The number of Jewish activists who came to Washington was said to be close to 1,200. In response, President Bush called a press conference and identified the group as representing “powerful political forces” against whom “little old me,” as he described himself, stood alone.
Lobby spokespersons and their friends in the media attempted to portray Bush as the party seeking a confrontation, but according to the New Republic’s Morton Kondracke, writing in late July, “Israel’s government thinks it has the votes in Congress to beat the administration and is reportedly spoiling for a fight, hoping to show the administration how powerful it is.” An ironic, if expensive, footnote: In December 1987, with little notice outside the financial journals, Congress approved extraordinary legislation, authored by the same Sen. Inouye, that would allow Israel to refinance its debt to the US Treasury through the sale of special bonds, 90 percent of which would be financed by the federal government. The sale on September 22, 1988, amounted to $4.8 billion, equivalent to Israel’s entire military debt. Offering a greater yield than US Treasury notes, the bonds were quickly grabbed by investors. Presumably they helped pay the costs for the first year of combating the intifada. Since the percentage of the US guarantees on the bond issues does not differ dramatically from what is being proposed, it is possible that had Modai kept his mouth shut and Israel not sought a confrontation, the lobby could have pushed through the request with a minimum of attention. Inouye’s first job in 1951, by the way, was as a salesman for State of Israel Bonds when he was working his way through college.