Updated May 18, 2006
CONTENTS SUMMARY MOST RECENT DEVELOPMENTS BACKGROUND AND ANALYSIS Historical Overview of Israel Government and Politics Overview Current Political Situation Economy Overview Current Issues Foreign Policy Middle East Iran Palestinian Authority Egypt Jordan Syria Lebanon Other European Union Relations with the United States Overview Issues Peace Process Trade and Investment Aid Security Cooperation Other Current Issues Military Sales Espionage-Related Cases Intellectual Property Protection U.S. Interest Groups
On May 14, 1948, the State of Israel declared its independence and was immediately engaged in a war with all of its neighbors. Armed conflict has marked every decade of Israel's existence. Despite its unstable regional environment, Israel has developed a vibrant parliamentary democracy, albeit with relatively fragile governments.
Prime Minister Ariel Sharon formed a three-party coalition in January 2005 to secure support for withdrawing from the Gaza Strip and four small settlements in the West Bank. In November, however, new Labor party leader Amir Peretz withdrew his party from the government and called for early elections. Sharon then resigned from the Likud party to form a new party, Kadima. On January 4, 2006, Sharon suffered an incapacitating stroke; Deputy Prime Minister Ehud Olmert succeeded Sharon. Kadima placed first in the March 28, 2006, Knesset (parliament) election, and Olmert has formed a four-party coalition government.
Israel has an advanced industrial, market economy in which the government plays a substantial role. The economy is now doing very well, and increased social spending is expected.
Israel's foreign policy is focused largely on its region, Europe, and the United States. The government views Iran as an existential threat due to its nuclear ambitions and support for anti-Israel terrorists. Israel negotiated a series of agreements with the Palestinians in the 1990s, but the Oslo peace process ended in 2000, after the beginning of the intifadah or uprising against Israeli occupation. Israeli and Palestinian officials resumed contacts after the November 2004 death of Yasir Arafat. Both sides accepted but have not implemented the "Roadmap," the international framework for achieving a two-state solution. Israel unilaterally disengaged from Gaza in summer 2005 and is constructing a security barrier to separate from the Palestinians. The victory of the Hamas terrorist group in the January 2006 Palestinian parliamentary elections has complicated Israeli-Palestinian relations and led Israeli officials to consider unilateral steps in the West Bank. Israel concluded a peace treaty with Egypt in 1979 and with Jordan in 1994, but never reached accords with Syria and Lebanon. It unilaterally withdrew from southern Lebanon in 2000. European countries collectively are Israel's second largest trading partner, and the EU participates in the peace process.
Since 1948, the United States and Israel have developed a close friendship based on common democratic values, religious affinities, and security interests. U.S.-Israeli bilateral relations are multidimensional. The United States is the principal proponent of the Arab-Israeli peace process, but U.S. and Israeli views differ on various peace process issues, such as the fate of the Golan Heights, Jerusalem, and Israeli settlements. The United States and Israel concluded a free-trade agreement in 1985, and the United States is Israel's largest trading partner. Since 1976, Israel has been the largest recipient of U.S. foreign aid. The two countries also have very close security relations.
Current issues in U.S.-Israeli relations include Israel's military sales to China, inadequate Israeli protection of U.S. intellectual property, and espionage-related cases.
See also CRS Issue Brief IB91137, The Middle East Peace Talks and CRS Report RL33222, U.S. Foreign Aid to Israel.
MOST RECENT DEVELOPMENTS
On May 4, 2006, the Knesset (parliament) approved a new four-party coalition government of Prime Minister Ehud Olmert's Kadima Party, the Labor Party, the Pensioners' Party, and the ultra-orthodox Shas Party. It controls 67 out of 120 seats in the Knesset, has 25 cabinet ministers, and Dalia Itzik of Kadima is the first woman Speaker of the Knesset. The government's guidelines call for shaping permanent borders for a democratic state with a Jewish majority. The government will strive to negotiate with the Palestinians, but it will act in the absence of negotiations. The guidelines also promise to narrow the social gap. Shas joined the coalition without agreeing to evacuate West Bank settlements as specified in the guidelines and will decide on the issue when it is on the government agenda. Negotiations continue with United Torah Judaism (UTJ) and Meretz. If they succeed, only the right-wing Likud, National Union, Yisrael Beiteinu (Israel Our Home), and Arab parties will not be in the government. Israel's 1.2 million Russian language speakers are not represented in the cabinet. Labor wants Olmert to negotiate with Palestinian President Mahmud Abbas before deciding on a unilateral move and may create problems if he does not oblige.
BACKGROUND AND ANALYSIS
Historical Overview of Israel (1)
The quest for a modern Jewish homeland was launched with the publication of Theodore Herzl's The Jewish State in 1896. The following year, Herzl described his vision at the first Zionist Congress, which encouraged Jewish settlement in Palestine, a land that had been the Biblical home of the Jews and was then part of the Ottoman Empire. In 1917, the British government issued the Balfour Declaration, supporting the "establishment in Palestine (which had become a British mandate after World War I) of a national home for the Jewish people." Britain also made conflicting promises to the Arabs concerning the fate of Palestine, which had an overwhelmingly Arab populace. Nonetheless, Jews immigrated to Palestine in ever greater numbers and, following World War II, the plight of Jewish survivors of the Nazi holocaust gave the demand for a Jewish home greater poignancy and urgency. In 1947, the U.N. developed a partition plan to divide Palestine into Jewish and Arab states, with Jerusalem under U.N. administration. The Arab states rejected the plan. On May 14, 1948, the State of Israel proclaimed its independence and was immediately invaded by Arab armies. The conflict ended with armistice agreements between Israel and its neighbors: Egypt, Jordan, Lebanon, and Syria. Israel engaged in armed conflict with some or all of these countries in 1948, 1956, 1967, 1973, and 1982. Since the late 1960's, it also has dealt with the threat of Palestinian terrorism. In 1979, Israel concluded a peace treaty with Egypt, thus making another multi-front war unlikely. Israel's current relations with its neighbors are discussed in "Foreign Policy" below.
Government and Politics
Israel is a parliamentary democracy in which the President is head of state and the Prime Minister is head of government. The unicameral parliament (the Knesset) elects a president for a seven-year term. The incumbent is Moshe Katzav. The Prime Minister is the leader of the party with the most seats in parliament. The political spectrum is highly fragmented, with small parties exercising disproportionate power due to the low vote threshold for entry into parliament and the need for their numbers to form coalition governments. In the March 2006, election, the threshold to enter parliament was raised from 1% to 2%, which was intended to bar some smaller parties from parliament but also spurred some to join together simply to overcome the threshold. National elections must be held at least every four years, but are often held earlier due to difficulties in holding coalitions together. The average life span of an Israeli government is 22 months. The peace process, the role of religion in the state, and political scandals have caused coalitions to break apart or produced early elections.
Israel does not have a constitution. Instead, 11 Basic Laws lay down the rules of government and enumerate fundamental rights; two new Basic Laws are under consideration. On February 2, 2006, the Knesset's Constitution, Law, and Justice Committee approved a draft constitution encompassing existing Basic Laws and a chapter of human rights and basic principles. To placate the ultra-orthodox, …