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Two-time US ambassador to Israel joins Lateli -

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LEIGH SALES, PRESENTER: And joining me now live from Washington is Martin Indyk, the vice president
and director of the Foreign Policy Program at the Brookings Institution since 1995. He's twice
served as United States' ambassador to Israel.

Martin Indyk, the UN Security Council is asking for an impartial, credible and transparent
investigation into the flotilla incident. Will this Israeli inquiry satisfy it?

MARTIN INDYK, BROOKINGS INSTITUTION: Well, I doubt that it will satisfy the harsh critics of
Israel, but Israel's main court of public opinion, at least the one that it cares about most is in
the United States where president Obama has worked closely with prime minister Netanyahu to shape
this investigation in a way that will make it credible, hence the addition of the two international
observers Lord Trimble being particularly credible in that regard. But one in which the Israeli
Government can cope with the consequences and possible findings of this.

Israel has an independent judiciary, a long standing credible independent judiciary. The leader of
this, Terkel, judge Terkel, is a revered Supreme Court justice, so I think there is credibility in
the court of public opinion that Israel cares about most.

LEIGH SALES: I'll come back to this question of public opinion shortly, but I just wanted to ask
you about Tony Blair saying today that Israel has agreed in principle to end the blockade and allow
through every-day items. Will that be an end to the blockade as most people would understand, I
guess, an end to the blockade, and also what do you think would have persuaded Israel to take that
step?

MARTIN INDYK: Well, here again Tony Blair's representative of the quartet of the US, the EU, Russia
and the United Nations, has been working closely with president Obama and prime minister Netanyahu
to try to reconcile two competing concerns, which have been intentioned throughout this crisis.

The need to stop the suffering of Palestinians in Gaza on the one side, but the need to prevent
Hamas from rearming so that it can continue its attacks from Gaza onto Israeli villages right
across the border from there. And so I think that what Blair is announcing is an arrangement which
will try better to reconcile those two competing requirements than the previous arrangement of the
blockade and the closure.

LEIGH SALES: Where does Fatah which administers the West Bank stand on this question of ending the
blockade of Gaza? Because, of course, it's no great friend of Hamas which administers Gaza?

MARTIN INDYK: That's a good question, because the little secret that nobody really wants to
emphasise at the moment is that Egypt, the Palestinian Authority which includes Fatah, the
Palestinian nationalist party that rules the West Bank, and the United States and Europe and the
quartet, all supported the idea of pressuring Hamas and preventing it from being able to rearm.

That's been an ongoing policy for some four years or so and the Egyptians, as well as Fatah, have
been complicit with Israel in this effort, because Hamas poses such a threat to their interests.
Where they stand now under the spotlight of international opinion is that they are, if you like,
shucking and jiving.

The Egyptians have opened the rougher crossing from Gaza into Egypt, but that's still fairly
restricted in terms of what's flowing there, particularly people and Fatah, or the Palestinian
Authority more exactly, that rules the West Bank is urging the relief of the siege. But they're
also saying that they as the legitimate government of the Palestinians should have a role in the
passage of the goods, through the passages from Israel into Gaza, so that they can try to
re-establish a toe hold in Gaza after having been thrown out by a Hamas push some two years ago.

LEIGH SALES: You mentioned earlier public opinion and you said that Israel cared about public
opinion in the United States. Does it need to be more worried about public opinion elsewhere?

MARTIN INDYK: For sure and I think what you are witnessing now is a campaign that's referred to in
Israel as an effort by the Palestinians and their supporters to delegitimise Israel
internationally. And that campaign's most obvious success was in the Goldstone Report into Israel's
operations in Gaza two Decembers ago called operation Cast Lead.

And that campaign has been given a huge boost by the Mavi Marmara flotilla incident and so the
Israelis are trying to mobilise to counter this, but having a great deal of difficulty doing so,
because the images are so negative for them.

LEIGH SALES: I have heard Israeli figures say, though, that no matter what they do they would never
be able to appease critics like that?

MARTIN INDYK: Well, that's probably true, but I think that there's a basic reality that when Israel
is giving up territory it's the hero of international public opinion and when it's maintaining its
occupation in the West Bank or its closure of Gaza, its legitimate security concerns are not given
their due and instead the focus is on their actions against the Palestinians.

So in effect there, in those circumstances they're playing a losing card and Israel that is moving
ahead trying to take the initiative in efforts to make peace with the Palestinians has a much
stronger hand to play.

LEIGH SALES: How would you describe Israel US relations at the moment?

MARTIN INDYK: Well, they've gone through a very tense time, even a crisis I would say, but they're
coming out of that in a way that few commentators seem to recognise. As I have said earlier in the
interview, president Obama and prime minister Netanyahu have actually been working very closely
together to try to ameliorate the impact of this current crisis. And they've actually come fairly
close together when it comes to the peace process issue, as well. For example, the Israeli Bureau
of Statistics published, just now, its latest report which showed that there was zero new
settlement activity in the West Bank.

There are no demolitions or evictions of Palestinians in east Jerusalem and announcements of new
tenders for building in Jewish suburbs of east Jerusalem. All of that is a result of the very
difficult relations, but I think the Prime Minister of Israel has tried now to meet the President's
concerns, and the President looking over his shoulder at the potential for losses in the November
elections here, also has his own political reasons for improving the relationship to rebuild his
support in the American Jewish community.

So for their own reasons these two leaders are finding ways to work together and from the point of
view of trying to make peace, I have always strongly believed that when the United States and
Israel can find ways to work together to further the cause of peace, they're working much more
effectively than when they're engaged in a fight.

LEIGH SALES: There has been some commentary around, and maybe this is the type of commentary that
you were referring to at the start of your answer, including by people such as Anthony Cordesman at
the Center for Strategic and International Studies. He's written that there's a growing view in
Washington that Israel, through its own actions, is becoming a strategic liability to the United
States rather than an asset. Where would you stand on that?

MARTIN INDYK: Well, I think he is right that that is the prevailing view of the elite public
opinion in Washington. The requirement when it comes to Israel serving as a strategic asset or
strategic liability for the United States is judged on a whole lot of different levels, but clearly
when Israel is taking actions that create problems for the United States, particularly at a time
when the United States is involved in two wars in the greater Middle East with 200,000 American
forces on the ground, there's a particular sensitivity when Israel's actions create problems in the
Arab and Muslim world.

But having said all of that, it all comes down to whether the Israeli Government is able and
willing to move ahead on making peace with the Palestinians. That is a priority concern for
president Obama. He has declared it to be a vital strategic interest of the United States. The
prime minister of Israel has also declared that he supports a two-state solution. The challenge
now, Mahmoud Abbas the leader of the Palestinians was in town in Washington just this last week.
Netanyahu will come back for a postponed visit, I think, in a couple of weeks time and the
challenge now is whether the prime minister and the president can work out a common way forward
with the Palestinian leadership to try to now achieve some kind of breakthrough to Israeli
Palestinian peace.

That will change the subject and that will change Israel's standing, including in Washington in
terms of whether it's judged a liability or an asset.

LEIGH SALES: Martin Indyk, unfortunately we're out of time, we'll have to leave it there. Thank you
very much for joining us tonight.

MARTIN INDYK: My pleasure, thanks for having me.