From Irgun to AIPAC: Israel Lobby’s US Treasury Follies Hurt

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By Grant F. Smith

According to the Jerusalem Post, the US Department of Treasury’s new Terrorism and Financial Intelligence (TFI) unit is going after the Islamic Republic of Iran Shipping Lines. TFI targeted the company and 18 affiliates for their alleged effort to "facilitate the transport of cargo for UN Designated proliferators.” TFI further charges it “falsifies documents and uses deceptive schemes to shroud its involvement in illicit commerce.” Later in the same article, the American Israel Public Affairs Committee (AIPAC) trumpets this as yet another victory in its drive to confront the Islamic Republic of Iran: “AIPAC strongly supports these steps which are part of a coordinated effort by the United States and the international community to ratchet up the pressure on Iran and convince it to suspend its illicit nuclear activities. These steps send an important signal that America continues to lead the effort to confront and stop Iran’s nuclear pursuit.” But is America actually in the driver’s seat of this destabilizing brinksmanship? History suggests that it is not.

AIPAC and its associated think tank, the Washington Institute for Near East Policy (WINEP), were instrumental in lobbying the president for the creation of the Office of Terrorism and Financial Intelligence unit early in 2004. The Israel lobby also vetted Stuart Levey who President Bush approved to lead the new unit. TFI claims to be “safeguarding the financial system against illicit use and combating rogue nations, terrorist facilitators, weapons of mass destruction (WMD) proliferators, money launderers, drug kingpins, and other national security threats.” However its actions—and more important, inactions—reveal it to be a sharp-edged tool forged principally to serve the Israel lobby.

TFI has taken no actions to undercut one nexus of money laundering in the Middle East unveiled in 2005 by Israeli prosecutor Talia Sasson and exposed by USA Today. Even mainstream print outlets such as Reuters continue to wonder aloud why US tax exemptions are offered for illegal overseas activities. Although Stuart Levey has made multiple official visits to Jerusalem to liaise with Israeli government officials, when formally asked under a Freedom of Information Act request to reveal how TFI was tackling the reported $50-$60 billion laundered from the US through Israel and into illegal West Bank settlements, TFI politely demurred. (PDF) TFI claims that Levey’s US-taxpayer-funded missions to Israel must be kept secret from the American public in order to comply with the Bank Secrecy Act, which ironically is an anti-money-laundering law.¹ This is not to say that TFI is a black box to everyone. Invited guests and members of WINEP have received many intimate briefings from TFI officials and consultants—possibly more than the entire US Congress.

TFI’s highly selective, largely secret pursuits should surprise no one. This is not the first time Israel lobbyists have bent an agency toward counterproductive foreign policy initiatives with the approval of a sitting president. During WWII, Treasury Secretary Henry Morgenthau Jr. became infatuated with the efforts of Peter H. Bergson (aka Hillel Kook, born in Lithuania, 1915-2001) toward the formation of a “Jewish Army” in the Middle East. Bergson’s “Committee for a Jewish Army” circulated an early plan to the US Congress calling for financing an army of 100,000 Jews in Palestine to fight Nazis and “fifth columnists” of Syria, Iraq, and Egypt. In reality, Bergson was leading an American front organization for Menachem Begin’s Irgun Z’vai Leumi organization. Irgun also lobbied Nazi Germany for a Jewish Army, as well as a formal alliance between 1940 and 1941 while Hitler appeared to have the upper hand in Europe.²

Morgenthau strongly identified with Bergson’s later rescue efforts to save Jews from Nazi barbarity by finding refugee havens in Western host countries. Morgenthau sought to remove displaced person policy from the jurisdiction of the US State Department by commissioning his own department assistants, Josiah Dubois, John Pehle, and Randolph Paul, to compile a report on rescue opportunities and failures, which he presented to President Roosevelt on January 16, 1944. It roundly castigated the State Department and recommended that Roosevelt “remove the hands of men who are indifferent, callous and perhaps even hostile.” He also threatened to launch a public relations attack on the State Department as a bastion of anti-Semitism. It was a charge, he said, that “will require little more in the way of proof for this suspicion to explode into a nasty scandal.”³

Roosevelt, not wishing to face such a scandal in an election year, issued Executive Order 9417 establishing the War Refugee Board (WRB). He named Morgenthau, Secretary of State Cordell Hull, and War Secretary Henry Stimson to head the board. John W. Pehle, who as assistant treasury secretary had spent much of his time working to produce evidence of State Department procrastination on refugee efforts, became director of the WRB. Josiah Dubois affirmed that the work of Bergson was effective in “generating an atmosphere conducive to its formation…we were seeking the same goals.” Earlier, Pehl had ordered that Bergson be allowed to utilize State Department cables to communicate with Irgun leader Vladimir Jabotinsky and facilitate his movements to Turkey.⁴ The WRB was authorized to establish refugee absorption centers in neutral countries, a worthy effort that was unable to lead by example. By late July of 1944, the WRB was only able to secure infrastructure for 1,000 refugees at Fort Ontario in Lake Oswego, New York. This number was unimpressive to other countries being lobbied to absorb refugees, and the entire effort was largely a failure. But it was more than just a failure to rescue innocent victims of the Holocaust or a diversion of wartime assets—with no referendum on the matter or act of Congress, Morgenthau had allied a key US government agency to terrorists.

Before Bergson began receiving support from Treasury, Irgun had plenty of blood on its hands. Vladimir Jabotinsky was a major figure in the World Zionist Organization and put together a force of 5,000 soldiers as the organization’s contribution to the British conquest of Palestine during WWI. In 1920, he organized the Haganah, the precursor to the Israeli Army, and held a position in the WZO World Executive for his leadership role. The Haganah worked jointly with the British to quell the uprising as their “settlement police.” He resigned to build his own far-right-wing Zionist-Revisionist World Union in 1925, which opposed World Zionist Organization president Chaim Weizmann’s vision. Jabotinsky’s was to “revise” the British decision to separate Trans-Jordan from territory allotted to become the “Jewish National Home” after WWI in the Balfour declaration. Jabotinsky also wanted to “revise” the British decision to disband the Jewish legion. His views evolved over time toward supporting the absolute necessity of violent armed displacement of Arabs in Palestine. This was frankly encapsulated in his 1923 “Iron Wall” manifesto:

There can be no kind of discussion of a voluntary reconciliation between us and the Arabs…Any native people…view their country as their national home. They will not voluntarily allow, not only a new master, but even a new partner…Colonization can have only one goal. For the Palestinian Arabs this goal is inadmissible. This is in the nature of things. To change that nature is impossible…colonization can therefore, continue and develop only under the protection of a force independent of the local population—an iron wall which the native population cannot break through. This is, in toto, our policy toward the Arabs. To formulate it any other way would only be hypocrisy.

Jabotinsky established his paramilitary Betar youth group in 1923 in Palestine and other countries. Menachem Begin joined in 1929 in Poland, rising to head the national unit that became Betar’s largest branch.

Arab Palestinians, sensing their own eventual displacement, had begun revolting against Jewish immigration in 1936. A Revisionist paramilitary split from the Haganah in 1931 and was placed under the command of Jabotinsky in December of 1936. Although they were originally committed to “self restraint,” by November the Irgun forces were actively engaging in terrorism, including the use of milk-can bombs that would be famously deployed a decade later against the British in the King David Hotel attack. Early in September of 1936, 13 Arabs were killed, supposedly in retaliation for the death of three Jews. Several Irgunists were determined to act on their own, but the Irgun Command headed them off by organizing a wave of operations, beginning on November 14, that resulted in 10 dead and numerous wounded. The Irgun’s campaign of attacks on purely civilian targets reached its high point in the summer of 1938. On July 6, a bomb in a milk can went off in the Arab market in Haifa, leaving 21 dead and 52 injured. On July 15, an electric mine in David Street in the old city of Jerusalem killed 10 and wounded 30. On July 25, another bomb in the Haifa market left 35 dead and 70 wounded. On July 26, a bomb in Jaffa’s market killed 24 and injured 35.⁵ Historian Paul Johnson claims that Israel owes its existence largely due to the timely deployment of such terrorist attacks.⁶ Still, in these days long predating the so-called “war on terror,” the architect of many of these bloodbaths had no problem entering the US.

In America, Irgun leader Jabotinsky roamed freely for a short time. On August 2, 1940, he was examined by a doctor who suspected that he had heart trouble. Jabotinsky then made his way to a Betar camp in Greene County in the Catskill Mountains, 130 miles from New York. After reviewing an honor guard, he collapsed and died. Although Irgun has long since left the building, AIPAC’s men may now kill off the remaining international credibility of an already severely debilitated US Treasury Department.

Treasury gasped this week as it bailed out Fannie Mae and Freddie Mac to the tune of billions in committed taxpayer funds. International financial institutions holding US-mortgage-backed and Treasury securities forced the Treasury to intervene in order to avert a global financial catastrophe. Such sovereign economic interests are now returning to the forefront of international relations and displacing blind acquiescence to preemptive bellicosity. Looking back, it is painfully obvious that the United States should have accepted the comprehensive “Grand Bargain” tendered by Iranian moderates in 2003. Iran’s $753-billion-dollar economy would be a highly productive trading partner for the United States—Iran’s competitive advantages in energy are well matched with the US’s high-tech, engineering service and machinery exports. Instead, we have AIPAC continually disrupting trade flows against the broader American interest.

AIPAC has a history of directing US trade policy against the interests of American producers and workers. In 1984, the FBI found AIPAC in possession of purloined secret International Trade Commission documents that US government officials solicited from private industry in order to negotiate a favorable bilateral free trade agreement with Israel. AIPAC promptly used this stolen information against the American worker—the subsequent FTA has yielded a $63 billion net US trade deficit with Israel between 1989 and 2007.

The grinding march toward a pointless war with Iran, like Morgenthau’s dalliances with the Irgun, is not really about America’s own best interests. It’s not that Stuart Levey doesn’t know how Israeli extremism can endanger the United States. Levey’s Fulbright-grant-funded undergraduate thesis was all about Meir Kahane, the Brooklyn-born rabbi who founded the Israeli group Kach. Kahane Chai (Kach) currently occupies slot number 20 on the State Department’s list of terrorist organizations. While the buttoned-down Levey is certainly not an extremist of Kahane’s or Jabotinsky’s violent mold, his AIPAC-sponsored financial warfare is clearly extreme. Levey and his supporters are threatening US trading partners, banks, multinational corporations, independent shippers, small trade related businesses and the international shipping system. The only beneficiary of the action is Israel—a non-signatory to the Nuclear Non-Proliferation Treaty (NPT) and longtime owner of its own nuclear weapons—an arsenal financed and created, in large part, by precisely the kinds of “deceptive schemes” and “illicit commerce” toward which TFI consciously turns a blind eye. In contrast, Iran signed the NPT, is under active International Atomic Energy Agency monitoring, and is not enriching uranium to levels sufficient for nuclear weapons production.

Like the rigged 1984 Free Trade Agreement, AIPAC’s Treasury Department actions will create more hard times for American workers. As never before, America’s economy could benefit from any expansion in export jobs boosted by new market access. Trade with Iran and the rest of the Middle East is based on real comparative advantages. US workers, many facing home foreclosures due to junk mortgages, will be the unknowing victims of the latest US Treasury gambit. Like the Morgenthau scheme, the Israel lobby’s latest venture is likely to fail as the international system routes around the new trade impediments. The world largely ignored Morgenthau’s and the men from Irgun’s attempts to “lead by example” to save displaced persons of Europe. Levey’s far less worthy cause, fighting for Israeli regional nuclear hegemony through damaging trade edicts, may also be similarly ignored. Countries suffering from the fallout of their investments in US junk mortgages are unlikely to buy into more junk policies and junk wars crafted by the Israel lobby.

1. Smith, Grant F., America’s Defense Line: The Justice Department’s Battle to Register the Israel Lobby as Agents of a Foreign Government, page 197-198. [↩]
   
2. Polkehn, Klaus, “The Secret Contacts: Zionism and Nazi Germany, 1933-1941,” Journal of Palestine Studies, Vol. 5, No. 3/4 (Spring–Summer 1976), pp. 54-82. [↩]
   
3. Peck, Sarah E., “The Campaign for an American Response to the Nazi Holocaust , 1943-1945,” Journal of Contemporary History, Vol. 15, No. 2 (April 1980), pp. 367-400. [↩]
   
4. Peck, Sarah E., “The Campaign for an American Response to the Nazi Holocaust, 1943-1945,” Journal of Contemporary History, Vol. 15, No. 2 (April 1980), pp. 367-400. [↩]
   
5. Brenner, Lenni, “Zionist-Revisionism: The Years of Fascism and Terror,” Journal of Palestine Studies, Vol. 13, No. 1 (Autumn 1983), pp. 66-92. [↩]
   
6. Johnson, Paul, A History of the Jews, New York, Harper and Row, 1987, p. 526. [↩]

Grant F. Smith is the author of the new book, America’s Defense Line: The Justice Department’s Battle to Register the Israel Lobby as Agents of a Foreign Government. He currently serves as director of research at the Institute for Research: Middle Eastern Policy in Washington (IRmep), D.C. Read other articles by Grant, or visit Grant’s website.