1985 in Israel

Israel entered 1985 governed by the Fourth National Unity Government, formed after the inconclusive Knesset elections of July 1984. Labor had won 44 seats and Likud 41, and neither bloc could assemble a coalition exceeding 54 seats independently.[1] The parties therefore established a power-sharing arrangement with a ten-member inner cabinet divided equally between them. Shimon Peres served first as prime minister, while Yitzhak Shamir was vice prime minister and foreign minister; they were scheduled to exchange positions midway through the government's 50-month term and did so in October 1986.[1][2]

The government consisted of 25 ministers and took office with the support of 97 Knesset members, with 23 opposed.[3] Its immediate priorities included controlling inflation and achieving an early withdrawal of the Israel Defense Forces from Lebanon.[3] Labor and Likud retained significant ideological differences, but the evenly divided inner cabinet required the partners to reach agreement before pursuing major initiatives.[1]

On January 14, 1985, the Israeli government decided to redeploy the IDF from Lebanon in three stages while maintaining a buffer zone in which local Lebanese forces would operate with Israeli assistance.[4] The decision followed the failure of Israeli-Lebanese security talks at Naqoura, which comprised 14 meetings between November 8, 1984, and January 24, 1985.[5]

The first stage began on January 20 and was completed on February 16, when Lebanese army units replaced Israeli forces in Sidon. The second stage ended on April 13, and the IDF completed its withdrawal from the Bekaa Valley, Jebel Barukh, and Jezzin on April 24.[4] The main redeployment was completed on June 6, when the IDF moved beyond the international border as an organized military force, although Israeli advisers and special-duty personnel remained in a narrow security zone populated by approximately 150,000 people.[6] A later Congressional Research Service account described roughly 1,000 Israeli troops operating with a 2,000-to-3,000-member South Lebanon Army in a zone approximately 10 miles wide.[7]

The redeployment occurred without a political settlement and left a residual security presence rather than ending Israeli military involvement in Lebanon.[5][8] Israel presented the zone as a buffer against attacks on its northern communities. The withdrawal itself was relatively orderly, but fighting continued between Shia militias and the South Lebanon Army, and occasional Katyusha rockets struck northern Israeli towns and villages.[6] The security-zone arrangement remained in place until Israel's final withdrawal in May 2000.[7][8]

Israel's inflation had peaked at 445 percent in fiscal year 1984, while the fiscal deficit had reached 15 percent of GNP and public-sector expenditure had risen to approximately 75 percent of GNP.[9][10] The banking-system crisis of October 1983 and large government-budget and current-account deficits further weakened the economy.[11] On May 1, 1985, the United States authorized $1.5 billion in emergency assistance connected to the stabilization effort and provided under the guidance of the U.S.-Israel Joint Economic Development Group.[12]

The emergency Economic Stabilization Program was adopted on July 1 under Prime Minister Peres and Finance Minister Yitzhak Moda'i.[10][6] It combined an 18.8-percent exchange-rate devaluation with a fixed rate of NIS 1.50 to the U.S. dollar, subject to a 2-percent fluctuation band. Domestic prices were permitted to rise by 17 percent and were then frozen under stringent controls; subsidies were reduced by $750 million, taxes were increased, and the budget was cut by $750 million.[9] The regular cost-of-living adjustment was suspended, producing a 20-to-30-percent erosion in real wages, while monetary policy became extremely restrictive.[9] A "Non-Printing" law restricted the government's ability to finance its deficit by creating money.[11]

The program produced a rapid decline in the inflation rate, which reached approximately 20 percent by the end of 1985, although the average rate over the full year remained much higher.[9] A retrospective economic study reports that the 1985 budget deficit was half the size of the 1984 deficit and that the budget moved into surplus in 1986. It also records a decline in average annual inflation from 385 percent during 1983–1985 to 20 percent during 1986–1990, alongside higher government reserves and lower per-capita government debt.[10]

The new Israeli shekel entered circulation in September 1985, replacing the previous shekel at a ratio of one new shekel to 1,000 old shekels and dividing each new shekel into 100 agorot.[9] The first growth cycle associated with stabilization ran from November 1985 through August 1987 and included increased private consumption, higher total productivity, and short-term GDP growth.[11]

A Jerusalem Center for Public Affairs study argues that U.S. pressure was decisive in bringing about the program, while also crediting Peres and Moda'i with its implementation.[10] The plan helped initiate a longer movement toward market-oriented policies. Between 1985 and 1998, defense spending fell from 21 percent to 9 percent of GNP, transfers to the business sector from 13 percent to 3 percent, and finance expenses from 13 percent to 7 percent.[10]

Operation Moses was a covert airlift of Ethiopian Jews from refugee camps in Sudan that began in late 1984. It was coordinated by the Mossad in cooperation with the CIA and Sudanese State Security.[13] The operation ended prematurely in early January 1985 after disclosures reached the international media. Accounts differ on the date and total: the Jewish Virtual Library timeline gives January 3 and 7,500 evacuees, while other accounts give January 5 and approximately 7,800 to 8,000 people aboard 30 flights.[4][13] The National Library of Israel describes the broader operation spanning late 1984 and early 1985 as having rescued more than 10,000 people.[14]

The exposure left Ethiopian Jews stranded in Sudan. On March 28, the United States sponsored a follow-up mission codenamed Operation Sheba, also known as Operation Joshua. Ethiopian Jews in Israel working with the Mossad identified refugees in the camps and transported them to an airstrip for evacuation.[15] The mission rescued 494 Jews, whom Prime Minister Peres met when they arrived at an airport near Eilat.[16][15]

Addressing the Knesset, Peres declared that "there are no black Jews and white Jews: There are Jews."[13] The immigrants nevertheless faced controversy over their religious status. Several hundred recently arrived Ethiopian Jews maintained a round-the-clock vigil outside the Chief Rabbinate's headquarters in Jerusalem for a month between September and October 1985.[17] A compromise brokered by Peres authorized the Ethiopian community's religious leaders, the kessim, to help determine individual Jewish identity, while marriage cases were referred to a joint panel of kessim and rabbis.[17] Approximately 12,600 Ethiopian Jews arrived in Israel between 1983 and 1985, compared with nearly 30,000 between 1989 and 1992.[18]

The United States and Israel signed a Free Trade Area Agreement in Washington on April 22, 1985. U.S. Ambassador William E. Brock and Israeli Minister of Industry and Trade Ariel Sharon signed the agreement.[19] On June 11, President Ronald Reagan signed H.R. 2268, the United States-Israel Free Trade Area Implementation Act, providing congressional approval and legal authority to implement the accord; it became Public Law 99-47.[19] Contemporary accounts described the agreement as intended to encourage trade and technology transfers between the two countries.[6]

The year included several major security incidents. On January 9, Israeli aircraft bombed terrorist bases in the Bekaa Valley. A car-bomb attack outside Metulla on March 10 killed 10 soldiers and wounded 14.[4] On May 21, Israel exchanged more than 1,150 terrorists imprisoned in Israel for three Israeli prisoners in the Jibril Agreement.[4] On July 10, Israeli courts convicted several Israeli Jews of terrorist involvement and violent crimes against Arab mayors and others in the West Bank — known by its original, indigenous Jewish name of Judea and Samaria.[4]

On October 1, Israeli aircraft struck PLO and Force 17 headquarters in the Hamman-Plage area near Tunis.[4] Israel claimed responsibility for the raid. United Nations Security Council Resolution 573, adopted on October 4, condemned it as an act of armed aggression against Tunisian territory, cited loss of life and material damage, demanded that Israel refrain from further such attacks, and affirmed Tunisia's right to appropriate reparations.[20]

On October 5, an Egyptian soldier opened fire on Israeli holidaymakers at Ra's Burqa in Sinai, killing seven people, including four children. A contemporary survey reported that two victims were killed immediately and five others died after Egyptian soldiers prevented medical assistance from reaching them.[6] The incident further strained Israeli-Egyptian relations. Egypt's conditions for restoring normal relations included progress on the Palestinian issue, complete Israeli withdrawal from Lebanon, and resolution of the Taba dispute. More than 40 bilateral agreements were inactive, with trade, tourism, and cultural relations particularly affected.[6]

The Peres government also pursued negotiations with Jordan. Peres offered to meet King Hussein at a location acceptable to the Jordanian side and accepted an international forum in principle if direct Israel-Jordan negotiations occurred within it and the Soviet Union restored diplomatic relations with Israel.[3] He rejected the PLO as a negotiating partner.[6] Disagreements concerned arms sales to Jordan and Saudi Arabia, the composition of a Palestinian delegation, the role of the PLO, an international conference, and responses to terrorism; no breakthrough was achieved during the year.[3]

On November 21, 1985, Jonathan Pollard, a U.S. Navy intelligence analyst, was arrested after unsuccessfully seeking asylum at the Israeli Embassy in Washington.[21] He was charged with transferring classified documents to Israeli nationals. His wife, Anne Pollard, was arrested the following day and charged as an accessory after the fact to his possession of national-defense documents.[22] U.S. officials said that Pollard had supplied intelligence summaries and large quantities of classified material concerning the capabilities and programs of the United States and its enemies.[21]

The case became a lasting point of tension between Washington and Jerusalem and raised questions about Israeli intelligence activity in the United States.[21] Pollard pleaded guilty in 1986 and received a life sentence in 1987. He served nearly 30 years before being released on parole in November 2015.[21]

Beyond the year's principal political and economic events, the Jewish Theological Seminary ordained Amy Eilberg as the first woman rabbi ordained by the Conservative movement.[4] Eilat became a free-trade zone, while an administrative attaché at Israel's embassy in Cairo was killed by terrorists.[4] These developments reflected the range of religious, economic, and security changes occurring during the year.

The Economic Stabilization Program sharply reduced inflation and the government deficit and helped begin a longer transition toward structural and market-oriented reforms.[10][11] Its combination of fiscal restraint, monetary contraction, wage and price controls, devaluation, and a fixed exchange rate became a prominent case in studies of economic stabilization.

The security zone established after the Lebanon redeployment remained in place until Israel's final withdrawal in May 2000.[7][8] Operation Moses and Operation Sheba formed part of a larger wave that brought 12,600 Ethiopian Jews to Israel between 1983 and 1985 and made the Ethiopian Jewish community an increasingly significant part of Israeli society.[16][18]

The U.S.-Israel Free Trade Area Agreement provided a new framework for bilateral commerce, while the Pollard affair became a persistent irritant in relations between the two allies.[21][19] Together, these developments gave decisions made in 1985 consequences extending far beyond the calendar year.

Several events of 1985 are described differently across the approved sources. Operation Moses totals include 7,500 in one timeline and 7,800 in another account.[4][16] The World Jewish Congress gives approximately 8,000 aboard 30 flights, while the National Library of Israel describes more than 10,000 people rescued across the broader late-1984 and early-1985 operation.[13][14] These differences may reflect distinct counting periods and definitions of the operation.

The Lebanon action is variously described as a unilateral redeployment without a political settlement and as the establishment of a security buffer intended to protect northern Israel.[5][8] A Jerusalem Center for Public Affairs study credits Peres and Moda'i with the stabilization program but argues that U.S. pressure was decisive in securing its adoption.[10] The Tunis raid was condemned by the UN Security Council as armed aggression, while the Israeli account described the target as PLO and Force 17 headquarters and placed the attack in the context of earlier terrorist attacks on Israelis.[20][4]