Obama’s UN Appearance Shadowed by Standoff Over Palestinian Bid

Sept. 19 (Bloomberg) -- This time last year, U.S. President Barack Obama told the United Nations General Assembly that, with his administration’s involvement, an Israeli-Palestinian peace accord might be possible by the group’s next annual gathering.

If all parties worked hard, he said, “when we come back here next year, we can have an agreement that will lead to a new member of the United Nations -- an independent, sovereign state of Palestine living in peace with Israel.”

The president arrives today in New York for three days at the UN General Assembly’s opening session with that goal in shambles, his Mideast policy in trouble, and the future of the democracy movements in the Arab world -- and U.S. influence there -- unclear.

“As far as the Arab world is concerned, our credibility is already at an all-time low,” said a former U.S. Middle East negotiator, Aaron David Miller, senior public policy fellow at the Woodrow Wilson International Center for Scholars, a policy research group in Washington.

Obama’s earlier declarations on the peace process “made a bad situation worse by raising expectations without the capacity to deliver,” Miller said.

Obama is turning briefly to focus on foreign policy at time when his administration is largely occupied with the state of the U.S. economy and a looming battle with Congress over how to reignite growth, drive down unemployment and deal with the nation’s long-term deficit. He’ll arrive in New York hours after delivering recommendations for a plan to trim the U.S. budget shortfall by $3 trillion over the next decade through a combination of tax increases and spending cuts.

With U.S. voters concerned with jobs and the economy, Miller said, Obama’s attention to foreign policy “becomes either a drag, in my judgment, or a wash.”

Europe’s Economy

Aside from the Israeli-Palestinian situation, Europe’s economic woes will be reviewed in meetings on the sidelines of the UN session, six weeks before the G20 meets in France.

“It will certainly be an issue of discussion,” said deputy national security adviser Ben Rhodes, on the agenda for Obama’s meetings with French President Nicolas Sarkozy, UK Prime Minister David Cameron, Brazilian President Dilma Rousseff and Japanese Prime Minister Yoshihiko Noda.

Understanding how the European leaders are addressing their situations “allows us to give greater confidence in terms of what we’re doing going forward on the economy,” Rhodes said.

The prospect that Greece will fail to qualify for more financial aid needed to avoid default halted a five-day rally in benchmark indexes. The Standard & Poor’s 500 Index retreated 2 percent to 1,192.10 at 1:14 p.m. in New York and the Stoxx Europe 600 Index closed down 2.3 percent. Ten-year Treasury yields fell 11 basis points and the similar-maturity Greek yield jumped 183 basis points.

Wide Impact

“Europe’s obviously under a lot of pressure and they face a lot of challenges,” U.S. Treasury Secretary Timothy F. Geithner said today at a White House briefing. “It’s affecting confidence here and around the world, not just in Europe.”

Heather Conley, a former deputy assistant secretary of state for European and Eurasian affairs during former President George W. Bush’s administration, said there is “precious little” the Obama administration can do with regard to the European sovereign debt crisis “other than to urge Europe to take action.”

While at the UN, Obama will have foreign policy successes to talk about in his group and individual meetings with world leaders and in a speech he’s scheduled to deliver on Sept. 21 o the General Assembly.

U.S. Successes

These include the killing of al-Qaeda founder Osama bin Laden in Pakistan by U.S. forces in May, and Libyans’ toppling of dictator Muammar Qaddafi with UN and NATO support. Among the leaders Obama will meet with this week is Mustafa Abdel Jalil, chairman of Libya’s Transitional National Council.

The biggest challenge for the U.S. this week is the Palestinians’ stated intent to seek recognition either as a full member state through the UN Security Council or as a non-member state through the General Assembly, said Jon Alterman, director of the Middle East Program at the Center for Strategic and International Studies, a policy institute in Washington.

The U.S. is prepared to veto a UN Security Council bid. The U.S. would have less power to stop a General Assembly vote. Although such votes aren’t expected to take place until after Obama leaves New York, the controversy will color his meetings and shape his speech.

“I can’t figure out any way anybody comes out ahead on this Palestine vote,” Alterman said. “I see it hurting everybody’s interest.”

Reaction to Veto

Although Obama must stand with U.S.-ally Israel against the Palestinian bid, Alterman said, a U.S. veto would lead “to all sorts of complaints the administration has no credibility in the international stage.”

Obama has said a Palestinian push for UN recognition would not resolve their status and would further strain the stalled talks with Israel. Obama also plans to meet with Israeli Prime Minister Benjamin Netanyahu at the UN this week.

Arab allies are siding with the Palestinians and say the U.S. stance could isolate Obama. Saudi Arabia’s Prince Turki al-Faisal, a former ambassador to the U.S. and former head of Saudi intelligence services, wrote in an opinion piece published Sept. 12 in the New York Times that if the U.S. does not back a Palestinian statehood bid at the UN, “American influence will decline further, Israeli security will be undermined and Iran will be empowered, increasing the chances of another war in the region.”

He also said Saudi Arabia “would no longer be able to cooperate with America in the same way it historically has.”

U.S. and Israel

Rhodes said Obama will make clear that, while the U.S. has an “unbreakable bond” with Israel, Obama also wants to see a two-state solution. The president’s core message, Rhodes said, is “if you support Palestinian aspirations, and if you support a Palestinian state, that the way to accomplish that is through negotiation with Israel. That’s the only way you’re going to reach an agreement” on borders, security and other issues.

“There’s no question that there is great frustration at the lack of progress on the Israeli-Palestinian issue in the Arab world,” Rhodes said. “We share that frustration.”

The potential confrontation illustrates the difficulty the U.S. has in influencing events in the Middle East, according to Miller.

“We’re neither as admired, feared or respected in this part of the world as we used to be,” he said.

To contact the reporter on this story: Margaret Talev in Washington at mtalev@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.