Obama Moves To Punish Israel?

The United States administration plans to cut about $1 billion from the balance of its loan guarantees to Israel because of its investments in the settlements. The balance currently stands at $4.6 billion.

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The assessment now is that the Obama administration will weigh the political situation carefully before deciding on a cut to the guarantees and may try to link it with Israeli measures beyond the Green Line.

I don't really understand how these loan guarantee thingies are supposed to work. However, it seems to be that the 1st Bush administration was able to use them as an effective cudgel to move the Israelis on certain issues. A stick to go with the carrot, in other words.