published May 6, 2018, 1:41:42 PM, by Michael S. Arnold and David Wainer
(Bloomberg) —

Israel will do what’s needed to block Iranian aggression, sooner rather than later, Prime Minister Benjamin Netanyahu said Sunday.

“Nations that didn’t act in time against murderous aggression against them paid a much higher price later on,” said Netanyahu, who often invokes European powers’ 1938 agreement to let Nazi Germany annex portions of Czechoslovakia. “We don’t seek escalation, but are prepared for any scenario.”

Frictions between Israel and Iran have escalated in the runup to President Donald Trump’s decision this month whether to quit the Iran nuclear deal, and Netanyahu’s comments reinforced concerns that the two Middle East powers might clash directly in Syria, Iran’s client. Other Israeli officials have suggested that a withdrawal from the accord and renewed U.S. sanctions could either bring Iran back to the negotiating table with a weaker hand, or even lead to regime change.

Housing Minister Yoav Gallant, a security cabinet member and retired general, said that if the U.S. ratchets up pressure, Iran will eventually relent.

“The U.S. is still the largest economy in the world, and when the Americans decide that those who do business with Iran can’t do business with America, countries will have to give up on doing business with Iran,” Gallant said in an interview. “There need to be economic sanctions and eventually there will be new negotiations, sooner or later.”

Israel considers Iran to be its most dangerous foe, and has repeatedly vowed to block it from building a nuclear bomb or establishing a permanent presence in Syria, where it is helping to prop up government forces. Last month, the Israeli military was accused of attacking Iranian targets in Syria twice, raising the prospect of fighting between their forces there.

As European signatories scramble to try to salvage the nuclear agreement, Israel has been urging Trump to jettison it unless it can be amended. At a widely publicized news conference last week, Netanyahu said Israel spirited half a ton of documents out of Iran proving it lied about the nature of its nuclear program, which Tehran claims is peaceful.

Israel is coordinating with intelligence agencies to review the material it took from the Iranian nuclear archive. So far only the U.S. has seen the material in its entirety, a senior Israeli official told reporters in Jerusalem, speaking anonymously due to the sensitivity of the matter.

The threat of sanctions gives President Trump a strong hand to play, and he should keep up the pressure on Tehran until it caves, the senior Israeli official said. Israeli Intelligence Minister Israel Katz recently said that additional pressure on Iran could bring down the regime.

Trump has expressed contempt for the 2015 nuclear accord that offers Iran sanctions relief in return for halting its nuclear weapons program, and has threatened to walk away if a more stringent deal isn’t agreed upon. Iranian President Hassan Rouhani said his country has been preparing for months for the possibility that Trump will pull out, warning that the U.S. would ultimately regret such a decision.

“It’s clear that friction between Iran and the U.S. can lead to a situation in which Iran decides to deploy Hezbollah against Israel,” Housing Minister Gallant said. “That’s their tool.”

Netanyahu, speaking Sunday, characterized the agreement as fatally flawed because it fails to address potential weaponization of Iran’s nuclear knowledge, imposing only temporary limits on uranium enrichment.

“I say that a deal that enables Iran to keep and hide all its nuclear weapons know-how is a terrible deal,” Netanyahu told reporters. “It has to be either fully fixed or fully nixed.”

Otherwise, he said, “you will end up with Iran with a nuclear arsenal in a very short time.”

Adds quote from housing minister in eleventh paragraph.
–With assistance from Alisa Odenheimer.To contact the reporters on this story: Michael S. Arnold in Tel Aviv at marnold48@bloomberg.net ;David Wainer in Tel Aviv at dwainer3@bloomberg.net To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net Gwen Ackerman, Amy Teibel
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