SPECIAL REPORT

US-Israel ties strained by anti-settlement vote

This is a rush transcript from "Special Report with Bret Baier," December 28, 2016. This copy may not be in its final form and may be updated.

DOUG MCKELWAY, GUEST ANCHOR: We're going to bring in our panel a little bit early tonight because of the importance of today's news. Let's start with that right now: Daniel Halper of The New York Post joins us; also Katie Pavlich, news editor at townhall.com; Amy Walter, national editor for the Cook Political Report; and syndicated columnist Charles Krauthammer.

Charles -- we're in a real danger zone at a point at which U.S.-Israeli relations have descended to a point which I've never seen in my adult life. I suspect you'd probably concur with that. But what remains unresolved is whether this is a temporary situation until the new administration takes place or whether the damage is long-lasting here.

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: Well, the damage from the resolution is long lasting. It's a matter of international law. The Israelis cannot escape it.

The damage from the speech today I think is meaningless. Nobody is going to remember it after a month. This is Kerry bloviating, trying to express himself emotionally mostly. But it will have no import because that administration and the view behind it will be swept away.

There was one important element in the 70 minutes of that word salad and it was important because I think there's a ray of hope. The danger for the Israelis, the danger for the peace process was that there was another shoe to drop. Possibly Obama would go back to the Security Council, take the Kerry six-point plan and impose it on the Israelis through Security Council resolution. That's been a threat.

And the second threat was that Obama would unilaterally recognize a Palestinian state demanding nothing in return from the Palestinians meaning that the state of war continues, the terrorism continues, et cetera.

Well, there was a passage buried in those 70 minutes of Kerry, which seemed to rule those two threats out. Where Kerry says there's some who want us to dictate the terms of the resolution of the Security Council. He said these are not choices we will make. And he said others want us to simply recognize the Palestinian state absent an agreement and again he says these are not choices we will make.

If Kerry sticks with that, then the damage is done, and we will start all over again on January 20th. I hope he sticks to it. You don't know what will happen in Paris. But unless he betrays his own words it looks like the damage is done and it will be somewhat limited.

MCKELWAY: Amy, even when Kerry and Netanyahu were talking about the same thing, about who specifically won't recognize Israel, they are kind of talking over each other. Listen to these sound bites together here.

(BEGIN VIDEO CLIPS)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: The persistent Palestinian refusal to recognize a Jewish state remains the core of the conflict. And its removal is the key to peace. Palestinian rejection of Israel and support for terror are what the nations of the world should focus on if they truly want to advance peace.

And I can only express my regret and say that it's a shame that Secretary Kerry does not see this simple truth.

JOHN KERRY, U.S. SECRETARY OF STATE: Most troubling of all, Hamas continues to pursue an extremist agenda. They refuse to accept Israel's very right to exist. They have a one state vision of their own -- all of the land is Palestine.

(END VIDEO CLIP)

MCKELWAY: So Kerry saying Hamas refuses to accept Israel's right to exist. Mr. Netanyahu says the Palestinians refuse to accept it.

AMY WALTER, COOK POLITICAL REPORT: Look, the long term effects, I agree with Charles about whether or not they're going to be significant and whether or not they will be significant. But the reality is for this administration the relationship with Netanyahu has been the issue and that this seemed to be as much about a rebuke of Netanyahu personally than it was about a rebuke of overall the Israeli policy. And that, I think, is what we're going to be remembering when we look back on this.

The Trump administration clearly is coming in with a very different perspective and I think that's what also important to remember is that for many folks especially in official Washington the expectation was that Hillary Clinton was going to win the presidency. And so the fact that she is not the President, that there's a Trump administration coming with very different perspectives, very different views on everything from settlements to a two-state solution at least in terms of the people that he's putting round him, their views on this adds fuel to what -- what is clearly a long simmering fire between Netanyahu and the Obama administration.

MCKELWAY: Katie, I'm struck again as Mr. Kerry was delivering this, by my count, one hour and 12 minute long speech. The President again a long way away in Hawaii, distantly removed from the dirtiness of all this or the sordid details.

KATIE PAVLICH, TOWNHALL.COM: Right. As Amy just pointed out this has been a long standing issue between Barack Obama and Benjamin Netanyahu. But I think today focusing on John Kerry's speech, it's important to listen to the words that he says because when he says that the Palestinians want a one-state solution as well, he's actually not being totally honest with the people he's speaking to because when you look at the charters of the people who have influence -- Hamas, Fatah -- the influence in the Palestinian government.

It's not about having one-state solution it's about completely annihilating the Jewish people and destroying Israel as a whole. And if that's where they're starting from and they can't recognize that Israel has the right to exist, where are you supposed to go from there? And that's where the frustration and the talking over each other comes from.

And also, you know, John Kerry struck me today that, you know, the United States can disagree as a friend with you, and issue some tough love. But this to Benjamin Netanyahu isn't about a disagreement, this is about a betrayal. And he feels as though this should not have been brought to the Security Council. It should have been dealt with -- a disagreement that's long standing. It should have been dealt with behind closed doors, in negotiations between the United States and Israel.

And so it's not about not being able to take tough love on Israel's behalf, it's about a betrayal from the United States and a reversal of long standing policy to defend Israel in front of the U.N.

MCKELWAY: Daniel, observations?

DANIEL HALPER, NEW YORK POST: Well look, I think it is worth pointing out some misperception and ideas in John Kerry's speech. I mean the whole anti-settlement craze hinges on the notion that Jews wouldn't be allowed to live in a Palestinian state under the final solution, right? That there would be some sort of Palestinian -- settlements are basically apartment buildings we're talking about. And they're saying Jews can't build here because the Palestinians won't allow that and won't allow that to happen in the final state.

So I think that sort of mindset is sort of washed over and baked in and it's perhaps damaging. But as far as John Kerry's speech goes, it's pure fantasy. I mean this has nothing to do with the reality of what's going to be happening.

The U.N. action is obviously very real, it has consequences. But Kerry and President Obama, though he is vacationing and hitting the links, this very much with his blessing as his own administration has told us.

What that's about, I think, is changing the way the Democrats and the way half of, you know, half of the government will be perhaps -- views Israel and interacts with Israel in the future. This is not something that, you know, they are not going to cheat peace in the next three weeks but they will change the way Democrats look and interact with Israel and in a real, very real way and perhaps alter that perception.

MCKELWAY: Charles -- go ahead.

KRAUTHAMMER: I just want to say. There's one thing that hasn't been raised here. And that is if the administration wants to -- if we want to give it the benefit of the doubt about outlying settlements and obstacle to peace and all that, fine. But why when the resolution came to a vote, did they not insist on removing the gratuitous language that says "including east Jerusalem".

Because if you had it on the territories you could say ok we're going to argue about the outlying settlements. But what everybody understands, what turns the resolution from unwise to scandalous is that it essentially declares that the Jewish corridor of Jerusalem, the Western Wall, the Temple Mount, the central areas of the Jewish identity in the world for 2,000 years are alien territory that the Jews have no claim to.

Now even this administration doesn't believe in that. If that's the case why didn't they simply insist on removing that phrase, "including east Jerusalem" and that would have at least eliminated the most egregious and scandalous elements of the resolution.

There's no explanation of that and this stance, this resolution now is a part of international law, says that the Jewish quarter of Jerusalem is an area where Jews should not be allowed to live.

MCKELWAY: And reminded again that President-Elect Trump's pick to be the ambassador to Israel is David Friedman who wants to relocate the U.S. embassy to Jerusalem.

KRAUTHAMMER: But it will not be East Jerusalem, it would be west Jerusalem. It's a lot less scandalous than it sounds.

MCKELWAY: A point of distinction.

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