Shultz Rebukes Israel for Not Punishing Spy Figures : Says He’s ‘Deeply Distressed’

Secretary of State George P. Shultz said today that he was “deeply distressed” by Israeli spying on the United States and rebuked Jerusalem for not punishing two key officials involved in the Jonathan Jay Pollard case.

Shultz told a House appropriations subcommittee that he had ordered American diplomats to shun Israeli Gen. Aviem Sella, who was indicted last week by a federal grand jury here, and the air force base he commands.

“I think it is very disheartening to find that Israel has been spying on the United States,” Shultz said. “I am deeply distressed about the spying on the United States by any country, and perhaps it hurts especially when it’s Israel.”

Some Cooperation

Shultz said Israel had cooperated in the U.S. investigation only “to a degree” and that Sella and Rafael Eitan, who was named a co-conspirator, “seemed to us to have been treated in a way that is not warranted.”

Sella was promoted to take charge of the Tel-nof Air Base after the Pollard case broke. Eitan, who headed the now-disbanded espionage unit in the Israeli Defense Ministry, became chairman of Israel Chemicals Co., the largest state-owned firm.

Shultz said Israeli Prime Minister Yitzhak Shamir, who visited here last month, told him he was “very ashamed” of the spy case. “It is up to the Israelis to decide internally what they wish to do about this matter,” Shultz said. “But certainly one would hope they would, if only within their own circle, clarify what happened.”

Panel Appointed

Almost simultaneously, in Jerusalem, the Israeli Cabinet decided to appoint a two-member committee to investigate Israel’s involvement in the affair.

The panel will cooperate with the parliamentary intelligence subcommittee investigating the case, said Cabinet Secretary Eliakim Rubinstein.

The announcement came after a 7 1/2-hour meeting of 10 key Cabinet members, five from Shamir’s Likud bloc and five from Foreign Minister Shimon Peres’ Labor Party.

Shamir had said all week that he opposed a public inquiry into the Pollard episode, and Israeli political analysts had predicted that the 10-member “inner Cabinet” of senior ministers would squelch rising demands for one.

Better U.S. Ties

The decision to probe the affair further appeared aimed at improving ties with the United States.

Pollard, a former American naval intelligence analyst, was convicted in Washington of spying and was sentenced last week to a life term in prison.

The secrets Pollard sold to Israel included information on Israel’s Arab enemies and details that reportedly helped Israel in its 1985 raid on Palestinian Liberation Organization headquarters in Tunis.

Israel television said one of the commission’s main tasks will be to investigate the roles of Sella and Eitan in the affair and consider whether they should be punished.

Shultz said the case should not be permitted to upset good U.S.-Israeli relations or to stand in the way of the need for a Middle East peace settlement.

“We should not allow our deep distress to divert us from seeing where the fundamentals are,” Shultz said.