Israelis Fret Over Proposed U.S. Aid Cut : Middle East: Officials say reductions in assistance would undermine Israel’s defenses.

Israeli officials reacted nervously Wednesday to a proposal put forth in Washington to cut U.S. aid to Israel, the world’s No. 1 recipient of American assistance.

Any aid cut, the officials said, would undermine Israel’s defenses and its plan to settle thousands of new immigrants from the Soviet Union.

Some Israeli officials suspected a link between the proposed aid cut and Israel’s reluctance to enter Middle East peace talks, hinting that talk of reduced aid is a form of pressure to get Israel to join negotiations with the Palestinians.

The proposal to reduce aid was made by Senate Republican Leader Bob Dole of Kansas and was indirectly seconded by Bush Administration officials. It provided substance and form for weeks of concern here that the thaw in the Cold War would reduce Israel’s claim on U.S. attention and aid.

Israel, with a population of 4.5 million, gets $3 billion a year in U.S. military and economic assistance, a sum based in part on its value to the United States as a military ally. The next largest recipient, Egypt, with a population of 55 million, gets $2.1 billion.

Under Dole’s plan for an across-the-board 5% reduction, money diverted from Israel and Egypt, as well as from Turkey, Pakistan and the Philippines, would be distributed to newly democratized East European countries and Panama.

Yosef Ben-Aharon, an aide to Prime Minister Yitzhak Shamir, argued that the Mideast is still a theater for superpower conflict and therefore the United States should support Israel as a reliable ally.

“I don’t see a reduction of tensions in this region,” Ben-Aharon said. “The Soviet Union is still arming countries like Libya, Syria and Iraq. This is still a dangerous neighborhood for Israel.”

A reduction in U.S. aid, he said, would be a blow to Israel’s already strained effort to settle the hundreds of Soviet immigrants who are arriving weekly. Twelve thousand Soviet Jews settled in Israel in 1989.

“We are having to drain money from our military budget to funnel (funds) to the Soviet Jews,” he said. “A cut in aid will make this very difficult.”

Ben-Aharon pointed out that Israel recently asked for a grant of $500 million beyond the regular annual U.S. aid package. The money would be used to build housing for Soviet Jews.

“Maybe this is a way the Bush Administration uses to remove any such hopes for more aid--a kind of preventive medicine,” he said.

Communications Minister Gad Yaacobi warned that if the intention of an aid cut was to persuade Israel to join in peace talks, the move would backfire.

“It will have a very negative effect on the Israeli economy,” Yaacobi said. “The Israeli public will be less amenable to give concessions on the peace process.”

Under a plan proposed by Secretary of State James A. Baker III, Israeli, Egyptian and the U.S. officials are to meet soon to work out a list of Palestinians to take part in peace talks. Israel i s balking, seeking guarantees that no one attached to the Palestine Liberation Organization takes part.

Earlier this week, Shamir appeared to preclude any chance of giving up the occupied West Bank and Gaza Strip in return for peace with the Palestinians. He said the land is needed to make room for the new immigrants, about 300,000 of whom are expected to settle in Israel over the next three years.

A trade of land for peace is a cornerstone of Washington’s efforts to resolve the Israeli-Palestinian conflict, and Shamir’s insistence on a “greater Israel” has put him at odds with Washington.

The State Department responded to Shamir’s comments on Wednesday, saying that no U.S. money could be used to assist Jewish settlers in the occupied territories.