Soviets Kill Airline Deal With Israel : Emigration: Decision will slow the exodus of Jews. Arab pressure is seen behind the cancellation of direct flights from Moscow to Tel Aviv.

The Soviet Union, retreating before pressure from Arab countries, has scrapped a deal to allow direct airline flights from Moscow to Tel Aviv to carry thousands of Soviet Jews emigrating to Israel, U.S. officials said today.

The effect of the Soviet decision will be to delay the emigration of hundreds--and perhaps thousands--of Jews because of a longstanding shortage of space on airlines leaving Moscow, the officials said.

At the same time, however, Soviet officials have assured the United States that they intend to maintain their policy of allowing virtually all applicants for emigration to leave the country, a move that has produced record levels of Soviet Jewish emigrants in recent months.

The deal to allow direct airline flights was negotiated by Aeroflot, the Soviet state-owned airline, and Israel’s El Al airline earlier this year. But Soviet Foreign Minister Eduard A. Shevardnadze decided not to approve the deal, officials said.

“This is going to slow things down and cause some hardship,” a senior U.S. official said. “But people are still coming. Chances are they’ll get through.”

Currently, instead of flying directly to Israel, Soviet Jewish emigrants must fly through a third country--most often, Hungary or Romania. But the number of seats aboard those flights is limited, officials said. Ironically, seats have become even scarcer as the government of President Mikhail S. Gorbachev has relaxed travel restrictions on all Soviet citizens.

Last month, an estimated 4,700 Soviet Jews emigrated--a record number, “at least since 1914,” one official said. But he estimated that as many as 6,000 might have left if airline space had been available.

Shevardnadze informed Secretary of State James A. Baker III of his decision to cancel the airline agreement during Baker’s visit to Moscow earlier this month, officials said.

“It was very clear” that the Soviet move was a response to Arab complaints about Soviet Jewish emigration to Israel, one said.

Arab countries have complained that Soviet Jews are being settled in the West Bank, which Israel occupied in the 1967 Middle East War. The United States and most other countries have long held that Israel’s policy of building Jewish settlements in the occupied territory is illegal under international law.

Israeli Prime Minister Yitzhak Shamir fueled the controversy last month when he said that the increasing number of Soviet emigrants required Israel to hold on to the occupied territories.

“What is clear,” Shamir told a meeting of his Likud Party, “is that for the big aliyah, we need the Land of Israel, a big and powerful state.”

In Shamir’s view, the aliyah, or “coming up” to Israel, by Soviet Jews--and their being settled in the occupied West Bank and Gaza Strip--is no different than the arrival of Jews over the last 100 years and their settlement in parts of what is now Israel proper. “Land of Israel” is the Israeli political term for a greater Israel that includes the West Bank and the Gaza Strip.

About 13,000 Soviet Jews came to Israel last year, compared to 2,200 in 1988. Israel expects 50,000 to 100,000 Soviet Jews to arrive this year and up to 750,000 in the next five to six years under the Kremlin’s liberalized emigration laws.

However, only a tiny fraction of the Soviet emigrants--as few as 1%, according to some estimates--ave settled in the West Bank, according to Israeli experts. Nevertheless, the enormous surge in emigration to Israel has spurred the Arabs to ask Moscow to halt the outflow altogether.

The Soviet Union has formally condemned Israel’s policy of settling the West Bank and has specifically opposed settling Soviet Jewish emigrants there. At the same time, however, Soviet officials have flatly told Arab diplomats, as well as U.S. and Israeli officials, that Gorbachev’s policy of open emigration will not change.

Officials said Israel has apparently raised no strong protest to the Soviet cancellation of the airline agreement. “They have problems absorbing people as it is, finding housing and jobs for them, so they may not want to press the issue,” one official said.

Last year, the United States announced a change in procedure under which Soviet Jews must remain in the Soviet Union while they apply for a U.S. entry visa, a process that may take months. By contrast, Israel automatically grants entry to Jews.

AZERBAIJANIS ANGRY--Delegates walked out of a Soviet legislative session. A8