THE SUMMIT AFTERMATH : Shamir Not Budging on Soviet Jews : Israel: In a rebuff to Gorbachev, the prime minister insists they have the right to live in the West Bank and Gaza Strip.

Caretaker Prime Minister Yitzhak Shamir on Monday defended the right of Soviet Jews to live in Israeli-occupied territory, saying a democracy cannot limit where people live.

Shamir was reacting to Soviet President Mikhail S. Gorbachev’s statement Sunday that he may limit Soviet Jewish emigration to Israel if the immigrants settle in the West Bank and Gaza Strip.

Speaking to Israeli manufacturers in Tel Aviv, Shamir, leader of the right-wing Likud Party, said his government’s policy is to allow Jews to live anywhere in Israel, including the West Bank, Gaza and East Jerusalem. Israel captured those areas from Egypt and Jordan in the 1967 Middle East War.

“If the Soviet Union of President Gorbachev does not consider itself empowered today to dictate to its citizens where to live . . . it’s as clear as the sun that we, educated by democracy and freedom, cannot impose limitations on this or another category of settlers in the state of Israel,” Shamir said.

“We shall not create ghettos and areas of residence in this country,” he added.

In the West Bank settlement of Ariel, Michael Klimovitsky, a recent arrival from Leningrad, supported Shamir’s statements.

“Israel is a free country. It’s not the Soviet Union, thank God. In this country, a man has to decide for himself where he will live,” the 25-year-old computer programmer said.

Ariel officials estimate that 200 Soviet immigrants have moved to the settlement. It is 10 miles southeast of Nablus, the West Bank’s largest city and a focal point of the 30-month-old Palestinian uprising against Israeli rule.

The Israeli government has said it doesn’t have a policy of resettling Soviet Jews in the occupied lands, where residents are primarily Arabs, and that very few have settled there. However, the number of immigrants has ballooned since Gorbachev relaxed visa rules. Up to 150,000 Soviet Jews are expected to arrive in Israel by the end of the year.

Shimon Peres, head of the center-left Labor Party and Shamir’s strongest political rival, said Gorbachev’s statement was a result of the government’s failure to move toward a peace settlement with the Palestinians.

In Washington, State Department spokeswoman Margaret Tutwiler said she doubts that the Soviet president will carry out his threat.

“We’re not sure what President Gorbachev meant by his comments,” Tutwiler said a day after the Soviet leader ended his summit meeting with President Bush.

“Nothing that was said during the private summit discussions indicated in any way that the Soviets won’t live up to their commitments to permit Soviet Jewish emigration,” she said. “We expect that they will continue to do so. They know how very important this is to us.”

In all, Israeli officials say, fewer than 300 of the 40,000 Soviet Jews who have arrived in Israel this year have moved to the West Bank and Gaza Strip. This figure does not include an estimated 3,200 Soviet immigrants living in annexed areas of Jerusalem.