Bush Weighs Ending PLO Talks, Calls Raid ‘Terror’ Act : Diplomacy: President urges Arafat to denounce the abortive attack on Israeli beaches.

President Bush said Friday that he is weighing whether to break off the U.S. dialogue with the Palestine Liberation Organization following a PLO-linked attack against Israel.

Breaking his silence on the issue of continuing the 18-month-old talks with PLO officials, the President prodded the organization’s chairman, Yasser Arafat, to condemn an abortive seaborne assault on Israeli beaches May 30.

“I’d certainly like to see Arafat speak out and denounce it because part of our discussions and dialogue was predicated on the renunciation of terror,” Bush said. “In my view, this is sheer terror. So I’d like to see that happen.”

So far, Arafat has declined to condemn the raid, and the PLO Executive Committee, after meeting for three days this week in Baghdad, Iraq, did not do so either; nor did it expel the admitted mastermind of the raid, Abul Abbas, from his seat on the committee.

Bush said no decision has been made on the PLO contacts, adding: “We’re trying to figure out a little more about this and see where we go. But I’m not prepared to make an announcement at this point.”

In Turnberry, Scotland, Secretary of State James A. Baker III came under pressure from European members of NATO to find a way to continue the talks. At a news conference, he echoed Bush’s statements, indicating no decision has been made and that the U.S. holds to its longstanding policy that the talks cannot continue in the face of terrorism.

“Terrorism is something that has to be taken very seriously,” Baker said after the meeting of NATO foreign ministers. “It is also important that we pursue peace in the Middle East in a serious manner.

“There is some perspective and responsibility required in dealing with this issue,” he added.

Baker’s remarks were also his first public comments on the subject since the raid.

Israel, major Jewish organizations in America and several members of Congress have urged Bush to stop talking to the PLO because of the May 30 attack, which was stopped by Israeli security forces. Four Palestinian raiders were killed and 12 captured. There were no Israeli casualties.

The raiders belonged to the Palestine Liberation Front, a group related to the PLO led by Abul Abbas. Israel accused the PLO of being involved, but Arafat has disavowed PLO responsibility.

Bush said his Administration has not yet fixed responsibility for the attack.

Israel and its supporters argue that the U.S.-PLO dialogue encourages terrorist acts by giving added legitimacy to the PLO. However, Administration officials say they believe the dialogue has been a restraining influence on PLO terrorism.

In December, 1988, when the Ronald Reagan Administration ended a two-decade diplomatic boycott of the PLO and agreed to begin the current dialogue in Tunis, then-Secretary of State George P. Shultz said the talks would end if the PLO engaged in terrorism.

“There has been no change in the original understandings that were entered into at the time the dialogue was established,” Baker said.

The European representatives argued that without the U.S.-PLO talks, there would be no chance of bringing Palestinians to the peace table with Israel.

“I think a break in the dialogue would be a real setback,” British Foreign Secretary Douglas Hurd told a news conference after Baker’s. “Jim Baker has worked very valiantly over a long time . . . to get the peace process up the hill as high as it is. I’m very keen that he and the United States Administration should remain directly engaged.”

A senior State Department official said it is unlikely that Baker will decide on the future of the dialogue this weekend. But the official added that Baker realizes a decision must be made soon.

For months, Baker has been trying to start talks between the Israeli government and representative Palestinian residents of the occupied West Bank and Gaza Strip.

Although U.S. officials refuse to say so on the record, Baker has been hoping to persuade the PLO to acquiesce in his efforts. Without at least tacit PLO approval, there is almost no chance that West Bank or Gaza Palestinians would be willing to participate.

The Baker initiative broke down last March when Israeli Prime Minister Yitzhak Shamir balked at going ahead with the negotiations. As a result of the prime minister’s reluctance to go ahead, the center-left Labor Party pulled out of the coalition government, causing it to fall and plunging Israel into a three-month governmental crisis.

Shamir announced Friday that he has formed a narrowly based conservative government, which immediately took a hard line on suppressing the intifada , or Palestinian uprising in the occupied territories. The new government is not expected to be responsive to the Baker proposal.

Nevertheless, Baker said Friday that he is ready to resume his efforts as soon as an Israeli government is in place.

Similarly, the President said he is prepared to work with the new Shamir government.

But he emphasized that U.S. policy would continue to urge peace talks between Israel and its foes in the Middle East no matter who is in power in Israel.

“The world is crying out for negotiations on this question . . . it’s essential that it go forward,” Bush told reporters aboard Air Force One as he flew from Des Moines to Omaha on a political fund-raising trip.

Eaton reported from Omaha and Kempster from Turnberry.