U.S. Will Guarantee Loans for Housing Soviet Emigres : Israel: Jerusalem agrees that none of the $400 million will be used in the West Bank and Gaza Strip.

The United States agreed Tuesday to give Israel $400 million in loan guarantees for housing for Soviet Jewish immigrants after Prime Minister Yitzhak Shamir’s government provided unprecedented guarantees that none of the money would be spent in the occupied West Bank and Gaza Strip.

Secretary of State James A. Baker III, announcing the agreement, said the Israeli promises “go beyond the traditional assurances that Israel has provided us with concerning settlements.”

The $400 million has been a matter of continuing controversy between Washington and Jerusalem since last spring, when Baker said the United States was demanding an end to all Israeli settlements in the occupied territory, regardless of how they were financed.

The final agreement does not require Shamir’s government to stop all settlements. But Baker said the United States is convinced that its funds will not contribute to that activity.

Baker said he and Israeli Foreign Minister David Levy, both in New York for the current United Nations session, reached “an understanding that will satisfy the concerns that we have had.”

He said Israel agreed to “confirm” an earlier statement by Israeli Housing Minister Ariel Sharon that Soviet immigrants would not be directed to settlements in occupied areas “beyond the green line.”

That formula would appear to permit Soviet immigrants to live in East Jerusalem, the predominantly Arab sector of the city that was under Jordanian control before the 1967 Arab-Israeli War. Sharon’s original statement did not apply to East Jerusalem, and Baker specifically cited that comment.

Baker said the Israelis also agreed to provide “no special incentives to settle people outside the green line.” In the past, the Israeli government has subsidized rents in West Bank and Gaza settlements.

The Israeli government has been hard-pressed to pay for housing needed for the influx of Jewish immigrants since the Soviet Union dropped its ban on emigration.