U.S. to Assist Housing of Soviet Jews in Israel : Immigrants: Going ahead with stalled program for loan guarantees may help mend bilateral relations.

Secretary of State James A. Baker III, trying to patch up Washington’s troubled relationship with Israel, agreed Friday to move ahead with a long-stalled program to provide $400 million in loan guarantees to finance housing for Soviet Jewish immigrants.

Zalman Shoval, Israel’s new ambassador to Washington, said Baker told him during a 55-minute meeting that a team from the Agency for International Development will visit Israel soon to work out details for the program. State Department spokeswoman Margaret Tutwiler confirmed Shoval’s account although she said no date has been set for the visit.

The significance of the action goes well beyond the loan guarantees, which are intended to help the Israeli government cope with a continuing flood of Jewish immigrants who are taking advantage of the Soviet Union’s relaxed departure regulations.

In announcing the program, Baker also hoped to repair the traditional U.S.-Israel friendship before embarking today on a weeklong trip to discuss the Persian Gulf crisis with leaders of Saudi Arabia, Egypt, Turkey, the Soviet Union, Britain, France and the exiled government of Kuwait.

Israel was conspicuously absent from Baker’s itinerary, reflecting the determination of U.S. officials to avoid antagonizing Arab nations that are participating in the international coalition against Iraq.

Relations between Washington and Israel, uneasy since Iraq’s Aug. 2 invasion of Kuwait, became severely strained last month after Israeli security forces killed 20 Arab demonstrators in Jerusalem and the United States joined in a U.N. condemnation of the action.

Although the underlying problems remain, the agreement on the housing loans removed one cause of irritation. It permitted Shoval to insist that relations between the two countries are good despite lingering Israeli resentment of U.S. support for the U.N. resolution.

“Disagreement between friends is something that is possible,” he told reporters. “The close links are as strong as ever. They can withstand quarrels or disagreements.”

Nevertheless, he was hard-pressed to refute suggestions that U.S.-Israeli relations are near a historic low. He said the relationship was worse in 1956-57, when the United States condemned Israel’s invasion of the Egyptian-held Sinai Peninsula, and before the Arab-Israeli War in 1967, when the United States rebuffed Israel’s request for arms.

But he said there is no question that if the gulf crisis escalates into a shooting war, the United States and Israel will be counted together.

“Both countries know that when it comes to the--is this the term, nitty-gritty?--there is no alternative to the U.S.-Israel relationship,” he said.

The housing loans have generated considerable controversy in recent months. Last spring, Baker said the United States wants guarantees that none of the $400 million would be used to build houses in territory that Israel captured in the 1967 war and that the U.S. loans would not be used to free other money to provide housing in the occupied territories.

Israel rejected Baker’s conditions, which would have been tantamount to an agreement to stop all settlement activities in the West Bank, Gaza Strip and East Jerusalem.

Baker and Israeli Foreign Minister David Levy reached agreement Oct. 2 on a formula under which Israel pledged not to use the U.S.-guaranteed funds in areas not under Israel’s administrative control before the 1967 war--an unambiguous commitment not to spend the money in the West Bank, Gaza Strip, East Jerusalem or Golan Heights.

At the same time, Levy said it was Israeli government policy not to settle Soviet Jews “beyond the Green Line,” a phrase that under the American definition would bar the Soviets from East Jerusalem, but under the Israeli definition would not.

Although Tutwiler insisted that the monthlong delay resulted only from the need to complete “detailed technical work,” Israel had complained of U.S. foot-dragging. The delay probably reflected the continuing disagreement over the status of East Jerusalem, which Israel captured from Jordan in 1967 and soon annexed.