Next Step : Under Baker's Plan, Israel, Arabs Get All--and Nothing : * By emphasizing form over substance, he hopes to forge a Mideast peace. So far, all that's emerged is confusion.

TIMES STAFF WRITER

James A. Baker III's method for building a "new world order" in the Middle East looks remarkably like pre-Gulf War ways of dealing with the long-intractable Israeli-Arab conflict: an attempt to entice warring sides to the negotiating table by skirting key issues, putting off confrontation and letting everybody think that someday they will all get what they want.

It is a winking and nodding style of diplomacy in which almost everyone can believe there are assurances of everything. Clarity is avoided at all costs. The precise goals of the talks are hidden in a haze of competing interpretations, at least until the process is well under way. It's like a baseball game in which the teams take the field and everyone is handed a bat and a glove, but the ball itself is withheld until the ninth inning.

Gone are the sweeping moral certainties that marked the prewar campaign to drive Iraq out of Kuwait. No votes in the United Nations, no deadlines and no economic pressure, at least none that is publicly announced.

While meant to soothe, Baker's tactics have already raised intense suspicion and created numerous points of confusion on both sides of the Israeli-Palestinian dispute, a conflict Baker hopes to resolve through a regional peace conference in tandem with an end to hostility between Israel and its Arab neighbors.

Tactically, Baker prefers to push form over substance, a choice that runs the risks that killed his old approach, which was based on holding Palestinian elections to create a team to sit and negotiate with the Israeli government. That plan, hatched in 1989, got tangled in questions of procedure, with no issue of substance ever taken up, much less resolved.

The recurrent problem is that in the Israeli-Palestinian conflict, procedure is often viewed as substance.

The key concrete issue of whether Israel will give up occupied land in return for peace with its neighbors is apparently to be left fuzzy. Israel says the formula is not in the cards; the Arabs say there can be no peace without it.

During his visit to Israel last week, Baker spun a legalistic blanket to overcome the immediate obstacle. Talks would be held under the umbrella of U.N. Security Council Resolutions 242 and 338, which call for withdrawal from unspecified "territories" Israel won in the 1967 Middle East War. Those captured lands include the Golan Heights (previously held by Syria); the West Bank and Arab neighborhoods of East Jerusalem (Jordan); the Gaza Strip and the Sinai Peninsula (Egypt).

For the purpose of getting everyone to sit down at the same table, each side would be permitted to hold on to their own particular interpretations of the U.N. resolutions. Israel, for example, contends that it has already complied by returning the Sinai to Egypt as part of its 1979 peace treaty with Cairo. However, the Arabs also want some, if not all, of the rest of the land they lost in 1967.

The issue of how Palestinians would be represented at the conference is equally confused. No sooner had Baker boarded a plane for Cairo than officials in the Israeli government of Prime Minister Yitzhak Shamir said that the Palestinians would form part of a joint delegation with Jordan.

U.S. officials said no such guarantees had been given, and the next day, Foreign Minister David Levy admitted that Israel "agreed in principle" to an independent Palestinian team. Shamir immediately contradicted him.

"We do not want, nor do we agree to, an independent Palestinian delegation," he said.

In Shamir's view, a joint delegation would, by its makeup, preclude the Palestinians from demanding an independent state. Members of Shamir's ruling coalition argue that Jordan--formed from part of Britain's post-World War I Palestinian mandate in 1920, and with a Palestinian majority--is already a Palestinian state. These Israelis say that Palestinian residents of the West Bank and Gaza Strip should call Jordan their political home while Israel maintains control of the land and resources in the occupied territories.

Shamir also said that Baker had agreed that no Palestinian from Jerusalem or from exile would be included. Those restrictions are meant to preclude any suggestion that Arab neighborhoods of Jerusalem, annexed in 1967, might revert to the Palestinians, or that the Palestine Liberation Organization might become involved.

Palestinians who met with Baker in Jerusalem asked for everything the Israelis oppose: PLO participation, inclusion of Jerusalemites and a framework that centers on land for peace.

The concept of a regional conference itself appears subject to the pitfalls of the form-over-substance approach. The Israelis want a one-shot meeting of Israel and the Arabs that would quickly give way to talks between Israel and individual Arab governments. This format would, in the Shamir government's view, mean that Israel would gain recognition from the Arab world without Jerusalem commiting itself to national rights of Palestinians.

Arab states, in mirror opposition, insist that the regional umbrella be maintained--even if the first meeting breaks up into one-on-one talks.

The hunger to get some process under way has apparently softened Baker's resolve to hit at Israel over its continued expansion of Jewish settlements in the West Bank and Gaza. About 90,000 Israelis now live in 165 Jewish settlements in the occupied territories, which are also home to 1.7 million Palestinians.

The Israeli government has permitted Housing Minister Ariel Sharon to build apace and to put up mobile homes for new Soviet immigrants in contradiction of promises made to the Bush Administration. The Defense Ministry is confiscating new acreage for "security purposes." When queried about the settlement program, officials in Baker's entourage papered over the issue, saying they were told that Sharon's grander plans--to build 13,000 housing units on the disputed land within two years--is still subject to Cabinet approval.

With Baker safely across the Suez Canal, Shamir lost no time in outlining his intentions. "There is no relation between the settlements and negotiations between us and the Arabs," he said on television. "It's an internal Israeli matter."

A top Shamir aide, Yosef Ben-Aharon, added: "I believe we agreed not to agree on this matter. Israel will continue settlement, and the United States will continue to express its dissatisfaction."

Assuming Baker's ginger approach works and Israel, Arab states and the Palestinians begin to meet, the question will then focus on how much pressure Washington is willing to put on the parties to give way on the issues of principle.

The United States, in the view of analysts here, holds numerous cards. It has emerged as the main protector of wealthy Arab states and the key link between impoverished Egypt and the West. The Palestinians, with the loss of their main champion, Iraq, have almost no one to appeal to but the Americans and Washington's Arab allies. Israel is seeking billions of dollars in new U.S. aid to help absorb a wave of Soviet immigrants. And as a key arms supplier to all sides of the Arab-Israeli conflict, the United States can alter the balance of power by granting or withholding supplies.

For Israel, especially, the specter of U.S. antagonism is daunting. "Should there be a deadlock," diplomatic reporter Leslie Susser wrote in the Jerusalem Report magazine, "and should Israel be perceived to be the party blocking progress, Israeli officials do not doubt the Americans will start playing hardball.

"The Americans are well aware that Israel's soft underbelly is its economy, made particularly vulnerable by the need for aid to absorb Soviet immigrants."

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