Arabs Ask Baker to Halt Settlements : Israel: Palestinian leaders say they are ‘cautiously optimistic’ about peace talks.

Three Palestinian leaders who met with Secretary of State James A. Baker III on Saturday urged him to stop Israel from building settlements in the West Bank and Gaza Strip and said they are “cautiously optimistic” about progress toward getting Mideast peace talks under way.

After speaking with Baker for more than two hours, the Palestinians, one each from the West Bank, the Gaza Strip and the Arab half of Jerusalem, declined to say exactly what caused them to reverse gloomier assessments of talks with Baker during his first two visits to Jerusalem. They met with Baker hours before he left for Jordan and a day after his talks with Israeli Prime Minister Yitzhak Shamir.

“This time, there was a readiness to talk about how to overcome obstacles and problems,” said Faisal Husseini, a prominent Palestinian leader from Jerusalem.

According to Hanan Ashrawi, a delegate from the West Bank, the talks covered questions of who will represent the Palestinians at talks, who will sponsor the negotiations and the nature of Palestinian “self-government” in the event Israel withdraws from the occupied lands.

The three seemed confident that the Palestine Liberation Organization, which they professed to represent, would at some point take a role in peace talks. Baker told the group that the United States has only “suspended” its contacts with the PLO, not “terminated” them, said Husseini, who is linked with the Fatah faction under the control of PLO chief Yasser Arafat. The implication was that the PLO might be brought in under some fig-leaf arrangement.

“Many formulas are possible,” said Ashrawi, a university educator.

Apparently the Palestinians got a sympathetic airing on Baker’s opposition to Israeli settlements in the occupied territories. Baker showed them a three-minute television news tape on new construction in the West Bank and explained how the activity harmed American credibility, the Palestinians said.

“We got a sense of compassion over what was happening here,” said Husseini, “and a will to take a firm position.”

The Bush Administration has persistently criticized Israel’s settlement program on grounds that it makes compromise over land impossible. Israeli backers of the program say that is just the idea; the land, they say, belongs to Israel.

In any case, the Palestinians reported no promise of steps to block the settlements. The three seemed content that a new “environment” had been created.

“There are still more questions than answers,” said Ashrawi.

Through the occasionally evasive comments of the Palestinians, it was possible to discern at least some outstanding issues that could sink efforts to get the Israelis and Palestinians, as well as Arab states, into talks.

Husseini’s presence seemed to suggest that Baker is refusing Israel’s request to exclude Jerusalem Arabs from the proposed talks. Israel fears that its hold on the annexed sections of the city will be undermined if a Jerusalemite attends.

The Palestinians also urged Baker to permit European governments to attend the talks and to hold them under U.N. oversight--moves Israel opposes. Israel sees the European Community as tilting toward the Arabs, and the United Nations as untrustworthy.

Husseini dismissed the notion that “self-government” for Palestinians means anything more than a plan for Israeli rule with Arab submission. “Just words,” he said. Israel proposes autonomy for Palestinians; the Palestinians are willing to accept only if there are guarantees that autonomy will lead to statehood.

Still, the atmosphere as described contrasted sharply with the tone of talks between Baker and the Israelis the day before. Tough was the most common adjective used by Israeli officials to describe them. Baker left a series of proposals for Israel to ponder and apparently wants answers reasonbly quickly.

Despite the rosy picture painted by the Palestinians, clouds are gathering for them behind the scenes. Leftist factions of the PLO opposed their meeting with Baker, and Palestinian observers fear that factional strife could break out. The three who met with Baker represented only Fatah.

Islamic nationalists also oppose the talks. Hamas, the largest Muslim group, shut down the West Bank, Gaza and East Jerusalem in a general strike to protest the Baker visit. The PLO excludes Hamas from participating in the talks.