Mubarak Links Settlements, End of Arab Boycott

Egyptian President Hosni Mubarak said Friday that if Israel stops building settlements in the occupied West Bank and Gaza Strip, Arab governments should respond by ending their four-decade-old boycott of companies that trade with Israel.

“If Israel could suspend the building of settlements in the occupied territories, I believe that the Arab states should make a reciprocal concession by suspending the boycott,” Mubarak told reporters after a meeting with Secretary of State James A. Baker III.

Baker said Mubarak’s offer “certainly evidences a desire on the part of the Arab states to reconcile with Israel and certainly should give a boost to the direct negotiations that we hope will follow a (Mideast) peace conference.”

It was the first time the Egyptian president has advocated an end to the Arab boycott, which has been in effect since 1948. Mubarak’s gesture appeared to be aimed at underscoring the economic benefits that Israel would obtain if the government of Prime Minister Yitzhak Shamir stops building new settlements and goes along with a U.S.-sponsored plan for a Mideast peace conference.

On Sunday, Baker is scheduled to visit Israel, where he will try to persuade Shamir to withdraw his objections to the American proposal for a peace conference.

The Arab world declared economic war on Israel beginning with its birth. Since the early 1950s, a secondary boycott has targeted countries and firms that do business with Israel.

In practical terms, Mubarak’s talk of an end to the Arab boycott has little impact. Egypt, which signed a separate peace agreement with Israel in 1979, no longer takes part in the boycott.

But other Arab governments do, and the embargo continues to have a significant impact on Israel’s economy. Only two months ago, following a meeting in Damascus, the Arab League’s Boycott of Israel Office added 110 new companies to its list.

Asked whether other Arab governments might go along with his suggestion, Mubarak said that if Israel halts its settlements, “I believe that the response from the Arab world will be positive.”

There was no immediate response in Israel to Mubarak’s statement linking a settlement halt to an end of the boycott. But in an interview published Friday, Defense Minister Moshe Arens predicted that the latest U.S. efforts to set up peace talks will fail.

In an interview with the daily newspaper Yediot Aharonot, Arens said Baker will need to make further efforts to iron out differences between Israel and the Arabs on how to conduct negotiations.

“I don’t think that Baker will leave here with an agreement that is acceptable to all sides and will bring about the meeting he wants to organize,” Arens said.

In Athens, where he was on the third stop of a four-nation European tour, President Bush said Friday that the reports from Baker were “very encouraging.”

“There were positive aspects,” Bush said in a brief encounter with reporters while touring the Acropolis. “What I’ve heard from the secretary is all positive so far. So we’ll see where we go.”

Ever since last April, the Bush Administration has been pressing for an easing of the boycott as one of a series of “confidence-building measures” that could be taken between Arab governments and Israel. The idea is to have the two sides take a series of concrete, achievable steps that might pave the way for a settlement of the broader issues in the Mideast.

The Bush Administration has also called on other governments outside the Mideast, such as Japan, to urge private companies to stop complying with the Arab boycott.

Earlier this week, during the economic summit in London, the seven leading industrialized democracies formally called for both a halt to Israeli settlements and for an end to the Arab boycott.

“If steps like (those two) could be taken, clearly it would evidence a mutual desire to improve the climate for negotiations,” Baker said Friday.

The secretary of state is now in the midst of his fifth trip to the Mideast since the end of the Gulf War. On Thursday, the long-frustrated efforts to bring about a Mideast peace conference got a big boost when Syrian President Hafez Assad announced that he would accept the American proposal.

Mubarak said Friday that Syria’s acceptance was “very encouraging. . . . It’s giving the peace process a boost.”

Speaking to reporters after a meeting with Baker at the presidential palace in Alexandria, Mubarak said he thinks the peace conference should be held soon. “Maybe tomorrow,” Mubarak said. “I hope this (conference) should convene and make very good progress in a very short time--one month, two months maximum.

Times staff writer James Gerstenzang, in Athens, contributed to this report.