Bush Offers to Ease Israeli Loan Delay : Foreign aid: He warns lawmakers that failure to back the White House on deferral of housing fund guarantees would peril the peace process.

President Bush, moving to head off a confrontation with congressional supporters of Israel, offered Tuesday to compensate the Israeli government for any costs it incurs if approval of its request for $10 billion in U.S. loan guarantees is delayed for four months.

At the same time, Bush raised the stakes with Israel, warning U.S. lawmakers in forceful terms that they risk undermining the delicate Middle East peace process unless they agree to his request to defer consideration of the housing loan guarantees for another four months.

“We risk losing everything we have been working on for the past six months,” Bush said of the “extremely sensitive” diplomatic efforts that Secretary of State James A. Baker III has undertaken to convene an Arab-Israeli peace conference.

If Congress approves the guarantees now, “rejectionists” on either side could use the issue to thwart Baker’s negotiations, and “the best chance to promote Arab-Israeli peace since the Camp David accords will be lost,” Bush warned in a letter to Senate Minority Leader Bob Dole (R-Kan.).

The dispute involves Israel’s request that the United States guarantee $10 billion in loans it intends to use to finance construction of housing for new immigrants, primarily Soviet Jews. There would be no cost to U.S. taxpayers unless Israel defaulted on the loans.

At the same time that Bush was putting his prestige on the line with lawmakers in the looming confrontation, the White House was moving behind the scenes to head off a congressional fight by promising to reimburse Israel for any costs that it might incur as a result of delayed approval of the loan guarantees.

Sen. Daniel K. Inouye of Hawaii, the second-ranking Democrat on the Senate Appropriations subcommittee that handles foreign aid, said that the promise is contained in a six-point offer that Bush conveyed to him and two other senators during a meeting at the White House on Tuesday morning.

The offer, which is likely to be intensely debated in closed-door discussions over the next few days, also promises that the Administration will act promptly on the Israeli request after the 120-day delay sought by the White House.

“The Administration will . . . seek no further delay at the end of 120 days no matter where the peace process is at that time,” stated the White House paper that was given to the senators. “If there is cost to Israel associated with the deferral, the Administration will agree that such cost be offset in the ultimate package.”

While some pro-Israel lawmakers indicated that they may oppose the Administration’s request, congressional leaders and other key senators, including those who met with Bush, said they have agreed to delay a confrontation for at least another two weeks while a compromise is sought.

“We have agreed with the President not to do anything about it for at least the next two weeks and to use that time to try to find a compromise,” said Sen. Bob Kasten of Wisconsin, the ranking Republican on the Appropriations subcommittee.

Pro-Israel lobbyists, however, were less than pleased. While the White House proposal has some “good points,” they said, it fails to guarantee that the Administration will support the loan-guarantee request when the deferral expires in January.

“They said there will be no further delay” in considering the request, said one pro-Israel lobbyist, who requested anonymity. “But that doesn’t mean they will vote for it. . . . They have not said they’re going to support it.”

Israeli Prime Minister Yitzhak Shamir has bitterly assailed the Administration on the issue, rejecting Bush’s pleas to defer the Israeli request until after the October peace conference that Baker is trying to arrange.

Israel’s supporters on Capitol Hill argue that Israel urgently needs the guarantees to obtain financing for new housing projects to accommodate the continuing influx of Jewish refugees from the Soviet Union.

Times staff writer Alan C. Miller contributed to this story.