U.S., Soviets Unsure Over Mideast Talks : Diplomacy: Baker says there is still hope for an October conference but that both nations will have to work harder on allies.

TIMES STAFF WRITER

Prospects for a proposed international peace conference on the Middle East have grown uncertain, U.S. and Soviet officials acknowledged Friday, and Moscow and Washington are asking each other whether they can ensure their respective allies' participation.

Secretary of State James A. Baker III said after meeting with Boris D. Pankin, the new Soviet foreign minister, that the two countries still hope to convene the conference next month but that both will have to increase their diplomatic efforts to prepare for it.

"We still need to do a fair amount of work in the region with respect to the parties that might attend such a conference," Baker said. He noted that he will be in the Mideast next week to seek agreement on the major remaining obstacle, Palestinian participation.

Baker and Pankin said they believe the conference can still be convened in October, as agreed at the Soviet-American summit meeting here in July, but neither appeared optimistic about it.

"We have not agreed on dates," Baker said. "We have agreed that we will continue to cooperate closely, the two countries to sponsor jointly if possible such a conference, and we have discussed the issue of invitations. But we have not agreed as yet with respect to the exact wording of the invitations or with respect to the fact of sending the invitations."

According to Soviet sources, Baker told Pankin that the United States is counting on the Soviet Union to use its full influence over the Palestine Liberation Organization to get Palestinian acceptance of Israeli conditions for the conference--no PLO officials and no Palestinians from East Jerusalem.

Pankin, in reply, the sources said, asked whether the United States, in view of the current strains in its relationship with Israel, can win suspension of Israel's rapid settlement of the West Bank--an issue that Arab participants in the conference regard as a test of Israeli sincerity.

"The point is that we can't 'deliver the Arabs,' as the Americans put it so quaintly, if the U.S. can't 'deliver' an Israel that is really ready for serious talks," a Soviet official said. "We think the Arabs, including the PLO, are at the point of commitment if they see good faith from Israel. . . . But those settlements, which are really financed with U.S. money, are a big, big obstacle. What is the U.S. going to do about it?"

The Bush Administration, attempting to demonstrate its commitment as a host of the proposed conference, is strongly resisting efforts by Israel and its American supporters to push $10 billion in loan guarantees through Congress to help house new immigrants.

President Bush, risking his own political prestige on the matter, sought a four-month postponement of the issue Thursday and threatened to veto any congressional moves to grant Israel the aid, if it is passed now.

In Israel, the President's action was greeted with anger, dismay and derision, the Associated Press reported Friday.

Prime Minister Yitzhak Shamir, returning from a session in Paris, said at an airport news conference: "We do not understand at all the request for the delay, and we have not heard yet the reasons for this delay." He said Israel remains committed to the regional peace talks but that Bush's delay of the loan guarantees could embolden Arab states and "create unexpected difficulties in the negotiations."

With a trip to Israel next week, Baker refused to be drawn out on the matter. "We are not trying to hide from the issue at all," he told reporters in Moscow. "In the interests of producing a viable peace process . . . I do not think it is productive to conduct these negotiations and discussions publicly."

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