Baker, Levy Try to Ease U.S.-Israel Tensions : Diplomacy: Bush is thanked for calling on U.N. to repeal 1975 Zionism resolution. But substantive differences remain.

Secretary of State James A. Baker III and Israeli Foreign Minister David Levy eased the tension of a festering dispute between the two nations Wednesday but failed to settle any of their substantive differences, officials on both sides said.

“All of those shadows between Israel and the United States have been removed,” Levy said through an Israeli interpreter after a meeting with Baker that ran almost twice as long as scheduled. “This is a better climate that has developed through these talks.”

Levy’s upbeat assessment was tied directly to President Bush’s call for the U.N. General Assembly to repeal the 1975 resolution equating Zionism with racism. He said he had asked Baker to convey to the President Israel’s appreciation of the speech.

However, Baker said the two men mentioned only in passing the primary cause of the dispute: the Bush Administration’s determination to use Israel’s request for $10 billion in U.S. housing loan guarantees as leverage to force Jerusalem to curtail construction of Jewish settlements in the occupied West Bank and Gaza Strip.

Baker said most of the meeting was devoted to his attempt to wrap up final details for a U.S.-brokered Mideast peace conference. Although Baker said some progress was made, he said the Administration is not yet ready to issue invitations to the session.

A senior State Department official said later that the United States believes it “still has a shot” at convening the conference next month.

Although Levy has complained bitterly in recent weeks that the dispute over the loan guarantees threatens to sour the entire U.S.-Israel relationship, the foreign minister is one of the most conciliatory members of Prime Minister Yitzhak Shamir’s Cabinet. He is far more anxious to smooth out the relationship than such hard-line officials as Housing Minister Ariel Sharon.

Also, some U.S. officials consider Levy to be a political lightweight whose opinions are often ignored at home.

Nevertheless, Baker seemed pleased by the improved atmosphere.

A senior aide said Baker “sought to use this meeting as a vehicle to remove some of the air of tension.”

The official said Baker hopes to use his meetings with Levy and Arab diplomats attending the opening of the U.N. General Assembly to complete work on details for a historic conference to be attended by Israel, Syria, Egypt, Lebanon, a joint Jordan-Palestinian delegation and the Saudi-led Gulf Cooperation Council.

Israel and Syria have asked Washington for procedural assurances before making final their tentative agreements to attend.

The U.S. official said Baker promised that there would be no surprises. He said Washington would inform all parties of any assurances offered to any potential participant.

Levy later told Israeli journalists that Baker promised to restate a 1975 declaration by then-President Gerald R. Ford that the Golan Heights “is essential to Israel’s security.”

Israel occupied the heights during the 1967 Arab-Israeli War.