Historic Mideast Talks Begin : Diplomacy: President Bush appeals to Israelis and Arabs to put aside the past in the quest for peace. He promises economic aid in the process.

President Bush, opening the long-awaited Middle East peace conference Wednesday, called on Israelis and Arabs to put aside “a history that weighs heavily against hope” to permit the people of the region to live normal lives for the first time in generations.

If the hostile parties can bring their decades of terrorism and intermittent war to an end, Bush promised that the United States, in conjunction with Western Europe and Japan, will provide economic assistance to assure “that peace and prosperity go hand in hand.”

The President’s remarks received a cool reception in the ornate Hall of Columns of the Spanish Royal Palace, where Arabs, some clad in flowing robes, and Israelis, some observant Jews in their skullcaps, were seated at a T-shaped table.

Perhaps the most memorable thing about this initial day of a three-day conference--conducted in a room that intentionally had been stripped of national flags--was that top officials of Israel, Syria, Lebanon, Jordan and the Palestinians sat around the same table for the first time in modern history and listened to the same speeches without walking out or issuing threats.

Hours after the formal session ended, Secretary of State James A. Baker III, the chief architect of the conference, proclaimed that “from this day forward, dialogue and negotiation, not violence and confrontation, should be the hallmark of the Middle East.”

Although conceding that nothing much of substance was accomplished, Baker said: “We have to crawl before we walk, and we have to walk before we run. Today, I think, we all began to crawl.”

Baker conceded that Israel and the Arabs are still squabbling about the site of the all-important face-to-face talks that the U.S. sponsors want to begin Sunday after these initial rounds of discussions.

Israel, however, is demanding that the meetings be shifted to the Middle East, with Arab leaders visiting Jerusalem and Israeli officials traveling to Arab capitals in a move that would imply its neighbors’ recognition of Israel as a nation. The Arab parties, especially Syria, want the talks in Madrid to avoid such an outcome.

Sources in both camps said late Wednesday that the most likely compromise would inaugurate the talks in the Spanish capital, then move them elsewhere for a second round.

With the United States established as the world’s predominant superpower, attention at the opening session concentrated on Bush’s speech. But Soviet President Mikhail S. Gorbachev also made brief remarks in which he expressed his hopes for a Mideast settlement but focused more on the problems of his nation.

Bush, meantime, sought to delicately balance Israeli and Arab buzzwords in nearly equal measure. He took care to say a little bit that he knew would please each side.

For the Israelis, the President endorsed face-to-face negotiations, a formal peace treaty with normal diplomatic relations and the need for continued security.

For the Arabs, he called for a settlement that would give Palestinians greater control over their own destiny, urged Israel to agree to “territorial compromise” and said Arab powers could be trusted to keep their commitments.

Israeli and Palestinian leaders, at least when talking in public, chose to emphasize the parts of Bush’s speech that were tailored to support their own hopes and aspirations while ignoring much of the rest.

Hanan Ashrawi, a spokeswoman for the Palestinian delegation, hailed Bush’s assertion that peace should “give the Palestinian people meaningful control over their own lives and fate.”

“This is a step toward self-determination,” she said.

Benjamin Netanyahu, Israel’s deputy foreign minister, praised Bush’s endorsement of direct negotiations, his call for a formal peace treaty and his assertion that Israel’s security must be assured. Netanyahu, former Israeli ambassador to the United Nations, recalled that he previously attended meetings with some of the Arab officials at the table in Madrid.

“It would be good to get away from these ceremonial meetings and get to direct negotiations,” he said.

In private, some Israelis complained that the United States, for years Israel’s closest ally, is acting too much like an impartial referee.

The first day’s schedule was supposed to avoid the heated controversy expected today, when the key combatants--Israel, Jordan, Lebanon, Syria and the Palestinians--make their opening statements.

Wednesday’s list of speakers represented the United States, the Soviet Union, the 12-nation European Community and Egypt. Those 15 nations all maintain diplomatic relations with both Israel and its Arab neighbors.

But Dutch Foreign Affairs Minister Hans van den Broek, speaking for the EC, and Egyptian Foreign Minister Amir Moussa expressed sympathy for the Palestinian cause and demanded a halt to the construction of Jewish settlements in territory, including East Jerusalem, that Israel occupied during the 1967 Arab-Israeli War. Israel annexed East Jerusalem; it continues to occupy the West Bank and Gaza Strip.

Nevertheless, Van den Broek added the EC’s substantial economic weight to Bush’s promise that the international community will supply the resources needed to address the region’s economic ills once peace has been assured.

In 1979, when Israel and Egypt signed their peace treaty, the United States underwrote it with billions of dollars to relocate Israeli military facilities from the Sinai Peninsula and with continuing economic and military aid of about $3 billion a year for Israel and $2 billion for Egypt. U.S. officials say Washington lacks the money to be that generous this time.

Moussa, although he represents the only Arab state to make peace with Israel, was the most blunt of the opening day’s speakers. “The legal status of the Palestinian people should not be challenged,” he said. “They are not just inhabitants or residents of conquered territories. They are people with history, culture (and) distinct national identity.

“The Arab-Israeli dispute is in essence an Israeli-Palestinian conflict,” he added. “Any breakthrough or progress depends on the settlement of the question of Palestine. . . . It also requires termination of the Israeli occupation of the Syrian territories occupied in 1967.” Israel took part of Syria’s Golan Heights in that war and annexed the area in 1981.

The other speeches were studded with the arcane code words of Middle East diplomacy. For the casual television viewer, the result may have been baffling:

* Bush, for instance, said: “Our objective . . . is not simply to end the state of war in the Middle East and replace it with a state of nonbelligerency. This is not enough; this will not last. Rather, we seek peace, real peace. And by real peace, I mean treaties. Security. Diplomatic relations. Economic relations. Trade. Investment. Cultural exchange. Even tourism.”

Such an outcome would meet Israel’s fondest hope. The Israelis have been complaining for months that some Arab states, especially Syria, are unwilling to establish friendly relations, even though they are ready to talk about ending the technical state of war in exchange for regaining lost land.

* The President also said, “We believe territorial compromise is essential for peace.” That is less direct than the code phrase “territory for peace,” which Bush avoided.

But the Arab parties interpreted Bush’s remarks as meaning that Israel would have to relinquish its hold on the occupied territories in order to achieve peace. They liked that.

* The President insisted: “The Egyptian-Israeli peace treaty is striking proof that former adversaries can make and sustain peace. And moreover, parties in the Middle East have respected agreements, not only in the Sinai but on the Golan Heights as well.”

That comment was intended to support Syria’s demand for the return of the part of the Golan Heights that Israel occupied.

Israelis argue that the mountainous region has so much military significance that Israel cannot ever give it up, even in exchange for peace agreements that, some Israelis imply, the Syrians might not keep.

In a conclusion that all parties could embrace, Bush said: “We have seen too many generations of children whose haunted eyes show only fear . . . too much hatred and too little love. And if we cannot summon the courage to lay down the past for ourselves, let us resolve to do it for the children.”

Today’s Events

Speakers on the second day of the conference. 10 a.m. Israel, Prime Minister Yitzhak Shamir. 11:15 a.m. Jordan, Foreign Minister Kamel abu Jaber. 2:45 p.m. Haidar Abdel-Shafi, head of the Palestinian side of the Palestinian-Jordanian delegation. 4 p.m. Lebanon, Foreign Minister Faris Bouez. 5:15 p.m. Syria, Foreign Minister Farouk Shareh. 6 p.m. End of session.