Rabin Moves to Rebuild Israeli Relations With U.S. : Mideast: But the prime minister-elect will not halt programs on the Golan Heights and in East Jerusalem.

By DANIEL WILLIAMS

June 25, 1992 12 AM PT

TIMES STAFF WRITER

JERUSALEM —

Yitzhak Rabin, the once and future prime minister of Israel, Wednesday outlined plans for building a new government and rebuilding relations with Washington, indicating that he will stop spending on West Bank and Gaza Strip settlements but continue programs on the Golan Heights and in parts of Jerusalem captured in 1967.

Labor Party officials said that Rabin will try to nail together a ruling coalition within three weeks. The latest results in Tuesday’s election showed Rabin and Labor at the head of a parliamentary bloc big enough to exclude right-wing parties, particularly the tattered Likud Party of exiting Prime Minister Yitzhak Shamir.

With only soldiers’ votes yet to be counted, it appeared certain that Labor’s phalanx--including Arab lawmakers who, although not part of the government, will be expected to vote with Labor--will include at least 61 seats out of the 120 at stake, observers predicted. Labor itself won 47 seats.

Rabin kept his coalition options open and said any party could join his government provided it accepted Labor’s priorities. Those include offering self-rule to the Palestinians, shifting funds from the expansion of settlements to developing Israel’s economy, reforming the electoral system and improving relations with the United States.

President Bush will not be happy with Rabin’s stand on settling Jews in Arab districts of Jerusalem. In the past, Bush has tried to condition support for loans to Israel on a halt to settlement construction not only in the West Bank and Gaza, but also in Arab East Jerusalem.

Israel considers all of Jerusalem its capital, but according to longstanding American policy, the status of the disputed city must be decided through negotiations.

Rabin also rejects surrender of the Golan Heights, won from Syria during the 1967 Middle East War. Israel first began putting up settlements on the strategic highlands under a Labor government, and Rabin believes that peace with Syria is a long way off.

In any case, Rabin appears eager to make headway on the Palestinian issue in Middle East peace talks. He committed himself Wednesday to self-rule for the Palestinians as outlined under the 1978 Camp David peace treaty with Egypt. “I don’t want to change operational concepts but to underline Israel’s continued international commitment according to Camp David to give self-government to the Palestinians,” he told reporters at a press conference.

His first chore, however, is to form a ruling majority. President Chaim Herzog, the country’s ceremonial leader, will begin a series of ritual consultations next week with the 10 parties elected to the Knesset. He will then decide which party is most likely to form a ruling bloc. No one doubts that he will pick Labor.

Rabin will try to create a stable partnership with the leftist Meretz party, which holds 12 seats, and with one or two religious parties that are expected to abandon their alliance with Likud.

In the wake of what is widely referred to as an upheaval in Israeli politics, observers expected at least a change in the tempo of government activities. “These elections make it clear that the Israeli public doesn’t want a government whose main talent is to do nothing,” wrote columnist Nahum Barnea in Yediot Aharonot, the country’s largest-circulation newspaper.

The Tel Aviv stock exchange soared Wednesday as Rabin’s victory was firmly established.

Right-wing commentators expressed hope that Rabin would invite at least one conservative party into the government for “balance,” although all the parties available oppose any freeze on the construction of settlements in the West Bank and Gaza Strip.

The mentionable candidate among the rightist parties is Tsomet, headed by Rafael Eitan, the chief of staff during Israel’s 1982 invasion of Lebanon. The retired general campaigned on a clean government platform, an issue that boosted his party’s parliamentary seats from two to seven. However, Eitan also opposes a freeze on building settlements of any kind, and it is not clear that he would abandon his position.

Labor last held power in 1977, when Rabin resigned as prime minister, and, a few months later, Likud ousted Labor from power. Because Labor has been unable to rule on its own terms for 15 years--it has either governed in tandem with Likud as part of a rotating government or held junior membership in a coalition--political factors may also preclude adding a large number of partners.

“Labor people are very hungry to get as many positions (in the Cabinet) as possible. The broader the government, the fewer posts for itself,” said Yosef Goell, a columnist for the pro-Likud Jerusalem Post.

Shimon Peres, whom Rabin ousted as Labor’s leader in a primary last January, met with supporters Wednesday and made plans to press for either the Defense or Foreign Ministry. Beilin, who like Peres is considered a dove, is also expected to lobby for a key ministry.

Meretz officials demanded that they be tapped first to join the coalition so that the partnership can deal with religious parties “from a position of strength.”

The two Arab-based parties whose five seats gave Rabin a so-called blocking majority--less than enough to govern outright but enough to ensure victory in any vote of confidence--are not going to be offered Cabinet seats, since both support Palestinian independence and their inclusion in the government would inflame political passions. They can be expected, however, to support Rabin in no-confidence votes.