Rabin Moves to Curb Building of Settlements : Israel: Construction contracts drafted but unsigned will be frozen for a week. Militants threaten violence.

The new government of Prime Minister Yitzhak Rabin took its first cautious step toward curbing expansion of settlements in the West Bank and Gaza Strip by announcing Thursday that contracts drawn up but not yet signed by the former right-wing government would not be honored, at least for the moment.

The gesture came just three days before U.S. Secretary of State James A. Baker III, a devout opponent of the settlement program, is due to visit and discuss Middle East peace talks as well as new aid for Israel.

The announcement by Rabin’s Housing Minister Benjamin Ben-Eliezer upset militant settlers who oppose Rabin’s plan to offer self-rule to Palestinians in parts of the occupied land. Some of the settlers have threatened violence should Rabin’s proposals take effect.

“All I’ve asked up to now, and I don’t intend to apologize for this,” Ben-Eliezer said, “is to stop those projects at those sites where contracts have not been signed.”

The moratorium is meant to last a week while the entire program is reviewed, Israeli officials said.

Asked on Israel army radio about settler threats of “war,” Ben-Eliezer replied: “I am certainly not their enemy, and they are not mine. But if this war is declared, then I am good at it, too.

“Whoever thinks we intend to settle another 100,000 Jews in these areas doesn’t understand what we are talking about,” he concluded defiantly.

Ben-Eliezer has not decided what to do about housing and infrastructure already being built.

The government is floating ideas that include a freeze on the introduction of new mobile homes into the disputed land and a freeze on construction of houses already under way, with reimbursement for the contractors.

Settlers estimate that 10,000 houses are in construction. More than 100,000 Israelis have settled in the West Bank and Gaza since Israel captured the territory in the 1967 Middle East War.

“If this freeze lasts more than a week and applies solely to the territories, then obviously we have trouble,” settlement spokesman Bob Lang said. He said settler groups are consulting lawyers to check the legality of the government’s move.

Rabin’s government has been grappling with the question of how to make good on his pledge to freeze new settlements in areas largely populated with Palestinians.

Rabin intends to keep developing settlements in the Jordan River Valley area and near Jerusalem. He has defined other communities as “political settlements” that he will stop subsidizing. It has yet to be made clear which of the 140 settlements fall into the political category.

The government is examining proposals for an agreement with Washington that would shake loose guarantees for loans Israel wants for economic development. The Bush Administration has refused to underwrite the loans to press home its opposition to the settlement program.

The Rabin government is reluctant to appear to cave in to the Americans and would prefer to construct a kind of fig leaf for a settlement freeze.

Officials have suggested that Rabin would sign the same kind of agreement that the previous government did: It would obtain $400 million in loan guarantees in exchange for a pledge not to spend the money in the occupied territories and a promise to inform Washington about construction.

The ousted government of former Prime Minister Yitzhak Shamir failed to comply with the reporting side of the agreement while spending hundreds of millions of dollars on construction.

Separately, Rabin would affirm his campaign pledge to divert spending from the West Bank and Gaza into Israel. This would represent a de facto curb on the most aggressive parts of the Shamir settlement program.

The elaborate web of promises would require President Bush to accept, instead of a total freeze, continued government support for building near Jerusalem and other areas that Rabin designates as necessary for defense.

The Bush Administration reacted coolly to the announcement Thursday, saying it wants to wait until Baker visits Israel on Sunday to hear exactly what the Rabin government is planning.

“The secretary will be seeing Prime Minister Rabin in about three days, and we really won’t have any comment on some of these things until then,” State Department spokesman Richard Boucher said. “Let the prime minister lay out the program for the secretary, and let them have their discussions before we comment on some of these plans.”

Mideast experts have said they believe that Baker hopes to work out the details of a settlement freeze during his two-day visit.

They speculate that if things go smoothly and he can nail down a lasting freeze on Israeli settlements, then in early August, when Rabin visits Bush in Maine, the President may drop his opposition to the $10 billion in U.S. loan guarantees that Israel has been seeking.

Those guarantees would amount to a major economic boost for Rabin and for Israel. At the same time, the freeing up of the loan guarantees would help Bush to improve his standing with American Jewish groups, which have been disturbed by the Administration’s tough stance toward Israel.

U.S. officials also say vaguely that during his upcoming trip to the Mideast, the secretary of state may urge both Israeli and Arab leaders to agree to new “confidence-building measures.”

They decline to say what these would be, but Israel could be asked to commit itself to some tangible step toward autonomy for Palestinians in the West Bank and Gaza. And Arab governments may be asked to end their boycott of companies doing business with Israel.

The settlement issue is not the only question simmering in advance of Baker’s visit. Another expected topic of discussion is the next stages of Middle East peace talks. The issue is complicated by a standoff between soldiers and students at a West Bank university where the Israelis say a group of armed gunmen is hiding out. The students refuse to leave the campus and submit to searches by soldiers surrounding the campus.

Times staff writer Jim Mann in Washington contributed to this report.

ARAB DILEMMA: Israel’s actions spark both skepticism, conciliation. A17