Israelis Confident as Baker Eases Conditions for Aid

Even though Israeli officials stressed that they will continue to develop some settlements in the occupied territories, Secretary of State James A. Baker III laid the groundwork Monday for President Bush to approve U.S. loan guarantees to Israel within a few weeks.

Baker met with Prime Minister Yitzhak Rabin throughout the day Monday. While U.S. officials refused to discuss the talks in depth, they indicated that the discussions focused on detailed economic as well as political issues concerning the loans. And their remarks pointed toward possible approval of the U.S.-backed loan guarantees by Bush when Rabin visits the United States next month.

There was no indication that Baker was imposing the condition that the Bush Administration had placed on the previous, right-wing government of Yitzhak Shamir--a total freeze on settlements in the West Bank and Gaza Strip.

Israeli officials were confident. “I imagine at the end of this year, the beginning of next year, the sums will be at our disposal,” Finance Minister Abraham Shohat predicted.

The risk in the partial U.S. retreat on settlements was that Arab participants in Middle East peace talks might object. But Palestinian leaders who also met with Baker on Monday said they will continue to take part despite the lack of a freeze. They took up Rabin’s invitation for negotiations to proceed unbroken.

“We agree to negotiations in a continuous manner and are prepared to look at serious proposals,” said Hanan Ashrawi, the spokeswoman for the Palestinian peace team, who was among the Palestinians who met with Baker.

A senior aide to Rabin acknowledged to reporters Monday that Rabin’s new Labor Party government intends to continue building what it calls “security” settlements in the Golan Heights, the Jordan River Valley and what the aide vaguely called “Greater Jerusalem and vicinity.”

But the official said the most important fact is that Rabin and his government will give a much lower priority to settlements than did Shamir and will shift resources from settlement-building to economic development in Israel.

That seemed to satisfy Baker. In fact, the word settlement seemed to have disappeared from the secretary of state’s public vocabulary.

“We just had a full discussion . . . about the reordering of national priorities that the new government is undertaking,” Baker told reporters before an afternoon meeting with Rabin. A “reordering of national priorities” was Rabin’s campaign euphemism for scaling back but not freezing settlement construction.

Rabin also avoided the word and thanked Baker for coming over “to assist Israel to be more capable to cope with our own problems.”

Israel has asked for the United States to underwrite $10 billion in loans over the next five years. Aides to Baker insisted they have reached no final agreement to move ahead with the guarantees, which Israel needs to help invigorate its flagging economy, but they suggested that an announcement might come during an upcoming meeting between Bush and Rabin.

The Israeli government insists it is complying with the general spirit of Bush’s apparently expired ban on settlements, which was aimed at keeping the peace talks going.

Nothing will be done to upset the Arab participants in peace talks, Israeli officials asserted. “Check our record. When Labor has been in government recently, there was almost no settlement development,” a Foreign Ministry official said.

He pointed out that the new Rabin government will not approve any new settlements. “We have changed our approach, and we expect the Americans to change theirs,” he concluded.

On Thursday, Rabin’s government announced it would not affirm contracts that were drawn up but left unsigned by the Shamir government.

Rabin has declined to identify exactly which settlements qualify as “security” and therefore might benefit from government development plans. As for settlements around Jerusalem, several have expanded their boundaries in recent years, even though the population has not warranted it. The town limits of Maaleh Adumim, on the eastern outskirts of the city, extend almost all the way to Jericho, 10 miles away.

Still, officials insist that about half of the 16,000 planned housing starts will be scrapped. Many of the rest may also remain incomplete; those lacking just a roof will probably be completed and residents permitted to move in.

Although they did not amount to an outright settlement ban, the actions by the new Rabin government won praise from Baker and his aides.

Palestinian officials were modestly upbeat after their meeting with Baker. “We see indications of positive steps in the right direction,” Ashrawi said. “We acknowledge a new tone in Israel.”