Arabs of Bethlehem Greet Israeli-PLO Accord With Skepticism : West Bank: Residents of city that pilgrims flock to hope for economic improvement. But many resent the fact that troops will guard Jewish shrine.

The day after Israeli and Palestinian leaders announced an agreement to expand Palestinian rule in the West Bank, merchant Mohammed Abed stared at Israeli soldiers positioned around Manger Square and agreed with his friends that it was too soon to celebrate.

“In our hearts we are happy,” Abed said Monday. “In our hands we still have nothing.”

Sunday’s agreement--the second part of the 1993 Israeli-Palestinian peace accord--requires Israeli soldiers to end their 28-year occupation of Arab cities in the West Bank by early next year, when Palestinians will hold elections for their first government. This is a major gain for people who have grown up under the gun since the 1967 Arab-Israeli War.

And yet to residents of this city about six miles from Jerusalem that is traditionally regarded as the place where Jesus was born, the long-awaited accord is clearly half a loaf, unlikely to satisfy their appetite for change.

“If the agreement is implemented and if there is an improvement in the economy, maybe things will start to look better and this will limit tensions for a while,” said Sharif Wazwas, 35, a money-changer. “But this is not the solution.”

“No,” added his colleague Maher Salahad, 24, speaking over the bustle of visitors to Jesus’ birthplace, the sound of normal shopping activity and the Muslim call to prayer. “The solution is a Palestinian state on our internationally recognized borders.”

Their statements, though skeptical, lacked the trembling anger of Palestinians in places like Hebron, where more than 400 Jewish settlers live in the Arabs’ midst. The agreement completed Sunday turns most of Hebron over to the Palestinians while leaving the armed settlers in the heart of town with Israeli soldiers to protect them.

Here there are no settlers downtown, but the agreement still leaves Israelis with a foothold in Bethlehem. They will be guarding the Jewish shrine of Rachel’s Tomb on the edge of town, an arrangement Bethlehem did not expect.

“They are using Rachel’s Tomb to prove they have a right to be in Bethlehem, which provokes people,” said 20-year-old Maysoon Najjar. “We will be happy to have Palestinian police here and things will be calmer, but the reality is Israeli soldiers will be here too.”

Covered modestly in a long dress and white head scarf, Najjar surveyed the street in front of her family’s novelty shop as the smell of deep-frying falafel wafted up the block.

Israeli troops are to leave most of the 450 Arab villages in the West Bank but will retain the right to enter them in pursuit of terrorists. Main roads connecting Arab cities are to be under Palestinian control, but Israeli soldiers may set up temporary checkpoints on them when they feel the need. And the approximately 130 Jewish settlements with about 120,000 Israelis will remain in the West Bank with new Israeli-patrolled bypass roads connecting them to Israel’s pre-1967 territory.

Bethlehem will be the Palestinian-ruled city closest to Jerusalem, whose future is scheduled to be decided during final-status peace negotiations beginning in May. Israelis claim Jerusalem as theirs alone, and Palestinians hope to make the city’s eastern half the capital of an independent state one day.

While Bethlehem brings the Palestinian government a step nearer to Jerusalem, the accord does nothing now to bring Bethlehem’s 40,000 Muslim and Christian Arabs any closer to the Holy City.

Unlike the tourists from around the world who routinely travel between Jerusalem and Bethlehem, most residents here say they have been unable to get permits to set foot in Jerusalem for many years. Israelis reserve the right to keep them out under the new accord, and the Israeli army checkpoint at the border of Bethlehem will remain.

“If we cannot go to Jerusalem, what is there to celebrate?” asked Nasser Daamas, leaning back in a leather chair at the Milano Saloon barbershop.

“Oh, this has to change; it can’t stay like this forever,” answered barber Ahmad Duweb. “[But] this agreement is the best we have gotten so far.”

Duweb is a supporter of Palestine Liberation Organization leader Yasser Arafat, whose picture hangs on the outside of his shop. “He is our president,” Duweb said.

Arafat and Israeli Prime Minister Yitzhak Rabin made the 1993 peace agreement, and the 65-year-old Arafat heads the Palestinian Authority that has run the Gaza Strip and West Bank town of Jericho for the last year and will now govern the rest of the 1.2 million West Bank Palestinians.

Not all of those residents are eager for Arafat’s arrival or optimistic about the kind of government he will form.

“The coming hours and days and years will prove what this peace will bring,” said Sheik Talal Seder, an Islamic leader. “The people will receive the Palestinian Authority with emotion, because they are our brothers and part of us. But how we live with them will depend on the way they interact. The occupation has dealt us the hardest form of authority. This can’t be more difficult.”

The transition will be easier, Bethlehem residents say, if there is an infusion of investment and opportunities for economic development. They are skeptical on this front too, charging that Israelis tightly control their main source of income--tourism to the Manger Church.

Shopkeepers say that Israeli tour companies control most of the buses streaming into town. They charge that the Israeli guides give tourists only half an hour to shop in Bethlehem before swooping them out of town.

“The bottom line, what’s important to people here, is to make a living, and the Israelis will still be in control of the economy,” complained grocer Elias Hazboun, 35, whose shop is across the plaza from the church.

Only his travel agent neighbor sounded more optimistic. Khalil Salahat, 38, an agent of Turkish Airlines, sees the West Bank developing into a kind of Palestinian Gulf state with a substitute for petroleum that the Israelis cannot hope to control.

“For the 2,000th birthday of Jesus Christ,” Salahat said with a smile, “we’re expecting 10 million to 15 million people.”