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                                                                                WORLD, Page 26

MIDDLE EAST

Seething over Settlements


While Palestinians and Jews shoot it out in the occupied
territories, U.S. and Israeli politicians slug it out on the
problem of loan guarantees

By JILL SMOLOWE -- Reported by Lisa Beyer/Jerusalem and J.F.O.
McAllister/Washington


    When violence erupts in the occupied territories, asking
who started it rarely serves a useful purpose. More pertinent
is what new hatreds have been etched in blood, and will kindle
new violence.

    Take the Palestinian attack two weeks ago on a bus bound
from Jerusalem to the West Bank Jewish settlement of Shiloh.
Dov Weiner, 11, was returning home from therapy for a gunshot
wound in his shoulder sustained during an October bus attack.
In the gunfire on Jan. 14, the boy was hit again, this time in
the leg. Later that night, Jewish men drove to the home of Riad
Malki, a Palestinian hard-liner, pelted the house with stones,
broke several windows and spray-painted Stars of David on all
the entrances. Although Malki's house is under Israeli
surveillance, the army did not intervene. Neither did the
Israeli police, who waited until morning to answer Malki's call
for help.

    The spiraling violence between Jewish settlers and
Palestinians in the West Bank reflects how much the question of
Israeli settlements in the occupied territories goes beyond
political abstraction: it is an issue that cuts to the very
dignity and survival of both Arabs and Jews. For them, the
looming battle between Jerusalem and Washington over $10 billion
in U.S. loan guarantees to Israel to help settle Soviet Jewish
immigrants is a symbol not only of where the Bush
Administration's sympathies lie but also of what the occupied
territories' future is likely to be.

    If the diplomatic tussle lives up to pre-bout rhetoric,
either the U.S.-Israeli friendship or the Middle East peace
process could suffer a knockdown. Last September the Bush
Administration hinted strongly that the loan guarantees might
be linked to limits on settlement construction. President Bush
has not budged since. Last week Israeli Prime Minister Yitzhak
Shamir answered by pledging to keep building, declaring that "no
power in the world can prevent us from carrying on." In
response, the Palestinian delegation to the U.S.-sponsored peace
talks threatened to boycott the negotiations if the guarantees
were granted unconditionally.

    Small wonder that some U.S. analysts see a bruising battle
ahead. But both Bush and Shamir are running for re-election this
year, and neither relishes the prospect of a fight with an ally
who can sway domestic voters from afar. Members of Congress,
who must approve the guarantees, know they will suffer
electoral consequences if the decision pits their loyalty to
Israel against their commitment to the peace process. So in
Washington, if not in the Middle East, compromise appears to be
at hand.

    There may have been a step in that direction in a meeting
last Friday between Secretary of State James Baker and Zalman
Shoval, Israel's ambassador to the U.S. Baker reportedly
proposed to condition the loan guarantees on Israel's agreement
not to begin any new construction in the territories. Officials
in Washington refused to confirm the reports, insisting that the
Baker-Shoval meeting was just the first of a series and that no
deal was likely for at least another month.

    But such an offer might be one that Shamir could live
with. It would still permit Israel to complete the significant
amount of housing it has under construction. At least 12,000
units of housing are estimated to be in the building stage in
the territories, enough to shelter 60,000 new settlers. "It's
not exactly what we wanted," says an Israeli official, "but
it's not as bad as it looked in September."

    Shamir can ill afford to do without the loan guarantees.
About 400,000 Soviet Jewish immigrants have arrived since 1989,
and an additional million are expected in the next five years,
swelling the population by more than 20% and costing the
government an estimated $26.5 billion. Israel's Finance Ministry
predicts that U.S. failure to deliver on the guarantees would
drive up unemployment from 11% to 16.2%. Ideologue though Shamir
may be, he is a pragmatist who knows when he must deal. Says
his spokesman Ehud Gol: "We are asking, after all, and they are
giving."

    But because Baker's reported proposal would fail to cap
Israeli growth in the territories, it is being met with a
grimace from the Palestinians. Their leadership knows that the
current peace talks are the only means by which Palestinians may
achieve a measure of self-rule. But any perception that the U.S.
will subsidize Israel's settlement plans could lead the
Palestinians to drag their feet in the peace process and subject
those who favor the talks to criticism from rejectionist Arabs.

    Even before the Baker-Shoval meeting last week, the
Palestinians had threatened to withdraw from the talks. But
Hanan Mikhail-Ashrawi, spokeswoman for the Palestinian peace
negotiators, made it clear that if the guarantees were
conditioned to "eliminate entirely any possibility of these
funds being subsidies to occupation and settlements," the
Palestinians would continue to negotiate. They are unlikely to
be satisfied by the proposal that Baker reportedly made. "It is
permission to put 10,000 obstacles on the road to peace," says
Saeb Erakat, a member of the Palestinian negotiating team.

    There is also the larger question of what is to become of
the more than 170 Jewish settlements already in place in the
West Bank and Gaza Strip. Quite a few of those have been
erected or expanded since the Bush Administration launched its
peace initiative last March. According to Peace Now, Israel's
leading movement for reconciliation with the Arabs, the Shamir
government pumped $1.1 billion into settlement expansion in
1991, adding 13,650 new housing units. Two opposition members
of the Knesset recently presented documents showing that over
the past 18 months, the Housing Ministry, intent on sealing
Israel's claim to the territories forever, added more than
18,000 new homes in the West Bank alone, at a cost of $1.5
billion.

    While politicians search their souls about the loan
guarantees, Palestinian and Israeli hard-liners, ever eager to
sabotage the peace process, press their opposing claims to the
territories. Palestinians, who regard the sudden flowering of
new settlements as a direct provocation, are meeting it with
increased calls to armed action. Attacks on Israeli targets
using firearms or explosives have risen from 179 in 1988, the
first full year of the intifadeh, to 447 in 1991.

    Militant Israelis have also adopted provocative tactics.
In October settlers moved overnight into Silwan, a strictly
Arab neighborhood in East Jerusalem, and occupied several
houses. Accounts vary as to how many Arabs they evicted. The
settlers' activities were temporarily restrained by an Israeli
court, but in December they returned with the government's
sanction. One Arab family now unhappily shares its home with
settlers.

    All over the West Bank, well-armed Jewish settlers are
becoming a law unto themselves, stalking the countryside with
guns, shooting up Arab homes and smashing cars. President Chaim
Herzog has warned that vigilante attacks "could create a most
dangerous situation in the future." Last week the army announced
that it would increase its estimated 4,000-troop force in the
territories by 20% to combat Palestinian violence. Yet the
Israeli army continues largely to turn a blind eye to the
settlers' miscreant activities.

    In the past, such cycles of violence would have provoked
frustration, even despair, among would-be American peace
brokers. But Bush has staked a large measure of his political
prestige on the continued progress of Middle East peace. To keep
the parties talking, he must find a way around the contentious
issue of the loan guarantees -- and ultimately, the settlements
themselves.