Palestinian deal 'is Bush's poll surprise'

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AN Israeli-Palestinian agreement just before the US presidential election is the October surprise planned by the White House to save George Bush from defeat. Diplomats expect the Arab-Israeli talks, which resume in Washington in late August, to produce agreement in principle on Palestinian elections and autonomy by mid-October.

'Bush will be able to produce a real success by resolving the Palestinian issue, which is at the heart of instability in the Middle East, just before the elections,' a senior Arab diplomat said. The President would be able both to claim a historic success for his foreign policy, and to dominate news coverage in the weeks before the polls.

The final steps towards an Arab-Israeli agreement start when the newly-elected Israeli Prime Minister, Yitzhak Rabin, visits President Bush at his holiday home at Kennebunkport in Maine on 10 and 11 August. The meeting is expected to resolve the prolonged dispute between Israel and the US over provision of dollars 10bn in loan guarantees for the settlement of Jewish immigrants from the former Soviet Union. Mr Bush had refused to let Israel have the guarantees because of the settlements that the Israelis were constructing on the West Bank and Gaza Strip.

A successful meeting with Mr Rabin should have immediate electoral benefits for Mr Bush, by diminishing American Jewish support for Bill Clinton and Al Gore, the Democratic candidates, both of whom had effectively supported the hard line of the former Israeli prime minister, Yitzhak Shamir, on the settlements.

Israel, its Arab neighbours and the Palestinians resume negotiations immediately after the Republican convention. The venue for the meeting was switched from Rome to Washington during last month's tour of the Middle East by the US Secretary of State, James Baker. Diplomats expect the US to exert intense pressure in pursuit of a succesful outcome to the talks between Israel and the three Arab delegations - Palestinian-Jordanian, Syrian and Lebanese - which are due to start on 24 August.

Serious problems remain, the most important being Israel's persistence in completing settlements already under construction. During his visit to the Middle East, Mr Baker asked Arab governments formally to abandon the boycott of Israel, but they refused while any settlement activity continued. Mr Rabin, however, says he wants settlements for security, not ideological reasons, which makes him more flexible than his predecessor.

The Palestinians are eager to get an agreement while Mr Bush and Mr Baker are in power, rather than risk a less sympathetic Democratic administration. They would, therefore, be likely to accept an interim administrative council - rather than the legislative body they had originally sought - to be elected by the 1.7 million Palestinians of the West Bank and Gaza.