Bush ends US feud with Israel

THE YEAR-LONG dispute between Israel and the United States ended yesterday when President George Bush, after talks with the Israeli Prime Minister, Yitzhak Rabin, announced that the US will provide up to dollars 10bn in loan guarantees to pay for the settlement of Jews from the former Soviet Union in Israel. President Bush had refused previously to provide the guarantees because of the construction of Israeli settlements in the occupied territories.

Mr Bush, speaking at his home in Kennebunkport, Maine, also said the Arab-Israeli talks which resume in Washington on 24 August would break through into a new phase. The next stage of the talks is to agree interim autonomy for the Palestinians and to hold elections for a Palestinian administration of the West Bank and Gaza.

He went out of his way to underline that the period of friction between Israel and the US was over, praising Mr Rabin's 'very different approach' to Israeli settlements. The Israeli leader has said he is committed to settlements which have a strategic rather than an ideological justification. He is, however, continuing to build 10,000 settlement units on which work had already begun.

The very presence of Mr Rabin at Kennebunkport was a sign of the success of US policy towards Israel. Last year President Bush and the US Secretary of State, James Baker, were able to persuade the then prime minister, Yitzhak Shamir, to go to Madrid for negotiations with Syrian, Lebanese and Jordanian-Palestinian delegations. But Mr Shamir speeded up settlement building and the negotiations stalled.

Since then Washington has been waiting on the results of the Israeli elections, hoping for Mr Shamir's defeat. In June it got its wish. One Israeli commentator said: 'When Israelis thought they could have both American money and settlements as under Reagan the settlements were not unpopular. When they had to chose between the two they voted against settlements.'

In this sense the main issue dividing the two countries had been resolved before Kennebunkport. It is unclear, however, at what pace emigration of Jews from the former Soviet Union will resume. Some Israelis think that the fear of pogroms has dropped compared to a year ago while the economic problems in both Israel and Russia makes it difficult to chose between the two.

The negotiations are also likely to proceed quickly because Mr Rabin was committed in the election to giving priority to the Palestinian issue and is now convinced that only a political solution is feasible.

Mr Rabin evidently does not consider it wise to delay negotiations until after the presidential election in which a Democrat and probably more sympathetic administration might come to power in Washington. He has always preferred dealing with administrations than looking to support from Congress or the American Jewish community. Delay would also deeply offend Republican leaders who hope President Bush's waning electoral chances will be boosted by significant progress in the peace talks.

The Palestinians are likely to be co- operative. They, in common with other Arab countries involved in negotiations, believe that Mr Bush and Mr Baker are the most sympathetic American leaders they are likely to see. Saudi Arabia, although not directly involved in the talks, is deeply interested in seeing President Bush re-elected and can threaten or offer financial incentives to the Syrians and others.

Palestinian leaders feel they must take what they can get. 'It would be difficult for the Palestiniansa to give an OK to an agreement without an OK from the Syrians, but they will probably give it,' said a Palestinian analyst. 'We are more or less resigned to the idea of administrative, rather than legislative, autonomy. The real question is the presence or absence of Israeli troops in Palestinian towns and villages.'

The key issue, as at Madrid, remains settlements. But, with the election of Mr Rabin, settling the West Bank is no longer an Israeli national priority. Few of the settlements had any economic support. In the hills of the West Bank they would have been dormitory suburbs for settlers working in Tel Aviv and elsewhere, but it is these Mr Rabin says have no strategic justification. The so-called strategic settlements, in the Jordan valley and the Golan, are less attractive to settlers, because they are too far from areas of employment.

The settlements will also be difficult to populate without government financial and security support. But the system of subsidies which gives priority to the settlers is now likely to change. Equally settlers require military protection at all times, so a reduction in Israeli government support would make them decreasingly attractive.

The Arabs are understandably suspicious of arguments that the settlements now under construction will whither by themselves. During his last tour of the Middle East, Mr Baker failed to persuade Arab countries to drop their boycott of companies trading with Israel until there was a final freeze on settlements. The Syrians also do not want to be marginalised at the talks. They rejected an offer from Mr Rabin for a disengagement of some military forces on the Golan, until Israel recognised Syrian sovereignty over the Golan, captured in the 1967 war.