On Eve of Baker's Visit, Israelis Give Ground Again on Settlements

AS US Secretary of State James Baker III arrives here, there are high hopes that a new constellation of personalities, events, and attitudes in Israel augurs well for the Middle East peace process.

"Expectations of this visit are very high," says one Israeli official. "I think that now we can get the peace talks moving again."

In the week since Yitzhak Rabin took office as Israel's new prime minister, promising to move fast to grant autonomy to Palestinians in the occupied territories, a number of changes that could herald progress in the stalled negotiations have transformed the atmosphere here:

* The Israeli Cabinet yesterday morning ordered a review of all decisions made by previous governments on building Jewish settlements in the territories, broadening Housing Minister Binyamin Ben-Eliezer's earlier announcement that no new building contracts would be signed. These moves constitute a first step toward the freeze on Jewish settlements that the United States has demanded.

* Egyptian officials announced that Mr. Rabin will visit Cairo tomorrow for talks with President Hosni Mubarak, the first Israeli premier to be given such an invitation since 1986.

* A four-day Israeli Army siege of An-Najah University in the West Bank town of Nablus ended peacefully Friday, in a demonstration of Palestinian and Israeli readiness to solve delicate problems informally.

Underpinning Israeli officials' optimism about Mr. Baker's visit is their confidence that the new government in Jerusalem can count on more US understanding than former premier Yitzhak Shamir enjoyed. "I very much hope that a different atmosphere will be created between us and the US which will help in making peace," Rabin said Saturday night.

But friendlier relations with Washington do not mean an end to potentially serious differences, analysts here point out. "Rabin will have the gift, I hope, to relate to US interests, to find the spaces where our interests and the Americans' meet, but that does not mean there won't be confrontation," says Mordechai Gazit, a former director general of the Israeli Foreign Ministry.

Nowhere is that clearer than on the top item of Mr. Baker's agenda here - the nature of the settlement freeze that Washington has demanded in return for $10 billion in loan guarantees to help Israel absorb immigrants from the former Soviet Union. Rabin's challenge is to persuade the Americans to accept his distinction between "political" settlements, which he has pledged not to build or greatly expand, and "security" settlements, which he says Israel must be free to develop to ensure its military safety.

Rabin has not clarified how many of the 132 Jewish settlements in the West Bank he sees in each category, and Washington has not yet commented on the distinction. Palestinian spokesmen insist that all settlements are illegal and must be frozen.

Officials here hope that in the new atmosphere of trust they expect with Washington, Baker will be flexible. "The reason the government moved so fast [to freeze new contracts] was to show that we are doing the review on our own account, and we do not want to hear any more about it" from Washington, the Israeli official says.

But the government has not yet decided what to do about the 14,000 houses in the occupied territories currently under construction.

"The US offer to countenance finishing houses under construction," made during negotiations last autumn, "was coupled with a total freeze when they are finished," points out one Western diplomat. "And Rabin is talking about something less than a total freeze."

Meanwhile, Israeli spokesmen are putting almost as much emphasis on Rabin's visit to Cairo as they are on Baker's arrival here. "The symbolism of Rabin making his first foreign trip to an Arab country, rather than to the US, is much better," says one official. Rabin is due to meet President Bush next month.

With Israel and the US both aiming at a Palestinian autonomy arrangement as laid down in the Camp David accords that Israel and Egypt signed in 1979, Rabin's first foreign trip also signals a new role for Cairo in the peace process that Mr. Shamir had been unwilling to grant. The trip might also provide an opportunity for a summit between Mr. Mubarak, Rabin, and Baker, who is due in Cairo Wednesday after visiting Jordan and Syria.

Israel's readiness to include Egypt in the peace talks is matched by the promising results of the contact between the Rabin government and the Palestinians during last week's crisis at An-Najah University. Some 2,000 Palestinian students refused to leave the campus for four days, after the Israeli Army surrounded it in a bid to arrest wanted gunmen the Israelis said were inside. The siege ended Friday night after Palestinian negotiators arranged for six of the wanted men to surrender and be deported for three years, rather than face trial.

"I think that this kind of solution might even symbolize the very specific and unique moment in which we live," said Mordechai Gur, who is expected to be named deputy defense minister. "It is a good sign that even a confrontation like this one, involving armed people or people believed to be armed, can be solved in a diplomatic way."