Latest snag in Middle East peace effort: E. Jerusalem?

East Jerusalem is likely to be a major issue facing US, Israeli, and Egyptian negotiators when they try to get the stalled Palestinian autonomy talks moving again here next month.

Israeli Prime Minister Menahem Begin's reported intention to move major government offices to annexed East Jerusalem, which the united States treats for diplomatic purposes as occupied Arab territory, could reheat the Jerusalem issue even before President Carter's envoy to the Middle East, Sol Linowitz, meets his Egyptian and Israeli counterparts here July 1-2.

Acting on instructions of an Islamic foreign ministers' conference in Pakistan last month, the UN Security Council met in New York June 24 to seek a new resolution, presented by Pakistan and supported by Jordan and other Muslim and Arab states, condemning Israeli actions to integrate East Jerusalem and calling upon Israel to rescind them. The United States was expected to abstain, rather than veto the move.

Since 1967, the US, like most other governments, has refused to move its embassy from Tel Aviv to Jerusalem. It maintains a consulate-general in the Jewish western portion of the holy city and a symbolic consular office in East Jerusalem, indicating that, for diplomatic purposes, East Jerusalem, populated by Arabs, is Israeli-occupied territory, not recognized as an integral part of Israel.

During a recent visit to the US, Saudi Arabian Electricity Minister Ghazi al-Ghosaibi, referred to statements by Republican presidential aspirant Ronald Reagan that Alaska had more oil than Saudi Arabia and that the US Embassy should be moved to Jerusalem. He said: "Not all the oil in Alaska would be enough to get the Israeli capital moved to Jerusalem."

President Sadat of Egypt reacted to the reports that Mr. Begin would move his office and other administrative services to the East Jerusalem by calling such a move "a new obstacle to the autonomy talks," although he said June 24 that he was "optimistic" about the talks.

The question of whether Arab residents of East Jerusalem should vote in elections for a self-governing Palestinian Arab council has been a sticking point in the talks. The US, insiders say, has leaned toward the Egyptian position that those residents should have the right to so vote. Israel rejects this, insisting they are Israeli citizens.

US Defense Secretary Harold Brown is flying to Geneva for a review June 26 with the Saudi defense minister of the strategic situation in the Middle East, including controversial Saudi requests for advanced weaponry for the US F-15 planes it has ordered, and possibly touching also on Saudi oil supplies to the US. Saudi leaders invariably point out during such meetings that the kingdom regards East Jerusalem and its Muslim shrines as Arab territory whose return to Arab sovereignty must be the heart of any Middle East peace.

Arab sources here have speculated that Saudi's impatience with what they see as US procrastination on the Jerusalem, Palestinian, and weapons issues may lead to some major shift in Saudi policy. This could include cancellation of the order for the 60 F-15s, none of which have been delivered yet, and announcement of a possible new major aircraft and arms deal with France which has been under discussion for months.

Another speculation is a cutback in the present Saudi oil production of 9.5 million barrels a day, especially if the Carter administration goes ahead with plans to fill US strategic oil stockpiles against Saudi wishes.

At a breakfast meeting with reporters June 24, Deputy US Secretary of State Warren Christopher said he did not anticipate any new Saudi gesture of disapproval. In a separate answer about East Jerusalem, Mr. Christopher said the State Department had not yet received clear information about exact Israeli intentions there.

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