WASHINGTON'S efforts to halt the building of Jewish settlements on occupied Arab land have strengthened Arab commitment to attend a Middle East peace conference.Press reports about US Secretary of State James Baker III's negotiations in the Middle East this week have said that Washington may want to link a freeze on settlement activity to approval of $10 billion in loan guarantees Israel is seeking from the US. For Washington, Israel's demands for loan guarantees threaten to derail months of intensive efforts to bring Arab states to the peace talks planned for next month. A senior Bush Administration official said Tuesday it was Mr. Baker's belief that "the Arabs would walk if [the loan guarantees] just rolled through with no conditions." Arab leaders have made it clear that negotiations with Israel to establish a lasting solution to their conflicts must be based on the principle of land for peace. They contend that US aid, like the controversial loan guarantees, encourages Israeli settlement of occupied Arab land. With the conference approaching, Israel has accelerated the building of such settlements in recent months. If Washington approves the loan guarantees now - before the conference convenes - the goodwill established by Baker with the Arab states would be weakened. But in a press conference late Tuesday, Egyptian President Hosni Mubarak brushed off suggestions that Arab states would boycott the talks if the US were to give unconditional approval to the loan guarantees. "Look ... the problem of the $10 billion is a problem between Israel and the United States. What happens concerns the two countries," he said, adding: "Attending the conference is a must." In Damascus, where Baker arrived late Wednesday, Syrian Foreign Minister Farouq al-Sharaa said Washington's differences with Israel showed the Americans were serious in their bid to end the 40-year-old Arab-Israeli conflict. "President Bush's stand reflects the seriousness with which the US Administration is dealing with the Middle East process," he said. "Syria considers the building of settlements as an obstacle to peace because they are illegal and illegitimate." The official Syrian daily newspaper Tishreen accused Israel of trying to destroy the peace initiative. "It is certain that President Bush and Baker are now fully convinced that the new settlements are nothing but obstacles deliberately laid by Israel to block the peace process," the paper said. Mr. Sharaa said the US loan guarantees for Israel would be "a major obstacle to peace," but he declined to comment on whether his country would boycott the peace conference if the guarantees were approved.