Israelis Signal Quiet Shift On Settlement Activities

ISRAELI right-wingers reacted angrily yesterday to signs that their government is quietly backing off its fiercely cherished right to settle Jews as and where it pleases in the occupied territories.

In negotiations with United States Secretary of State James Baker III over Israel's request for $10 billion in US loan guarantees to help house and employ immigrants from the former Soviet Union, the Israeli ambassador to Washington, Zalman Shoval, offered on Friday to limit settlement activities to accommodating "natural growth," once houses now under construction have been completed, according to US and Israeli officials.

That formula would seem to preclude the creation of any new settlements, and the arrival of any more settlers once the homes already started have been filled. It also runs directly counter to Israeli Prime Minister Yitzhak Shamir's oft-stated conviction that Jews must exercise their right to live where they like in the occupied West Bank and Gaza Strip.

The US is insisting on a freeze on settlement building, after the units being constructed have been finished, in return for the loan guarantees. Right-wing objections

"This is the darkness at the end of the tunnel," lamented Elyakim Haetzni, a Knesset member from the right-wing Tehiya (Renaissance) Party. "Israel is entering the era of the American mandate, and Shamir should add another star to the US flag."

"Entering a discussion with the Americans was itself a wrong step," added Eden Blitental, spokesman for another radical right-wing party, Moledet. "It means the talks are about the amount of new building, not on the principle."

Israeli officials refused to comment on Israel's negotiating posture in the loan-guarantee talks, but Mr. Shamir's spokesman, Ehud Gol, said his government "has to be pragmatic as well," beyond the issue of principle. "How pragmatic we are going to be, I cannot go into," he said.

But he insisted that Israel's fundamental concern now "is not to create any linkage" between the loan guarantees and curbs on settlement activity.

"Our principle ... is that the issue of guarantees does not relate to settlements," Mr. Shoval said on Friday. "The issue of settlement is one to be discussed with the Palestinians" in bilateral peace talks.

Whether any linkage is formally acknowledged or not, it has clearly been created by the conditions that Washington has attached to the loan guarantees, in order to ensure that no US money helps fund settlement building.

And Israel's apparent willingness to negotiate the number of houses it will build in the occupied territories, rather than stand on its principle, suggests that Shamir may be preparing to take advantage of a political opportunity created by upcoming elections in order to reach a compromise with Washington.

With a June 23 date set for the elections, Shamir's government cannot be brought down by a vote of no confidence, even though the prime minister does not command a majority in the Knesset. Since three small right-wing parties left the ruling coalition last month, in the short term Shamir no longer needs to fear their reaction to any compromise. Until the next government is formed, his administration is constitutionally guaranteed.

"He is free from now until June, but he will have to take into account the effects on election day" of any agreement to curb settlement, said Mr. Gol. Shamir's assessment

Those effects, Shamir seems to have calculated, will be positive, as voters worry increasingly about Israel's economic future, and immigrants from the former Soviet Union grow bitter about the lack of jobs for them.

To help house those immigrants and, more importantly, to create employment, Israeli planners intend to seek $10 billion in commercial bank loans, which they are asking the United States to guarantee to the tune of $2 billion a year over five years.

Washington has offered the guarantees only if Israel stops building settlements, which US officials see as an obstacle to Middle East peace, after the 9,000 units that Washington considers to be under construction are completed.

To ensure that no US guaranteed money funds further settlement, Washington has also said it would deduct $1 from the guarantees for every dollar spent in the occupied territories. New settlement principle

On Friday, Shoval argued that this penalty should apply only to settlement houses built in addition to the 13,500 that the Israeli government says are currently under way, and that allowance must be made for "natural growth" in the settler population, now put at around 110,000 in the West Bank and Gaza Strip, excluding Jerusalem.

That proposal would require a revision of current government plans, outlined in the 1992 budget, to build 5,000 new homes in the occupied territories this year. Conservatively estimating the cost of each house and its accompanying infrastructure at $40,000, such a building program would incur $2 billion in US penalties on the loan guarantees, equivalent to the full sum Israel is requesting for this year.

Gol said yesterday he did not expect any agreement before March, and that given the differences that still separate the US and Israeli positions, "I cannot say at this stage what the chances of success are" in the negotiations.