ISRAEL DROPS BID FOR US LOAN GUARANTEES

The Israeli government has abandoned efforts to secure guarantees worth $10 billion from the United States.

But Defense Minister Moshe Arens said March 17 Israel would not halt Jewish settlement of occupied Arab land - the condition set by the Bush administration for the guarantees.

"We will have to mobilize the resources necessary for absorbing immigration from the [former] Soviet Union ourselves, with the help of the Jewish communities of the world," Mr. Arens told Israel Radio. "In my opinion there's no point to another request [to the US]."

Arens said he understood the White House would not grant the request to underwrite aid for integrating immigrants.

In brokering the Middle East peace talks that began last October, the US believes a settlement must include an Israeli withdrawal from Arab land captured in the Middle East war of 1967 in exchange for peace with its Arab neighbors.

Prime Minister Yitzhak Shamir has flatly refused to return any land. His government maintains that the occupied territories belong to Israel by biblical right and are necessary for the country's defense.

Had the US guaranteed the loans, Israel could have borrowed commercially at favorable interest rates. Without US support, world bankers may be reluctant to lend to a country with a deteriorating economy.