Palestinians Shift Stance On Eve of New Peace Talks

THE Palestine Liberation Organization is seeking Arab support for a delay of the Middle East peace talks set to resume next week, pending clarification from the United States on the deal reached between President Bush and Israeli Prime Minister Yitzhak Rabin during the Israeli leader's visit to the US last week.

Mr. Bush announced he would press the US Congress to grant Israel $10 billion in loan guarantees to help settle immigrants from the former Soviet Union. Further details were not disclosed, but Palestinian officials in Amman and Tunis, citing information they said they received from the US Consulate in Jerusalem, said the transaction included three major points:

* Israel will stop the building of 11,000 housing units contracted by the former Likud Party government.

* Settlements in East Jerusalem, annexed by Israel in 1986, will be excluded from any freeze on settlement building. The US will not deduct from the loan guarantees amounts spent on Jewish housing in East Jerusalem, as it will for amounts spent on settlement in the territories.

* The Israeli government will curb - not completely halt - the settlements.

The US ambassador to Jordan, Roger Harrison, declined to comment yesterday on the Palestinian account of the transaction.

The US decision to grant the loan guarantees is now seen here as a sharp turning point that warrants a new Arab negotiating position. "The US decision changes everything. Arabs have to adopt a new strategy," PLO Executive Committee member Yasser Abed Rabo said on Tuesday.

The four Arab parties involved in the peace talks - Jordan, Lebanon, Syria, and Palestinian officials - along with Egypt, met in Damascus yesterday evening to coordinate a new negotiating strategy. The Arabs, and particularly the Palestinians, who seemed ready to take a more pragmatic attitude last week, are expected to adopt a more hard-line approach to the talks. No autonomy talks

The apparent arrangement behind the loan guarantees "provides legitimacy to the settlements and reinforces Israeli claims that East Jerusalem is part of Israel," Mr. Abed Rabo said. The PLO will now insist that the Palestinian delegation not proceed to negotiations on Palestinian autonomy, seen as the next step in the process, until the Israelis agree to halt all settlements, including in East Jerusalem.

The Palestinian approach going into the Damascus meeting contrasts sharply with statements that PLO officials made just days ago indicating a readiness for substantive discussions on the nature of an interim period of Palestinian autonomy.

Abed Rabo argued that the US-Israeli deal amounts to a determination of the final status of East Jerusalem and legitimizes existing settlements. "They have predefined the boundaries of Palestinian autonomy and are prejudging the outcome of [negotiations on] the final status" of the city, he said. Process `could collapse'

"As far as we are concerned Jerusalem remains the decisive point," says Saleh Raafat, who sits on the PLO's 100-member Central Council. "All the negotiations could collapse if it were not made clear from the beginning that East Jerusalem is part of the occupied territories."

If talks do resume in Washington on Aug. 24, the PLO, according to these officials, is ready to go as far as to press immediately for the implementation of United Nations Security Council Resolution 242, which calls for an Israeli withdrawal from the occupied territories. They would decline to take part in talks on an interim period of Palestinian autonomy.

"If Israel and the US insist on predefining the final status then negotiations on an interim period become meaningless," said a senior PLO official who spoke on condition of anonymity.

So far there have been no official statements by the other Arab parties to the peace process indicating a hardening of their positions, but these countries have come under increasing pressure to take firmer positions in the wake of the US decision on the loan guarantees.

For the last 10 days, for instance, Syrian state-run newspapers have published scathing criticism of Bush, accusing him of bias in favor of Israel to gain Jewish votes in the USelection. The sharp rhetoric in the Arabic press reflects the erosion of Arab confidence in Bush's commitment to the peace process and the dampened hopes that Mr. Rabin's government will depart dramatically from the policies of his hard-line predecessor, Yitzhak Shamir.

Arab officials privately say the appointment of Secretary of State James Baker III, the major architect of the peace process, as White House chief of staff was an indicator that the US commitment to the peace talks is being sacrificed for the election campaign.