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Baker and Levy Unable to Agree on Assurances for Loan Guarantees

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Israeli Foreign Minister David Levy met here for 90 minutes Wednesday with Secretary of State James Baker, but the two leaders apparently were unable to overcome differences over assurances the United States is seeking on Israel’s settlement policy in the administered territories.

Officials of the State Department and the Israeli Foreign Ministry were planning to meet here throughout the evening in an attempt to bridge the differences, according to Israeli sources.

At stake is some $400 million in loan guarantees that the United States has promised to give Israel, so that it can build housing for the tens of thousands of Soviet immigrants arriving there.

Although Congress approved the loan guarantees last spring, the Bush administration has held up final approval until it receives assurances that the money will not be used to help Soviet Jews settle in the West Bank or the Gaza Strip.

Israel has publicly stated that no U.S. funds will be used for this purpose and that the government’s policy is not to direct immigrants to the administered territories, though they are free to live wherever they choose.

Current plans call for the construction of thousands of housing units in the Negev and Galilee regions, not in the West Bank or Gaza Strip.

Israeli Finance Minister Yitzhak Moda’i discussed the loan guarantees Tuesday in Washington with Deputy Secretary of State Lawrence Eagleburger and Treasury Secretary Nicholas Brady.

After those meetings, Moda’i reported that the administration had agreed to issue the guarantees, which would enable Israel to secure loans from private banks.

“The guarantee of $400 million is now valid,” Moda’i told the Jewish Telegraphic Agency late Tuesday.

‘BEYOND WHERE WE WERE BEFORE’

But according to Israeli sources, Baker insisted Wednesday that Jerusalem make concessions on its overall settlement policy. Levy reportedly replied that such a sweeping commitment could only be undertaken by the Israeli Cabinet.

Nevertheless, both sides expressed optimism that they would work out a framework to bridge the gap by Thursday morning. A ranking State Department official told reporters, “We’re beyond where we were before.”

Baker and Levy also discussed Israel’s economic difficulties and military needs in the wake of the Persian Gulf crisis. The foreign minister reportedly was told that Israel’s requests would be looked at sympathetically.

Baker also was said to have reiterated President Bush’s pledge to maintain Israel’s qualitative military edge in the Middle East.

Baker and Levy were in New York to attend the opening of the U.N. General Assembly. Earlier Wednesday, the secretary of state met here with Soviet Foreign Minister Eduard Shevardnadze.

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