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Baker Meets with Shamir, but Fails to Resolve Dispute over Loan Money

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Prime Minister Yitzhak Shamir and Secretary of State James Baker met for over three hours Monday but apparently failed to resolve the bitter U.S.-Israeli dispute over Israel’s demand for swift approval of guarantees for $10 billion in loans for immigrant absorption.

The two men were closeted alone for more than 90 minutes without even a note-taker present. Afterward, they were joined by Foreign Minister David Levy and Defense Minister Moshe Arens for another hour and 45 minutes of discussion.

Shamir’s media spokesman, Avi Pazner, said afterward that the atmosphere was “good” but they had not managed to complete their agenda and would meet again Tuesday morning.

A senior U.S. official said the issue of the loan guarantees had not been resolved.

Baker, here on his seventh visit since the end of the Persian Gulf War in March, has been struggling to set up a Middle East peace conference that the United States and Soviet Union still hope to convene next month.

But the bitter altercation that developed between Shamir’s government and the White House after President Bush urged Congress to defer action on the loan guarantees until January may have put the entire process in jeopardy.

The acrimony was evident in the streets of Jerusalem, where demonstrators pelted Baker’s motorcade with tomatoes as it made its way to the Prime Minister’s Office.

CAN’T LET IT ‘RUIN ALL WE HAVE DONE’

Most observers believe the latest round of Baker-Shamir talks will be crucial to the further evolution of the peace process. Pazner said they discussed the planned regional conference, the loan guarantee issue and “bilateral matters.”

Observers wondered if “bilateral matters” referred to Washington’s growing anger with Israel over its accelerated settlement-building in the administered territories.

Foreign Ministry sources said earlier that Baker and Levy had resolved between them to try to work out a solution to the loan guarantee problem.

“We have worked so hard and achieved so much on the peace process. We cannot let this issue ruin all we have done,” Levy was quoted as telling the secretary of state on the way from Ben-Gurion Airport to Jerusalem.

Briefing reporters who accompanied him on his flight from the Soviet Union, Baker sought to play down the gravity of the U.S.-Israeli dispute. “Ups and downs” were to be expected in the peace process, he said.

Some American reporters had the impression that Baker was not entirely happy with Bush’s confrontational tactics over the loan guarantees and was trying to distance himself from them.

Following his prolonged session with Shamir, Baker went to the U.S. Consulate in East Jerusalem to meet with a delegation of Palestinian leaders headed by Faisal Husseini.

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