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Israel Ready to Freeze New Housing in Order to Get U.S. Loan Guarantees

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Israel appears to have conceded it will have to freeze new housing starts in the West Bank and Gaza Strip in order to get U.S. guarantees for $10 billion in loans badly needed for immigrant resettlement.

Still to be settled is how many of the settlement construction projects begun in the administered territories Israel would be permitted to complete, and what other conditions would be attached to U.S underwriting of the loans.

When the Israeli ambassador to Washington, Zalman Shoval, emerged Friday from his latest meeting with Secretary of State James Baker, he indicated the discussions have a long way to go.

He told reporters Israel does not believe that the humanitarian issue of loan guarantees should be linked to the settlements.

But in an apparent sign of resignation, he added, “Obviously that view is not entirely shared by the United States.”

Of his meeting with Baker, Shoval said there was “agreement on some points,” and disagreement on others, Neither the Israeli envoy nor Baker would give any details.

The Bush administration is making it unequivocally clear to Israel that it will not receive the guarantees if it does not stop building settlements on disputed land.

“If the American people are going to be called upon to make additional assistance available, it’s only appropriate, we think, that it be done so based on U.S. policy,” Baker said in an interview Saturday on the Cable News Network.

He reiterated that U.S. policy since 1967 has been that the settlements in the territories are an obstacle to peace.

Baker said that any agreement on the guarantees would have to be coupled with a halt to new construction activity, and that anything completed would be reduced “dollar for dollar from assistance to Israel.”

DISAGREEMENT ON NUMBER OF UNITS

The U.S. proposals have already been made public. They are that Israel would be allowed to complete housing already under construction. The number has been estimated by the United States to be no more than 9,000 units and by Israel to be 13,500 units.

Any construction beyond that would result in the United States canceling the guarantees.

In addition, the United States would deduct from the amount covered by the guarantees the amount of money Israel spends building the houses now started, as well as the cost of new roads and infrastructure to support the settlements.

Israel reportedly has agreed to a slowdown, but not a halt, to new construction and wants to be able to continue building in existing settlements.

In Jerusalem, Israeli officials were trying to put a positive gloss on the difficult negotiations in Washington.

Health Minister Ehud Olmert indicated Sunday that Israel had agreed to the principle that it could complete whatever it has started building. What is under discussion is numbers, the Likud minister said.

“The question whether it is 10,000 or 12,000 or 14,000 is not essential,” he said.

The issue was not on the agenda of Sunday’s weekly Cabinet meeting. Foreign Ministry sources said the Shoval-Baker talks would continue later this month and that the hope in Israel is for an amicable accord.

The sources declined to discuss whether the money spent completing the approved building starts would be deducted from the guarantees.

Complicating the negotiations are the positions of Sen. Patrick Leahy (D-Vt.), chairman of the Senate Appropriations subcommittee on foreign operations. He met with Baker after the Shoval meeting.

Leahy, who first proposed the dollar-for-dollar cut, told The New York Times that if the administration and Israel cannot reach an agreement, he will make his own proposal.

If either Israel or the administration rejects the proposal, “there won’t be a loan guarantee package this year,” Leahy told The Times.

(JTA correspondent David Landau in Jerusalem contributed to this report.)

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