WASHINGTON -- The United States and Israel failed again yesterday to agree on terms for loan guarantees to settle Soviet Jews as new questions arose in Congress on how Israel proposed to use the money.
After a 50-minute meeting between Secretary of State James A. Baker III and Israeli ambassador Zalman Shoval, the U.S. demand for a halt to new construction in the occupied territories still blocked a deal.
"We haven't seen anything to indicate that Israel is willing to limit new construction," a U.S. official said.
But a senior official said that there was "progress" in trying to bridge the seemingly irreconcilable positions and that talks would continue. "It doesn't look worse," this official said.
The talks are shadowed by tough election battles in both countries. U.S. voters are sour on foreign aid generally in a campaign tinged with isolationism. In Israel, Prime Minister Yitzhak Shamir faces a choice between failing to deliver absorption aid and alienating right-wing constituents.
Mr. Baker is demanding a halt to construction of new units in the occupied territories. He would allow Israel to finish building about 6,000 already under construction, but he supports a dollar-for-dollar reduction in loan proceeds if Israel does so.
Israelis had hoped to reach an agreement in principle yesterday, but Mr. Shoval said, "There is no agreement yet. We will have another talk." No date has been fixed.
Sen. Patrick Leahy, a Vermont Democrat who chairs a foreign aid appropriations panel, said after a separate meeting with Mr. Baker that he had told the secretary, "It's fish-or-cut-bait time."
Either agreement is reached in the next few days, "or as far as my committee is concerned, the issue of loan guarantees for this year is over," he said.
Mr. Leahy said he gave Mr. Baker a proposal he hoped would offer a face-saving way out for both sides while achieving U.S. policy goals. In addition to the dollar-for-dollar reduction for completion of units under way by Jan. 1 of this year, his proposal would make clear that if Israel resumed building new units it would "risk losing the loan guarantees."
Mr. Leahy's counterpart in the House, Rep. David Obey, a Democrat of Wisconsin, likewise supports the goal of freezing new construction.
And while saying that the United States has a moral obligation to help Israel absorb Soviet Jews after pressing former Soviet authorities for years to let them emigrate, Mr. Obey warned at a hearing yesterday that U.S. taxpayers "are in no mood to support these guarantees."
Mr. Obey raised questions about how Israel would use the money, noting that Israeli plans call for it to be directed toward a development package with substantial sums for road and rail networks, energy, communications and water sources.
"Is this really an economic growth package for Israel, or is this an attempt to deal with the problems of Soviet immigrants?" Mr. Obey asked.