JERUSALEM -- They are not ready to kiss and hug, but Israelis and Palestinians were talking in softer tones about each other yesterday after sessions with Secretary of State James A. Baker III.
The U.S. secretary of state was to leave Israel today, apparently satisfied that he made progress toward peace between the hostile parties. He now moves on to Jordan, Syria, Egypt and Saudi Arabia to try to get them in the peace mood.
His progress here was measured in degrees, not in drama.
The Palestinians hinted they might be willing to accept -- or at least overlook -- something less than a total freeze on Israeli settlements in the occupied territories.
The Israelis promised to mostly quit building in the settlements and vowed not to use in those regions any money from U.S.-backed loans.
The Americans seemed satisfied that Israel would meet the conditions needed to get the loan guarantees.
And all sides seemed eager to get back to the bargaining table and resume the formal peace talks in Rome.
"There's a convergence in their sense of urgency," said a State Department official who was part of the negotiations. "In the past, things always seemed to be out of sync. When one side was ready to do something, the other wasn't. Now they might be in sync."
Mr. Baker is on an express-plane tour of the Middle East to rekindle the peace talks. He wants a success here as a capstone to his dogged efforts in the region -- and as a plum to bring to the sagging re-election fortunes of President Bush.
The replacement of the Likud government in Israel last week with a Labor coalition led by Yitzhak Rabin created an opportunity to move the stalled peace negotiations.
Mr. Rabin made such progress the central theme of his election campaign. Immediately after Mr. Baker's departure today, Mr. Rabin was to leave for Cairo to talk to Egyptian President Hosni Mubarak.
Mr. Baker met three times with Mr. Rabin yesterday and spent more than three hours in a separate meeting with Palestinian leaders inside the U.S. Consulate in Jerusalem.
All sides emerged talking positively.
"We do acknowledge there is a shift in tone in the new Israeli government," said Hanan Ashrawi, a spokeswoman for the Palestinian delegation.
But detailed agreements remain to be worked out. "Nothing is finalized," said a State Department source.
Mr. Baker must first bring the results of his talks to the other Arab leaders in an attempt to enlist their cooperation.
Agreement on the loan guarantees -- which became a symbol of the gap between Israeli goals and U.S. priorities -- is likely to be announced when Mr. Rabin visits President Bush next month in Washington.
Further issues could be resolved when Israel and the Arab states meet again in formal peace negotiations. Israeli and Palestinian negotiators are said to be willing to meet early next month in Rome, though Italy's traditional August vacation may delay the conference.
According to Israeli and U.S. diplomats, the negotiators have made progress overcoming the most troublesome problems -- the settlements issue and loan guarantees -- by finessing them.
For example, the United States may not insist on stringent restrictions of Israeli settlements in order to grant the loan guarantees, based on the Israeli government's avowal that it is not interested in pursuing settlements.
"There is no need to condition the loan guarantees" on changes in Israeli policy, said an Israeli diplomatic source. "We are already doing it anyhow." Israel has desperately sought $10 billion in loans, guaranteed by the United States, to invigorate its stagnant economy.
Similarly, the Palestinian delegation may not force the issue by demanding an absolute settlement freeze, if it feels it has gained other concessions.
Mrs. Ashrawi backed away yesterday from her earlier implied threat that the Palestinians might quit the peace talks if the loan guarantees were given to Israel without a complete settlement freeze.
"If the U.S. ensures its funds are not used for settlement activities, and if it has the ability to monitor and the availability of records, which it never had before, then at least it will rescue [U.S.] credibility in the peace process," she said.
The news conference held by Mrs. Ashrawi was briefly interrupted when five Jewish right-wing activists, one of them brandishing a submachine gun, arrived at the site in Arab East Jerusalem. After a flurry of shouting and shoving with unarmed Arabs, the five were arrested by Israeli police.
Security for Mr. Baker has been especially tight in Israel, following reports in the Israeli press that three rocket-propelled grenades had been stolen from an army camp and were in the hands of Jewish extremists.