Occupied Territories

WASHINGTON -- Two key senators have crafted a compromise loan guarantee proposal for Israel, but it appears to fall short of Secretary of State James A. Baker III's requirement of a halt in new construction in the Israeli occupied territories.The plan would provide up to $1 billion worth of loan guarantees to Israel immediately, without making them subject to presidential discretion, according to a source familiar with the plan.The Bush administration would be able to block future sums, depending on whether Israel met conditions in the bill.

WASHINGTON -- President Bush pledged not to make peace with Iraq at Israel's expense, Prime Minister Yitzhak Shamir reported yesterday, as the United States and Israel made cautious early moves to restart the search for Middle East peace once the Persian Gulf crisis is settled.Mr. Shamir was expected to hold what his spokesman said was "evidently a meeting of importance" today with Soviet Foreign Minister Eduard A. Shevardnadze. The Soviet Union, which has not formally restored relations with Israel that were broken in 1967, has pressed for an international conference to settle a range of Middle East disputes.

''Yasser Arafat has made a fatal mistake.'' Thus confided a prominent Palestinian friend from Gaza a few weeks after Mr. Arafat had embraced Saddam Hussein and expressed his explicit support for Iraq's overrunning Kuwait.At first I could only wonder. Until then the continuing Palestinian uprising had merely boosted Mr. Arafat's acceptability in the world. Furthermore, by repeatedly renouncing terrorism and by recognizing Israel's right to exist in secure borders in the Middle East, Mr. Arafat had seemed to have become a statesman, a leader of a national movement.

ISRAEL IS THE key to understanding President Bush's strategy in Iraq. Not because it had any influence over the decision-making process leading to the Iraq war, but because the Bush administration has adopted the democratic occupation model that Israel introduced in the West Bank and Gaza Strip. After the eruption of the first Palestinian intifada in December 1987, Israel had to deploy a relatively large number of troops aided by tanks and armored vehicles to sustain the occupation - exactly as the United States is now doing in Iraq.

KARNEI SHOMRON, Israeli-Occupied West Bank -- Walking past faded wall posters of right-wing parties defeated in Israel's recent election, Moshe Weizman acknowledged that he felt queasy about his future in this settlement sprawling along a chain of rocky, tree-studded hills."

JERUSALEM -- Palestinians began to see the first small fruits of their accord with Israel, as the government yesterday announced an easing of restrictions on entry into Israel and the release of some Palestinian prisoners.Neither step went far enough for Palestinians. They have demanded free access into disputed East Jerusalem, which Israel captured in the 1967 Mideast War, and a release of all the estimated 9,500 to 13,000 Palestinians held in Israeli jails.But "if this is a step that will be followed by other steps, then it is the right idea," said Ghassan al-Khatib, a member of the Palestinian delegation to the peace talks.

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.

WASHINGTON -- Secretary of State James A. Baker III said yesterday that Middle East extremists will try to torpedo chances of a late October peace conference as the time for it draws near."

Thanks to the tireless efforts of Secretary of State James Baker, there is at last a real chance for peace in the Middle East for the first time since the modern state of Israel was established in 1948.The only remaining question is whether the effort will founder this time because of Israeli opposition rather than prior intractable Arab resistance to any arrangement which envisioned Israel as a permanent state in the region.For years, the Israelis had sought negotiations without preconditions in an effort to attain a stable and secure peace with their Arab neighbors, only to be persistently rebuffed by the hard-line Arabs.

WASHINGTON -- The FBI has stepped up its scrutiny of Muslim militants in the United States who are raising funds for the Palestinian Hamas organization, and the State Department has decided to add the group to its list of terrorist factions.The FBI has confirmed that Hamas supporters engage in fund-raising and propaganda activities in the United States, but has found no evidence to support Israeli claims that the group's leadership exercises "command and control" from the Washington area, the officials said yesterday.