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U.S., Israel try to defuse crisis over aid Loan guarantee tied to talks by Bush


WASHINGTON -- U.S. and Israeli officials worked with congressional leaders yesterday to defuse a growing crisis over Israel's request for $10 billion in loan guarantees in hopes of finding what one Bush administration source called a "common ground for discussion."

Their common goal was to head off a direct confrontation between the White House and the pro-Israel lobby over the aid request on which President Bush wants to delay action for four months so that it does not interfere with the Middle East peace conference he hopes will be held in October.

"We know we have a problem. We hope we have a solution," a senior administration official said. "If a vote is taken [on the Israeli aid request], we all lose. It's a lose-lose proposition. We can't discuss it without the peace process being the loser."

U.S. officials denied reports from Israel that the United States had offered an interim financing measure. This was viewed here as a trial balloon "trying to test how much flexibility we have on the issue," the senior official said. "That's not something that's on the table."

But the official said the United States was "open for discussion" and "testing the waters. Everybody's trying to find out if we have common ground for discussion. . . . It's in everybody's interest to settle it amicably."

President Bush began the effort himself with phone calls Friday and over the weekend to top House and Senate leaders explaining his view that granting the Israeli request soon might needlessly inflame Arab participants in the still-unscheduled peace conference before it begins.

The loan guarantees are intended to help Israel borrow $10 billion on world markets to finance the influx of 1 million Soviet Jews expected to immigrate over the next five years. Mr. Bush fears Arab leaders would see it as financing for additional Jewish settlements in the occupied territories over which they are hoping to regain control in the negotiations.

As of late yesterday, legislative leaders -- including those considered to be among Israel's top allies -- were publicly noncommittal.

House Speaker Thomas S. Foley, D-Wash, and Senate Majority Leader George J. Mitchell, D-Maine, were described by aides as consulting with colleagues.

In Jerusalem, however, Prime Minister Minister Yitzhak Shamir characterized Mr. Bush's delay request as a device to force Israel to stop construction of settlements, even before the issue is negotiated.

Mr. Shamir said Jews would continue to settle in the occupie lands and cautioned that Israel's participation in peace talks was not a sure thing if it didn't approve of the makeup of the Palestinian delegation.

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