Israel loan accord is reported Rabin looking to expand alliance


KENNEBUNKPORT, Maine -- President Bush and Israeli Prime Minister Yitzhak Rabin are expected to announce today agreement on a formula for $10 billion in U.S. loan guarantees for the Jewish state.

The agreement will effectively consummate the new, happier relationship between Washington and Jerusalem since Mr. Rabin ended former Prime Minister Yitzhak Shamir's nine-year hold on power in last June's elections.

But the new Israeli prime minister is looking for more than the loan guarantees as he and many Israelis ponder the place of their nation in the scheme of regional and world affairs following the end of the Cold War and Israel's painfully awkward role in the Persian Gulf war.

The end of the Cold War substantially diminished Israel's significance as a U.S.-allied bulwark against Soviet ambitions in the Middle East. The Gulf war became the Jewish state's first experience in being attacked without retaliating, because of U.S. anxiety about the effect that Israeli intrusion could have had on the anti-Iraq coalition's Arab members.

With the sore subject of the loan guarantees behind him, Mr. Rabin now wants to craft an expanded U.S.-Israeli alliance for defense cooperation in the Middle East. For the last decade and a half, that alliance has generated as much as $4 billion in annual U.S. economic and military assistance to Israel.

Mr. Rabin is expected to argue in discussions with Mr. Bush and in a later session in Washington today with Defense Secretary Dick Cheneythat Israel can now play a new role as a kind of forward basing port in a volatile region troubled by dictators like Iraq's Saddam Hussein and Islamic fundamentalists who treat the United States as their chief enemy.

He is also looking for greater defense commitments, such as permanently based Patriot missile banks of the type first deployed in Israel during the Gulf war to help thwart the Scuds fired by Iraq, officials said.

"Our security cooperation agreement needs to be updated to reflect the current world situation," a spokeswoman for Mr. Rabin said here.

It wasn't clear yesterday how Mr. Bush will respond to such an appeal, although he did say: "We are looking forward to strengthening a relationship that is strong and will be even stronger."

Security cooperation was only discussed in a general manner during the long opening day of talks between the two leaders yesterday, according to a senior Bush administration official.

There was no expectation on the U.S. side that a new memorandum of understanding on the security issues between the United States and Israel would be settled today.

A senior Israeli official said the serious debate on the security relationship between the two countries was expected to take place in today's meeting with Mr. Cheney. Mr. Rabin is Israel's minister of defense as well as prime minister.

The discussions on the loan guarantees, the peace process -- in which Israeli cooperation can only be helpful to Mr. Bush's image -- and security arrangements took place yesterday in a remarkably changed atmosphere compared to meetings with Mr. Rabin's predecessor.

As the two leaders concluded an afternoon of talks and prepared for a cocktail party and dinner at Walker's Point, the White House also announced that it had received final confirmation from all of the parties in the Middle East peace talks that they would attend the sixth round of the negotiations, beginning in Washington Aug. 24.

The President and Mr. Rabin treated each other yesterday like long-lost friends.

"The welcome mat is out for Prime Minister Rabin," Mr. Bush said yesterday morning as his guest arrived for the first of two days of talks at the president's seaside vacation home. "He has many friends in the United States, including the man he's standing next to."

Mr. Rabin, who was extended the most choice invitation Mr. Bush has to offer immediately after he won Israel's June elections, thanked the president for "your kind invitation at this // chapter of life in Israel.

"We would like to make sure there is a better and more intimate relationship between our two countries, our two peoples and our two governments," he said.

Even before he arrived, Mr. Rabin was considered certain to take home with him a promise, finally, of $10 billion in loan guarantees to help with settling about 400,000 immigrants from the former Soviet Union. Mr. Shamir's request for the help last year was shelved by Mr. Bush because the Shamir government refused to halt the building of settlements in the occupied territories.

Mr. Rabin has drawn a distinction between political settlements, which he has moved to stop, and security settlements, which Israelbegan erecting in the occupied territories immediately following the 1967 war when Mr. Rabin's Labor Party was in power.

Mr. Bush asked Mr. Rabin for a personal explanation of his policy and was largely satisfied with it, officials said.

Among the remaining issues, they said, was what settlements would be permitted under the accord and how the United States would deduct the costs of any additional construction from the loan guarantees. The two leaders' aides were instructed to work out a private agreement on the issue last on Monday night, the officials said.

The two leaders spent much of their time walking alone around the grounds of the seaside estate and walked out on the granite rocks thatline the jagged Atlantic Ocean coast.

But even here, a reminder arose of the zealous opposition Mr. Rabin still faces among Israelis and their supporters in the United States against halting settlement activity. At one point, Mr. Bush spotted a sailboat bearing a group of radical Jewish followers of the late Rabbi Meir Kahane, who were protesting Mr. Rabin's decision to halt most construction in the occupied territories.

The president ran into the house to alert U.S. and Israeli negotiators to the sight of the boat carrying a banner that read "Kahane Lives."

"I thought that guy was kind of dead," Mr. Bush remarked, according to an Israeli official who described the scene.

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