ARLINGTON, Va. -- Yasser Arafat expressed optimism yesterday about reaching a final peace agreement with Israel within a year, but the Palestinian leader also warned of "difficulties" ahead, calling the volatile problem of Jerusalem's political status critical to a lasting accord in the region.
"Jerusalem is not only a Palestinian place," Arafat said in a meeting here with diplomats, analysts and reporters. "It's Palestinian, Arab, Christian, Muslim. And we should remember also in Jerusalem that there is the holy wall, the holiest place for the Jews.
"The fate of Jerusalem," he added, "will be the key to all issues of how we want the Middle East to be."
Arafat spoke at an Arlington hotel at a meeting arranged by the Center for Strategic and International Studies, a Washington-based think tank. He was in the Washington area to meet with President Clinton to discuss negotiations that are supposed to establish a permanent peace between Israel and the Palestinians.
In an agreement signed in Egypt earlier this month, the two sides set February as the deadline for drawing the outlines of a final accord and next September as the goal for concluding it.
Most analysts believe it is an extremely ambitious schedule. Though Arafat called it "a realistic time frame," he seemed to imply that it could take longer when he noted that six years have passed since the so-called Oslo accord set the stage for the current talks between the Israelis and the Palestinians.
Speaking softly though an interpreter, staring straight ahead most of the time, Arafat said he was hopeful for Israel's satisfactory implementation of a land-for-security swap that was agreed to in Maryland last year and was revived three weeks ago.
But, he added, "having said this, I am telling you, we are heading toward difficulties. That's what we should expect from the permanent-status negotiations."
Arafat envisions Jerusalem as the capital of a future Palestinian state, which clashes with the Israeli position. Israeli Prime Minister Ehud Barak of Israel has consistently demanded "one unified Jerusalem, eternal capital of Israel."
Aside from Jerusalem, Arafat said, the toughest issues in the talks ahead are the fate of Palestinians who left their land after the creation of Israel in 1947 and the ensuing Arab-Israeli war, along with the future of Jewish settlements on the West Bank.
"We are approaching the moment of truth," he said.
He dismissed suggestions that refugees could be compensated financially or settled in another Arab country. "It's time for them to come home."
Hundreds of thousands of Palestinians live in a vast diaspora that includes refugee camps in Jordan, Lebanon and Syria. Many of their families left land that is now in Israel proper.
Barak has said he will agree to neither the return of refugees nor the removal of Jewish settlements in occupied territories on the West Bank, though he has ruled out any future settlements there.
As he has for several weeks, Arafat spoke warmly of Barak and repeatedly contrasted him with Barak's predecessor, Benjamin Netanyahu, who froze implementation of the Wye River agreement reached in Maryland last year.
Asked about his ultimate vision for the Middle East, Arafat said: "We must find a way to stop the extremism on all sides. We have to bear in mind that extremists and terrorism in the region are on both sides."
He invited the United States to be "a full partner" in the peace process. Arafat has sought more active participation from the Clinton administration than has Barak, underscored by his 90-minute visit to the White House on Thursday.
Administration officials said the meeting focused more on the method of final-status negotiations than the substance, with Clinton urging Arafat to be flexible.
"He wanted to run some ideas by the president," said Mike Hammer, a White House spokesman. "The president is prepared to engage as is appropriate to help the process along."
Clinton called Barak afterward, Hammer said.
Pub Date: 9/25/99