BERNARD SHAW, CNN ANCHOR: Joining us now from New York to discuss the Israeli side of the settlement issue, as well as the Israeli troop pullout from Hebron is Eliahu Ben-Elissar. Israel's ambassador to the United States. Mr. Ambassador, as I welcome you to "Worldview," it has been said as Jerrold Kessel said, that many people regard President Clinton as Israel's best presidential friend to date. The criticism expressed by the White House, the state department, and we just heard Secretary of State Christopher was done in not-very- subtle words. What is your government going to do?

ELIAHU BEN-ELISSAR, AMBASSADOR TO UNITED STATES, ISRAEL: I can tell you that Israel has decided not to create new settlements; has decided not to expand existing settlements; and actually, we are pursuing a policy which used to be the policy of the state of Israel, whether Labor or Likud were in office. We do consider President Clinton as a very, very friendly president to the state of Israel. He, the President, and the United States have done very much in order to enhance the chances of peace in the Middle East, of peace and security for the state of Israel and we're very, very grateful. And I have no doubt that we will be able to achieve some kind of settlement with the Palestinians. And all I can tell you, is that we have been working very closely together with the United States on sharing actually, the same policy and the same goals.

SHAW: Mr. Ambassador, you just said categorically that Israel has decided not to create and not to expand the settlements.

BEN-ELISSAR: Correct.

SHAW: Then what is all the fuss about?

BEN-ELISSAR: To tell you the truth, sometimes I am puzzled myself what is it all about? How come that all of a sudden, from different quarters in the United States, not only the media but especially the media, we are being criticized of -- and for no blame, no thought committed to our side. I simply don't know why should we be blamed. We are, for instance, ready to sign that accord which has been already now negotiated for over two months with the PLO, with the Palestinian authority on Hebron, where in fact, ready even to withdraw from Hebron.

SHAW: Mr. Ambassador, if I could interrupt you, sir, the decision to give financial subsidies to settlers, was not a decision taken in a vacuum. Your government had to know there would be international reaction especially since there has been no movement on Hebron and especially since both Israelis and Palestinians have been killed and the violence has ticked up a bit. Was the decision based on domestic political considerations more important to your government than possible international reaction?

BEN-ELISSAR: The relationship -- the friendly relationship with the United States is very, very dear to us. It's actually, the cornerstone of Prime Minister Netanyahu's and the Israeli government and the state of Israel's whole policy and whole strategy. The very profound friendship between the United States and Israel. Having said that, I can tell you that 160,000 Israelis live today in what is being called settlements, and they have been discriminated against by the last Israeli government. All that the recent governments -- Israeli cabinets' resolution has actually -- is intended to... is to re-establish some kind of status quo and to abolish any discrimination between or among Israeli citizens. That's all. It has nothing to do with expanding settlements.

SHAW: I want to conclude our interview because I have one more question I want to be certain you have time to respond. You are aware of the letter signed by three previous United States secretaries of state including Eagleburger, Vance, Baker, and some former national security advisers from Bresinski, to (ph) Scowcroft, to (ph) Carlucci, Former Ambassador Robert Strauss. They talked about concern about what your government has done. They warned that to engage in unilateral actions such as the expansions of the settlements could undermine the peace process and they said, such a tragic result -- if the peace process is undermined, could threaten the security not only of Israel, but Palestinians, the friendly Arab states, but it could disrupt U.S. interests in the Middle East. Your reaction to that letter that was released yesterday?

BEN-ELISSAR: While we were burying our dead people, a mother and a child, this letter was sent to us. I'm sorry, but I have to praise some other secretaries of state like -- former secretaries like Dr. Kissinger, Schultz, Hague, who have not signed this letter, so that not everybody agrees with this kind of position which I would have preferred not to take place, especially... especially because we are, all of us, situated at the very delicate stage in the peace process. And Israel, believe me, is not to be blamed.

SHAW: A quick question, ambassador. At this point in time, is the Middle East peace process dead in the water?

BEN-ELISSAR: Absolutely not. Not only is it not dead, it's very well alive. It is up to everybody to make a contribution to it. We are ready to make a contribution to it. We are ready now to sign the agreement on Hebron. We are ready to go on with the process. We're actually calling on Syria, not only on the Palestinians to come and talk with us. I don't know whether there will be a positive result, but I am certain that if we do not talk, then there would be no result whatsoever. Better to talk than not to talk. The same with the Palestinians.

SHAW: Mr. Ambassador for your time, I thank you.

BEN-ELISSAR: Thank you so much.

SHAW: You're quite welcome.