BOB FRANKEN: Welcome to Newsmaker Sunday. I'm Bob Franken in Washington. An emergency United Nations meeting in Geneva, and renewed violence in Israel that prompted it, serve as stark reminders that while peace is breaking out in many parts of the world, the Mideast is a dangerous exceptions. Peace is breaking out in many parts of the world, the Middle East is a dangerous exception. Joining us today to discuss the renewed Palestinian uprising are Moshe Arad, Israeli Ambassador to the United States, who this morning is quoted as saying, 'Israel stands before a grave crisis in its relations with the United States;' Richard Murphy, former assistant secretary of state; James Zogby of the Arab-American Institute; and, Michael Lerner of Tikkun magazine. Israel, Palestinians and world opinion next on Newsmaker Sunday.

[voice-over] Once again, angry Palestinians, many of them children, were by the thousands flinging rocks at heavily armed Israeli security forces, showing that the period of quiet in the occupied territories was a deceptive calm. Nearly 20 Palestinians were killed in the latest violence. Hundreds wounded. And once again Israel's image world wide was taking a serious beating.

YASSER ARAFAT: This what we are asking -- we are not asking for the moon. We are asking for the international entity to be implemented.

FRANKEN: [voice-over] Meeting in Geneva to avoid U.S. visa problems for Yasser Arafat, the United Nations Security Council heard the PLO leader call for the deployment of an international force to disputed Israeli territory. What was remarkable was that the United States was not totally rejecting the idea.

JAMES A. BAKER III, United States Secretary of State: We would be prepared to discuss the question of a UN observer team if that, indeed, comes up.

FRANKEN: [voice-over] That departure from long-standing U.S. policy is just the latest sign of the Bush administration's clear irritation with the Israeli government's refusal so far to agree to peace negotiations with the Palestinians and so, many think, is the president's reaction to the renewed violence in Israel.

PRESIDENT GEORGE BUSH: Well, I have called on both sides for restraint. I've called on the Israeli forces to show constraint.

FRANKEN: [voice-over] Israeli officials insist the criticism is unfair and that the new rioting is simply a cynical attempt to exploit the tragic violence of a deranged man. A week ago, a 21-year-old, who had been discharged from the army, rounded up Palestinian workers, shot seven to death and wounded 10 others. That ignited Palestinian outrage, not only throughout Israel, but outward into Jordan where protesters attacked a bus load of French tourists and wounded several.

MOSHE ARENS, Foreign Minister, Israel: The Israeli government has expressed its great sorrow at the incident, sympathy to bereaved families, the hope that those who were injured will fully recover.

FRANKEN: [voice-over] Palestinians reject all Israel sympathy.

HANAN ASHRAWI, Bir Zeit University: We place the full blame on the Israeli government and the Israeli political circles for preparing for this and for perpetuating such massacres constantly.

FRANKEN: By the way, ultimately, the United States blocked any action on international observers after Israel refused to go along, so the United States action at the moment is sort of at a standstill.

Ambassador Arad, thank you very much for being with us. Let me start with a quote that is attributed to you today by the largest Israeli daily. It is quoting what was a secret cable that you reportedly sent. It says, 'Israel stands before a grave crisis in its relations with the United States which refuses -- ' which means that you have to reexamine your polices is what the cable goes on to say. Did you say that?

MOSHE ARAD, Israeli Ambassador to the United States: Well, I assume that you will understand if I will not like to comment about my communication with my government. I think this is an issue which should stay between myself and the Israel government. I think the relationship is sound, strong and solid. We are facing -- facing at this very moment a somewhat bumpy road. I think there are a number of issues which require to be addressed and as soon as an Israeli government will be in place that the next prime minister -- the new prime minister, rather, I would say -- probably would address the issue and, of course, at the top of the agenda is a continuation of the peace process.

FRANKEN: Your description of it as a bumpy road is consistent with your Prime Minister Shamir's description of it, but you have many American Jewish groups, which are such an important part of Israel's support, who are critical of Israel now, for the first time in many cases. You are being caught up in a whole whirlwind of worldwide opinion, and the United States seems to be taking a more negative view towards Israel. Do you, in fact, believe, as you are quoted as saying here, that there is a crisis, a grave crisis?

AMB. ARAD: Well, I believe that the support of the American Jewish community is strong and solid. There were instance of criticism about certain actions of the Israel government. The action concerning the hostile -- in the Christian East Jerusalem is one example. I think there is a criticism in the community about the system of government, the fact that we were unable for the last two [unintelligible], but the overall support for Israel and the problems that are facing us, the threats to its existence, to its security, the prospect that the President of Iraq, Saddam Hussein, has by his statement concerning the security of Israel - - and threatening to put fire to half of Israel -- the issue of the rejection of that, I think, are understood by the American Jewish community, and they support Israel.

FRANKEN: But the United States, above and beyond the American Jewish community, is now having the president call for Israeli restraint when it comes to the Palestinian uprising. You have a secretary of state who surely was not surprised when eyebrows were raised when he said they would consider the international observer force. Most people take those as signs of eroding U.S. support for Israel.

AMB. ARAD: Well, I feel that the administration has -- is addressing the issues, and a major concern of the administration as far as I understand it is to re-initiate the peace process. And this content -- in this context, you will find the new Israeli government as interested as the administration to pursue the process, which is, after all, based on the Israeli peace initiative, which was presented and endorsed by the American administration last year.

FRANKEN: What about the opposite complaint on the part of Arab representatives, in the words of one, that Israel continues to have a strangle-hold on American foreign policy?

AMB. ARAD: Well, I think this is a comment which really doesn't really require comment. I think the administration and the American policy towards the Middle East is clear, it's one of support for the peace process. It's one of rejecting any threats for war. Israel, of course, is not only -- is not interested in war -- is interested in pursuing the peace process and we feel that the issue has to be negotiated at the negotiating table.

FRANKEN: When we return, in a moment, let's discuss many people's feelings that Israel really is not interested in pursuing the peace process. We'll do that when we continue in a moment.

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FRANKEN: The latest violence in Israel was ignited last Sunday, a week ago, when a man described as deranged by the Israelis massacred seven Palestinians -- shot, skilled seven Palestinians and wounded 10 others. And Israel says that the uprising is sort of a cynical reaction to all of this. But your critics say that, in fact, this was not just a deranged man acting, he was really acting as -- on behalf, they say, of a racist policy against the Arabs in Israel that's pervasive.

AMB. ARAD: Well, I think it's a cynical, really, attempt to exploit a crime, a very dastardly crime, against innocent Arabs, civilians, while they were waiting on the side of the road to be picked up. But I think the whole Arab reaction concerning this act is one in trying to inflame again -- to inflame the hatred and the violence against Israel and to perpetrate more crimes.

FRANKEN: Well, what the critics say, and not just Arabs, is that, in fact, this was just a reaction to extremely repressive policies against the Palestinians in Israel and of an attitude in Israel that they are somehow inferior; in other words, a racist act.

AMB. ARAD: There is no such attitude in Israel, I can assure you. The statements made by the leadership of Israel, the expression of sympathy and bringing flowers and sympathy by those Arab victims in Israel, by the public at large, is the best reflection that we are not a racist state, there is no such atmosphere. On the contrary, there is a lot of sympathy and understanding for the suffering. And we who have suffered so much in the last 42 years, since the establishment of the State Israel and previously, can understand this. But I think that statements like -- by the prime minister of Jordan, by Mr. Arafat, which suggest that this is a concerted policy of massacres, this tends to inflame, this tends to actually encourage people to further violence.

FRANKEN: If not repression, why is it that Israel is not able to negotiate on an equal footing with the people Palestinians want as their negotiators, namely, the PLO?

AMB. ARAD: We have suggested elections for the people of Palestine, for the people in the territories, so they will be able to elect their own leadership and not to negotiate with people which are devoted to the destruction of Israel and which are, after all -- and have made their career as leaders of terrorist organizations.

FRANKEN: When you slip some of these people in who you won't negotiate with, you take away some of the very people they would like as their representatives.

AMB. ARAD: We don't know and we cannot say who are going to be the people elected by the Palestinians in free elections. We have an excellent record in terms of having free elections. We are offering this offer again, we repeat this statement and I think the Palestinian have an extraordinary opportunity to take their future in their own hands and to insure that their legitimate rights would be implemented.

FRANKEN: Ambassador Arad, thank you very much for being with us. As you know, there are any number of points of view which we'll explore in just a moment.