AMB. RABINOVICH: (Applause.) Thank you very much for the very kind introduction. Thank you all. I would like to open with a few personal words.

In March a year ago, I had the honor and privilege of addressing the AIPAC Policy Conference. This is -- I was then new in Washington. This is my second year, and it remains a very moving experience to witness, to watch this huge hall overflowing with Israel's friends and supporters and to know that you are here. The difference between this year and last year is that, through this year, I've worked very closely with AIPAC, met with the officers regularly, visited AIPAC chapters in a number of cities, and there are many familiar faces on the dais, in the hall, and it's a much more personal experience for me to be addressing you today, for which I am privileged.

I'm delighted that my friend, Ambassador Maher El Sayed, is here with us for more than one reason. He is a personal friend, as I said, and as a friend I'll take a few minutes later to explain to him what "dayenu" really means. (Laughter.) Second, Egypt is the one Arab state thus far that has made peace with us. And actually this month we have marked the 15th anniversary of the peace treaty with Egypt. It was signed in March 1979. (Applause.) Thirdly, Egypt is very instrumental in facilitating and promoting the current peace process. Many, many meetings take place -- I hate to say on neutral grounds in Egypt, but let's say in a third country, in Egypt.

And Egypt's president and some Egypt's diplomats, the ambassador included, are very, very helpful in trying other Arabs and Israel to make peace. And there are services that a superpower can render to a peace process, and there are services that another Arab country can render to a peace process, and one exists independently of the other. But since we have had peace with Egypt for 15 years now and since this is the first and the only peace treaty that we have with another Arab state -- or with an Arab state, let me point to five lessons that we ought to grow from this peace.

One is that Egypt was the first Arab state to make peace with Israel because Egypt is a coherent, powerful state that had a visionary and a powerful leader, an authoritative leader at the time. The leader made a decision, and the effectiveness of a state enabled to him to turn that decision into policy, make that policy stick, and make that peace stay and overcome many difficulties over the years.

Second, Egypt's then president, President Sadat, understood that there was a very important psychological dimension to the Arab-Israeli conflict and therefore to Arab-Israeli peacemaking. And he therefore understood early on that he must address the Israeli people directly through what we now call public diplomacy, and he took public diplomacy almost to the extreme and was vindicated because it was a very effective technique that he used.

Thirdly, President Sadat understood that procedure, a channel, the way in which an Arab country and Israel communicated and dealt with one another was very important. Early on, actually prior to the public diplomacy part, he agreed to an unpublicized informal meeting between the deputy prime minister of Egypt, the late Moshe Dayan, in Morocco. It was that "walk in the woods," in the language of diplomacy, that prepared the ground for subsequent negotiations, because the informality and the secrecy of the channel enabled the two leaders to establish to their mutual satisfaction that the basis for a deal, the basis for peacemaking was there.

Fourth point, the history of peacemaking between Egypt and Israel and the history of the subsequent relationship teaches us that peacemaking in this complex, difficult Arab-Israeli conflict is not an easy matter, is not a one- day affair. There was the great historic moment, the euphoria after the Sadat visit to Jerusalem. And then came some hard bargaining, some ups and downs, some crises. And even after Camp David, in September 1978, it took another six months and a visit by President Carter to the Middle East in order to resolve the difficulties. And there were many, many difficulties subsequently, and what you need is patience and determination to overcome them and the political wisdom and experience to understand that in a such a conflict you do not make peace in one fell swoop.

Finally, the fifth point is that the lesson that we learn is that two former enemies can make peace, become friendly and still disagree. And much of what Ambassador Maher El Sayed has said to you is not agreeable to us. (Applause.) He was cordially invited to AIPAC. He was very warmly received. He stood here knowing full well that he's welcome to say the truth as Egypt sees it and spoke very frankly and very openly, and we all accepted it in that spirit. But see the present crisis and we see many aspects of this peacemaking differently. We are Israel. We are the government of Israel. (Applause.) We have a different perspective, and yet peace with Egypt will remain, and we will continue to rely on Egypt in facilitating this peace process.

Let me now address the issues at hand. Now, we are in a peace process, the peace process begun in Madrid two and a half years ago. In Madrid, three broad goals were defined, or three categories were established. Peace was to be made with three Arab states -- Syrian, Jordan and Lebanon -- with whom we are negotiating in order to make peace, in order to sign peace treaties. With the Palestinians, we are not negotiating a final peace. We are negotiating an interim settlement as provided for in the terms of the Madrid conference.

Thirdly, there is the larger Arab world with which we seek peace and normalization, although we do not have a direct quarrel with many Arab states, be they near us, be they in they Persian Gulf, be they in North Africa.

With the Palestinians we have had the first breakthrough. We signed an agreement in September. We reaffirmed it a few weeks ago when in Cairo Foreign Minister Peres and Chairman Arafat reached an agreement on the security issues.

We are now in the midst of a crisis provoked by the massacre in Hebron. We have to deal with this crisis, and there are three dimensions to the way in which we have to deal with the crisis. There's one dimension that is mostly behind us, what I call the moral and ethical problem; the fact that a Jew, a member of our people, a citizen of Israel could perpetrate that massacre is something we all had to come to terms with, we all had to account for, which we did I think admirably so in the first few days. (Applause.) I think the statements published immediately by the president, the prime minister and the foreign minister, by several rabbis and spiritual leaders; the powerful speech by the prime minister in the Knesset; the establishment of a commission of inquiry that is tearing our guts out in public; and the banning of two movements in the cabinet decision yesterday are very powerful indications of this process that we have undertaken and done a lot through.

But this does not exist in a vacuum; this is part of a political process. Peacemaking is a political process. We operate in a political world. In that political world, our counterparts -- the Palestinians, the PLO leadership -- has been trying to take advantage of some of these events in order to reopen the agreements signed in Oslo and Washington and reaffirmed in Cairo. We are against reopening agreements. We are against any revision. (Applause, cheers.)

The issue of the settlements has been defined as a final status issue between us and the Palestinians. This is not an agreement that is 15 years old or 10 years old, this is a fresh agreement; it was made in September, it was signed in September, it was reaffirmed just a few weeks ago. Settlements are not ghettos. (Applause.) Now, this is not a pro-settlement speech, this is a government that has a very defined policy on the issue of settlements. But our policy is not based on renunciation of rights. Our policy is predicated on the assumption that we have as good a right to these parts of the land of Israel as anybody else. (Applause, cheers.) Our policy is that we may not necessarily choose to exercise that right everywhere. (Applause.) But this is a final status issue. We will come to terms with that issue in about two years from now and through the fifth year of the agreement.

This was built into the Oslo and Washington agreements for a reason. This is why this is an interim process. We know that there cannot be a final status solution to the Israeli-Palestinian conflict now. This is the point of departure of this process. Interim means that you build phases, that you work from one phase to the next, that you try to build confidence, you try to work together, and maybe what is not feasible now may be feasible two years from now or four years from now. Maybe. We don't know.

But this is the philosophy that underlies this agreement. This is the agreement that we made in Oslo and Washington. We did not sign another agreement. And therefore it is very important that the other party to this agreement, the PLO, the Palestinians, understand, as they did then, what is the nature of the agreement. We made concessions in that agreement, and we made those concessions because they were balanced by what we saw as our achievement in that agreement. And it is very dangerous, in terms of the health of this peace process, to come now and say, We the Palestinians -- or we the Arabs -- want to retain our achievements but we would like you to withdraw yours. This is not the way in which we plan to negotiate. (Applause.)

Furthermore, we believe that it is the enlightened self-interest of the PLO to resume the negotiations as soon as they can. (Applause.) Yes, the peace process has been assailed. Yes, a very severe challenge has been presented to the peace process. Yes, the leadership of Yasser Arafat has been challenged by this. I am the first -- or the Israelis will be the first to acknowledge that.

But the question is, how do you overcome the challenge? The answer is, you overcome the challenge if you hold. if you manage to hold the bull by the horns, if you come to the terrain, if you come together, if you come to Jericho. And Yasser Arafat, if he wants to negotiate seriously, is less than two weeks away from that agreement. And all he needs to do is to resume the negotiations, negotiate seriously, start the changes on the ground, present his people with the new reality, rebuild his leadership, and remain a viable leader and a valuable negotiating partner. (Applause.)

But as I said, there is more to the peace process than the negotiations with the Palestinians. There are negotiations with the Syrians, and we are to resume a 13th round of negotiations in early April. We are to discuss the negotiations with the Syrians in other ways. The president of the United States called the president of Syria on the eve of the prime minister's visit to Washington in order to discuss the negotiations with him. It will be one item of the agenda of the prime minister's negotiation with the administration tomorrow and the day after tomorrow, and we very much hope that these negotiations will sail forward.

Now, in these negotiations some of the lessons that I mentioned earlier as lessons that should be drawn from the successful negotiations with Egypt ought to be applied.

The public diplomacy is very important. Our people have yet to listen to a forceful statement of serious willingness and desire and determination to make peace with us that is comparable, that comes close to what President Sadat did at the time. We think that the channel, the fashion in which we negotiate ought to be augmented. As the person who does the negotiations here in Washington, I'll be the first to say that these are important negotiations, but there are ways in which the technique of the negotiations could be improved.

There are issues on the table that still separate us. They concern questions of peace and withdrawal; they concern the question of security; they concern the question of the time frame within which an agreement ought to be achieved and implemented. There is some very serious work ahead of us, but it can be done. 1994 has been defined by us as the year of decision. This is not the year in which it must happen; this is the year in which it can happen.

Thirdly, the negotiations of the relations with the larger Arab world are tied to this. Lebanon and Jordan make no secret of the fact that they expect a breakthrough with Syria before they make their move. Other countries in the Gulf and in North Africa have indicated very clearly that they would like to normalize relations with Israel as soon as there is movement on the Syrian- Israeli track. A breakthrough with Syria could mean the beginning of a real change in the relationship between Israel and the Arab world. This is all ahead of us in the next few months. It is doable; it is difficult. The recent events have demonstrated to us how fragile and precarious it is all. But with wisdom, determination and the kind of support that we have had so far, it is doable, and we will do it.

Thank you very much.

(Applause.)

MODERATOR: In the few minutes that we have left, we thought we might ask these two friends, as they each characterized each other, to address themselves in a bit of a dialogue to a couple of issues. The first issue I would like the two ambassadors to speak to is the new factor in some of the issues that we have been reading about and that is the emergence of Russia and the Russian foreign minister into the region over these last few days as a presence attempting to involve himself and Russia in the peace process. As you all know, Russia is a cosponsor of this effort. But I wonder if the ambassadors, first Ambassador El Sayed, second, Itamar, would care to comment on the involvement of Russian in this effort, the appropriateness of it, how it will play out and whether this is a positive development for the peace process that we all agree must be renewed at the earliest possible moment. And if you want to, you could stay right at your seats if you like, the microphones are open.

AMB. EL SAYED: Thank you very much. Thank you very much. I think we should not forget that Russia is a cosponsor of the peace process.

It has been for a long time a very passive and dormant sponsor, but we see that of late they decided to be more active. We do welcome this activity inasmuch as it helps overcome the difficulties that are still preventing the resumption of the negotiations. We are sure that the Russians will want to play a positive and active role, and they have been consulting with the parties, they have been consulting with the United States, they have been consulting with us, and I am sure and I hope that there is no intention on their part other than to help the peace process and to help the parties come back together to make the peace that we are all longing for.

AMB. RABINOVICH: I suppose the term "even-handed" has some resonance in this hall. We claim no even-handedness between the United States and Russia. There are two caveats to our outlook on a new Russian role here. One is that we make no bones of the fact that there is a special relationship between the United States and Israel. It's normally thought of in terms of what flows out of Washington in our direction, but when the time comes for whatever needs to flow from our direction to Washington, the United States knows very, very well that we have a special relationship and a special attitude to Washington. And second is we asked of Russia that if it wants to play a more active or assertive role in this arena, that it coordinated moves very closely with the United States. There are two cosponsors of this process, but the last thing we need is ill-coordinated cosponsors. And we very much hope that the Russians will fully coordinate their moves with Washington. (Applause.)

MODERATOR: And a second issue, before we have our concluding comments and announcements from our conference chair, Amy Friedkin (sp) and then move to our next session, is the issue of the Arab boycott. When Secretary of Commerce Ron Brown went to the region in January, he told Arab leaders in Riyadh, in Amman, in Cairo and in other parts of the Middle East that the secondary and tertiary boycotts particularly were damaging American companies, costing the United States jobs, and were simply incompatible with peace. Following that, he believed that he secured a commitment from the Arab League to put this issue on the Arab League's agenda at the meeting to be held at the end of March. I wonder if each of the ambassadors could comment on the issue of the boycott, particularly toward the secondary and tertiary boycotts that have been the subject of some language in the State Department authorization bill and what their feelings are about movement on the issue of the boycott.

AMB. EL SAYED: What we want to build is a Middle East where cooperation prevails, where there are no more boycotts, no more problems dividing the peoples of the area. (Applause.)

To the boycott I think there are two aspects. One is the direct boycott by some Arab countries -- of course you know Egypt is not one of them -- of Israel. And this certainly is a subject that is related to the establishment of normal relations between Israel and the Arab countries, and this is what is being negotiated, what we want to achieve as a result of these negotiations; a Middle East, an area where there will be no occupation, where there will be no violence, where there will be no boycotts, where there will be peaceful, normal, full relations.

As to the problem of the secondary and tertiary boycott, I will say that it is on the agenda of the Arab League meeting at the end of the month. But let me be very candid with you. I think this boycott is not really implemented, but we understand the symbolism of it and I think that we are headed towards a solution to this problem that will satisfy all the parties and that will respond to the interests of all the parties, including American companies, which we welcome to work in the Arab world and which we welcome to come and help build the new Middle East that we have been dreaming of. So I think that this is a problem that will soon enough be behind us.

Thank you. (Applause.)

AMB. RABINOVICH: If you ask me about the Arab boycott, I'd like to answer with a story about President McKinley, who was known to be short of speech. One Sunday he went to church without his wife. When he came back Mrs. McKinley said, "How was the sermon?" And the president said, "Good." She said, "What did the preacher speak about?" He said, "He spoke about sin." "What did he say about sin?" "He was against it." (Laughter.)

You ask me about the Arab boycott -- I'm against it. (Applause.)