MARY TILLOTSON: [voice-over] Will the promise of an international conference on Israel's occupied territories be the cover under which Saddam Hussein withdraws from Kuwait and avoids war? Will Israeli resistance sway the Bush Administration to block a U.N. vote for that conference? And if Saddam leaves Kuwait as a hero to Palestinians with concessions from the West, what does that spell for the future?

[on camera] Welcome to Newsmaker Sunday. I'm Mary Tillotson in Washington. Our guests are Israeli Ambassador to the United States Zalman Shoval, who joins us from our New York bureau; Senator Richard Lugar of Indiana, the most influential Republican on the Senate Foreign Relations Committee; and Michigan Democrat, Carl Levin, who sits on the Armed Services Committee -- all ahead on Newsmaker Sunday... Our first guest, from our New York bureau, is Israel's Ambassador to the United States, Zalman Shoval. Mr. Ambassador, thanks for joining us this morning. Before we get into talking about that United Nations vote, I did want to ask you about a London Observer story that ran today. The gist of the story is that Saddam Hussein's government in Iraq has redrawn its boundaries with Kuwait, including some oil fields and two off-shore islands, and the interpretation that the London Observer gives of this move is that it may mean Saddam Hussein is ready to withdraw even earlier than those of us in the West had hoped. What, if any, interpretation do Israelis give to that move, if you're familiar with it?

ZALMAN SHOVAL, Israeli Ambassador to the United States: I don't know if the news is true or not. It may well be true. It could be another propaganda ploy in his favor, but, look, I don't think the world is going to be fooled by that. Back before the Second World War -- in the beginning, Hitler said that all he wanted was the Sudeten region in Czechoslovakia and, then, a year later, when everybody looked away, he grabbed all of Czechoslovakia. I think the American administration and the rest of the world are wise to Saddam Hussein's tricks.

TILLOTSON: And, of course, as we all know, the administration's position is that any Kuwaiti territory in his hands is not the resolution they want to see of this. To go to the vote in the U.N., which, now, at the earliest, will be Monday, why is it not in the interest of the United States to approve a resolution that merely calls for a conference at, quote, 'some appropriate time'?

AMB. SHOVAL: Because this is what Saddam Hussein wants. He wants to camouflage his own aggression, his own designs on the rest of the Middle East and the rest of the world by saying that he went to Kuwait in order to raise the Palestinian question and, as Secretary Baker said, very wisely, astutely, 'You didn't invade Kuwait to help the Palestinians.' Now, the mere idea of linkage between the Kuwaiti thing -- the Iraqi- Kuwaiti thing and the Palestinian issue is, of course- I mean, mind boggling. It is immoral and it is also strange. You can't make any sort of equation, any sort of linkage between an aggressor -- Iraq -- and the victim of aggression -- Israel. Israel was the victim of aggression in 1967. Fortunately, not like the Kuwaitis, it was able to defend itself and, as a result of her defensive war, it occupied certain territories. The whole equation is strange and immoral and -- Well, I can't go beyond that. So, there is no linkage.

But what America also says [is that] by creating a linkage at the U.N. or elsewhere, this would give Saddam Hussein the sort of political victory which he wants. Now, what would the result of that be? The result of that would be that those Arabs who oppose Saddam Hussein or those Arabs with whom we will eventually have to sit down and discuss peace on the Palestinian issue, they'll say, 'Saddam Hussein's our hero.' They'll support him. They'll support his extremism, his radicalism, his aggression. That would be a very bad thing not only for Israel, but America and the rest of the world.

TILLOTSON: For all that the United States government would deny any such linkage exists, if the resolution were approved -- presumably with the U.S. abstaining, not voting actively for it -- by the Security Council, isn't it clear that Arabs, in general -- not just Saddam Hussein -- would draw a linkage? That would give him the very victory you're talking about, wouldn't it?

AMB. SHOVAL: Right, but look, the whole thing is a bit strange. The Arab coalition partners of the United States, like Egypt and Saudi Arabia and even Syria, they haven't raised this matter. They're not even pushing for that resolution. Who's pushing for the resolution? The Yemenis, the Cubans, the PLO, all the -- and the Malaysians, all those countries which oppose the United States about the Gulf crisis. So, why should the Western world, and the rest of the world, as a matter of fact, give in to the aggressors on Israel? I don't think so [sic].

TILLOTSON: The United States government certainly agrees with you, with everything Secretary Baker has said publicly, that Saddam Hussein is very cynically using the Palestinian issue as a public relations weapon, if you will, but has not the Israeli government helped sharpen that PR weapon for him through their own handling of the intifada, Mr. Ambassador?

AMB. SHOVAL: Look, I understand that in that resolution there is a sentence or phrase about protection of the Palestinians in the territories. That's not the question. We didn't start the intifada. The Palestinians, the PLO, the other terrorist organizations started the intifada. Now, we are going to defend ourselves. We have to protect ourselves. We also have to protect the Palestinians in the territories. I don't know if you know that, but most of the Palestinians this year in the territories were killed by Palestinians, not by the Israeli defense forces. We are responsible for the security in the area but, at the same time, we have said many times, and we are saying now, 'Let's sit down. Let's sit down at the negotiating table. Let's talk about the possibility of having peace in the area, not only between Israel and the Palestinians, but between Israel and her Arab neighbors, all these Arab countries.' The only country which has made peace with us is Egypt. Why shouldn't there be peace between us and Jordan, between us and Syria? As a matter of fact, why shouldn't there be peace between us and Iraq - - which has never even signed an arms agreement since 1948? We are for that.

TILLOTSON: I have seen those figures showing that the majority of Palestinians in the territories are now being killed as a suspected collaboration by other Palestinians.

AMB. SHOVAL: Eighty-four percent of the Palestinians in the last three months were killed by Palestinians.

TILLOTSON: But, Mr. Ambassador, the United States does not suffer from those killings as we do when our clear and professed ally, Israel, seems to put the country in the position of at least acquiescing in tactics that may be seen as brutal toward Arabs, for example, the Temple Mount killing. Will your Prime Minister, Mr. Yitzhak Shamir, bring any assurances to President Bush that Israel will not, in some way, be an obstacle to this coalition with Arabs, which is necessary to the United States right now?

AMB. SHOVAL: Well, we have said all along that we are willing to keep the low profile as long as there doesn't exist a direct threat to the security of Israel -- then, of course, there may be a different stance -- and we are keeping to that position and we are being praised by the United States government about our low profile. The matter of the Temple Mount and other incidents were expressly instigated by those who wanted to divert attention from the Iraqi aggression in Kuwait back towards the Palestinian issue. Now, we have -- we may have been at fault about some minor matters. Perhaps our police wasn't [sic] up to the job at that moment. We had the commission to inquire into these things, but let's not forget that this was an incident that was not planned by the Israelis. Jewish people praying at the Western Wall were attacked. The police reacted -- perhaps overreacted. Many people were killed. Seventeen people were killed. We are terribly sorry about that, but look what's happening all around us. Hundreds and hundreds of Christian Lebanese were killed. This issue didn't come up at the United Nations Security Council. I'm just saying this to prove and to illustrate why this incident in Jerusalem -- which we are very sorry about, because it hurts us, too -- was created [sic] into a political issue. It was made into a political issue.

TILLOTSON: Mr. Ambassador, I'm afraid we have to take a break, but I do thank you for having joined us. And up next, I'm going to be talking with two Senators, members of the Senate Foreign Relations and Senate Armed Services Committees. Those committees have been holding hearings on the Persian Gulf crisis. Stay with us.