ED SCHAEFER: Good morning ladies and gentlemen. I'd like to welcome you all to today's National Press Club Morning Newsmaker. I'm Ed Schaefer, a member of the Morning Newsmaker committee. Today's guest is the Honorable Zalman Shoval, Israel's ambassador to the United States. Ambassador Shoval is with us to discuss the recently concluded Mideast peace talks. And hopefully provide an incite into where do we go from here. The ambassador has had a distinguished career in government. He served in the Knesset for over a decade, and was a member of Israel's delegation to the United Nations General Assembly. Outside of government he worked as a leading economist specializing in banking and finance. Ambassador Shoval is a graduate of the universities of California and Geneva, Switzerland. Earning advanced degrees in political science and international relations. Welcome to the National Press Club Mr. Ambassador.

AMB. SHOVAL: Thank you very much Mr. Schaefer. Good morning. I welcome you in this cold weather. Ladies and gentlemen, let me say at the very start that these 10 days or so which we just passed in Washington were in my view very valuable 10 days, and I am referring especially to the Israeli-Jordanian-Palestinian part of it. The negotiations with the Syrians and Lebanese are different with regard to Syria they are still, I must say grave doubts, how interested Syria really is in peace with Israel, or to put it a different way, whether Syria, with its internal dictatorial makeup can really afford to make peace with Israel, but that remains to be seen. Talks have started. Hopefully they will continue. With the Lebanese, well I was not part of the Israelis delegation meeting with the Lebanese, but the feeling was that had the Syrians not watched over them, Israel and Lebanon could have reached a peace agreement within half a day.

The atmosphere was very friendly. With regards to the Jordanian- Palestinian-Israeli part of this process, let me say that we exchange during peace days of corridor talks on the sofa many drafts of agreements. We agreed on a formula of continuation. We agreed to go on the Seventh of January, although the place, the venue, has not yet been agreed upon, but I would suppose that if we shall be successful in establishing direct links of communication as we have tried ever since Madrid unsuccessfully, unfortunately, it will be easier to agree also on the next venue, and what is more importantly of course, on the venue after the next meeting, how to go on, where to go on.

This matter of direct communication is very, very important. Many of the difficulties which were ahead of this meeting could have been avoided had we talked to each other. Unfortunately all the Arab parties refused to return our calls. And I think -- let me say I hope that that difficulty will be overcome now with regard to Dr. Alshockey (ph.), the head of the Palestinian component of the joint Palestinian-Jordanian delegation. We did exchange telephone numbers which was a symbolic act, because of course Dr. Alshockey (ph.) is in the Israeli telephone book. There would be no difficulty in getting that number. But it's symbolically important that the numbers were exchanged, with regard to the governments, Jordanian and so on and so forth, they are still waiting for the decision of their respective governments whether we can establish a link perhaps through the embassies here in Washington.

It would be important, I am stressing this again, to have this direct communication because then we could perhaps avoid some of the preliminaries before we actually meet. And I believe that could be important for the progress of the talks. Let me say very clearly that these 10 days were not a waste of time. And the talks in the corridors on the sofa were not just about procedures. Because of course procedures, when you talk about an issue as intricate, as long standing, as emotionally difficult as the Israeli-Palestinian conflict, a conflict which has gone on for 100 years or so, sometimes procedure leads to substance, and each side is understandably concerned not to take steps which could prejudice the continuation of the outcome of these negotiations, but there was a good feeling between the members of the delegations. One of the Palestinians offered his prayer beads to one of the members as a present to one of the members of the Israeli delegation as a souvenir. I said to Dr. Alshockey (ph.), who is a medical doctor, doctor if we stay here much longer, I'll need you as a doctor.

He said, I may need a doctor myself. We could almost have had peace by exhaustion. Now, where do we stand, or where did we stand at the end of these talks? Let me say, we were so close, that close. And if I can show this graphically or plastically, I think, although I am not objective, it was Israel moving like that, more than the other side. Now, we had differences of opinion, as you know, but I think that the basic factor in creating difficulties was that there was an attempt on the part of the Palestinians basically to change the ground rules of this whole process. Now, nothing of course is sacred. But president -- Secretary Baker during his eight month of traveling back and forth to the Middle East, in a very diligent manner, a very earnest manner, very hard working fashion, set out these rules which of course are predicated upon everybody making some compromises. There were things we didn't like. There were things they didn't like. But at the end of the day, these were rules. And without rules, a complicated process like that has not chance of taking off, of going on, certainly not of leading to any sort of fruitful conclusion, and because there has been some conclusion, let me just quote to you. In the agreed letter of invitation sent by the sponsors, United States and the Soviet Union, it says very distinctly and clearly, Palestinians will be invited and attend as part of the join Jordanian-Palestinian delegation.

Furthermore it says, with respect to negotiations between Israel and Palestinians, who are part of the joint delegation. Now, the Palestinians who perhaps in Madrid or after Madrid, for reasons I don't want to go into, thought that they can change these rules retractably, try to create new facts on the ground so to say here in Washington, but let me say that and this may perhaps be a surprise to some, we had really solved mainly thanks to Israel's spirit of compromise and flexibility most of the problems.

The problems with regard to the schedule of meetings between the joint delegation and between the separate tracks which derive from the joint delegation, one track for the Palestinian issues pertaining to the self government arrangements, the other track to the Jordanian-Israeli bilateral issues. And we had reached agreement on that. What we had not reached agreement on, was the exact numerical proportion in each track and in each delegation.

Again referring to the ground rules, and to the defacto situation in Madrid, we the Israeli delegation, 14 members were facing across the table, 14 members. Half and half. Seven Jordanians, seven Palestinians. They now want to double their number, meaning that Israel would face across the table, 28 members in order to establish the fact of a separate Palestinian entity all along the process, not just defacto but also deregula (ph.). And this is something we could not accept, do not accept, and I must say that the American sponsors back our position on that, because these were the agreements and these were the rules.

Now, and I would like to perhaps mention or say at this opportunity, that we commend the US for not letting itself be provoked to interfere at this stage of the process, because this could have derailed the process from the very outset and it would have reinforced the perception among some of the Arabs, a wrong perception that peace has to be negotiated with the United States and not with Israel, that is a wrong perception. That is not the way the United States sees it. And of course it is not the way Israel sees it.

Now I mentioned before that we had approached, we have actually reached agreement on the main issue and we would have wished that we could have concluded this round of talks in Washington by saying so we have agreed, A, B, C, D, and only one issue remains. But unfortunately the other side did not agree to that either, because perhaps for negotiating tactics, for reasons of negotiating tactics, they said, this is a package, and unless we agree on the package, we cannot single out the agreements, although, as I said some other place, these were four fifths of the issues. And I would much rather have said four fifths of the glass is full. Instead of saying one fifth is empty. Now I mentioned before the necessity of direct links, direct communications, and I am saying this not just as a matter of principle, although there is a matter of principle involved. Perhaps we can find a way to communicate between now and the Seventh of January and settle these remaining questions so that when we meet again on the Seventh of January, wherever, we can directly go to substance.

The day before yesterday, President Bush very forcefully, very earnestly, urged all sides to move from procedure to substance. I was there with Foreign Minister Levy (ph.) when he said that and he then conveyed that message I understand to the Arab parties, and let me say, we Israel, fully concur. We tried to move the talks to proposals of substance from day one. Unfortunately we were rebuffed on the pretext that first we had to agree to the split up of the delegation into the separate groups, or into the separate tracks, and although as I said before we did agree in principal and then we actually agreed on a final formula, all these days from that point of view were wasted as far as substance is concerned. But we hope to say that we will be able to start with substance when we meet again. Unfortunately we sometimes have the feeling that the Palestinians have internal problems. Maybe they feel they are watched by the eye of Big Brother, whether their big brother is the PLO or the Syrians, or whoever. And we see different, I would say, expression among the Palestinians of where we go, how quickly we go, and the unfortunate result, of course, is that when they reach a consensus, the consensus is usually based on the lowest common denominator and not on the highest common denominator.

Ladies and gentlemen, what we offer the Palestinians is without any doubt, less than what they would have wanted to achieve. What we offer to the Palestinians would also result in Israel achieving less than some of us, or most of us, would have wanted to achieve. That is the nature of compromise. And compromise has to be a two-way street.

Yes, we do not talk about the creation of another state. That is very clear. That is not part of the outline of the terms of reference of this process. But we do offer the Palestinians in the territory most of what they want. And certainly a lot more than the Turks or the British or the Jordanians or the Egyptians ever offered them in the past.

And we do not do this out of the goodness of our heart. And we don't do this as a favor to them. First of all, we have no desire to be over lords. We have no desire to rule over another people. But there is more involved. We have a very strong interest -- I would say an egotistical interest -- to solve the problem of the Palestinians to the territories. Because it is we who have to live with them. It is we who are going to co-exist with the Palestinian Arabs for all time.

So, we do have a stake in that. And we have an interest in solving it. So, we say to the Palestinians, in the delegation, and outside of the delegation and directly, and indirectly. We appeal to the Palestinians. Up till now, they have always rejected our out stretched hands. At least four times in the last seven years, as I mentioned most recently up in Camp David. We can wait. We have (the faith?). We are building it up. We are making progress. Many problems, we are overcoming them. Time is not working in our disfavor. The Jordanians have this faith. Governments, parliaments. The Palestinians have to hurry. The Palestinians should not waste time. The Palestinians should come and negotiate with us. What is realistic? And I certainly hope that the Palestinians will not want to get unjustified. And by Eban's famous saying that they never miss an opportunity to miss an opportunity.

Thank you very much. This was my opening statement. I would now like to take questions, comments.

Q: Jeraro Cardenos (ph.) with the Mexican News Agency. If there is this willingness from your part to negotiate with the Palestinians, is there also willingness on January 7 to discuss some kind of a (meddling?) of the ground rules. To discuss separately with the Palestinians, especially if the talks will be held closer to home -- somewhere in the Middle East?

AMB. SHOVAL: Well, I think you made a good point. Any change in the ground rules has to be mutually accepted. Now, if at sometime in the future, it will turn out that some of these rules -- that one or another one -- has to be changed for the mutual benefit of the different parties, maybe we, maybe they will consider it. But right now, these rules have to go on. Also, as I've said before, for practical reasons.

The factors in Palestine -- all of Palestine, including Jordan -- are so interwoven, intertwined, you cannot cut them up with a sharp knife. And therefore, I think the idea of having a joint delegation is a sound idea, whatever the political outcome of these negotiations will be.

Q: My name Oleya (ph.), I'm from Voice of Kuwait. And you said the Palestinians and the Arabs do not want a peace talk to be very fast. And then your trying to make it fast because it's for the Palestinians interests.

So, what do you think about what happened during the Peace Talk in Sedoin (ph.) and the Kescus (ph.) and the Medlin (ph.) and the other cities in the West Bank. They were curfews, you know, they were any bad situation. How do you explain that?

AMB. SHOVAL: Well, first of all, I would like to commend Kuwait on not voting against repeal of the Zionist racism resolution in the UN. We were very sorry to see, by the way, that the three countries with which we are negotiating peace: Jordan, Syria, Lebanon, voted against repeal. I would say almost putting their fist in the eye of President Bush who had very clearly said that the resolution of Zionism -- equating Zionism with racism -- really the denial, I'm quoting President Bush, denying Israel's right to exist.

How are you going to talk peace with a country which denies your right to exist? But coming to the specific question. Maybe, I'm speculating, maybe the Palestinians, Jordanians, Syria believe that by dilly dallying, by dragging their feet, by creating a crisis or a perception of crisis -- even is there is no crisis -- they can drag the American sponsors into the process with the hope that America will put pressure in Israel. The saying used to be in the Arab world: deliver Israel.

This will not happen. The American's have made this very clear, that this will not happen. Therefore, my feeling was, at least among the Palestinians, that they have doubts about their own tactics, their own strategies. You had the feeling that some of the members of the Palestinian delegation did not want to say no to us. And therefore, I am still basically hopeful about the continuation of the process when we start again on the seventh of January. Now, I would like to say in a very general fashion: violence is not helpful to the peace process. Intifada is a negation of the peace process. You are not negotiating peace under the threat of a gun. You are not negotiating peace when terrorism goes on.

Q: We don't -- the Palestinian's do not have guns on the West Bank. No, we have stones.

AMB. SHOVAL: Are you Palestinian or Kuwaiti? You must make up your mind, now.

Q: Yeah. I am.

AMB. SHOVAL: You must make up your mind, now --

Q: No, I'm Palestinian --

AMB. SHOVAL: Oh, so did you say Kuwaiti --

Q: I'm working for a Kuwaiti newspaper.

AMB. SHOVAL: I see, right.

Q: No, I'm working for the Kuwaiti newspaper. AMB. SHOVAL: Okay, fine. Now we got that settled. The Kuwaitis and Palestinians, -- you're all together. I can see.

Q: Yeah, we are Arabs, you know.

AMB. SHOVAL: Okay.

Q: Whatever happens, you know, we are Arabs.

AMB. SHOVAL: Well, if you're all Arabs, why do you need a separate Palestinian state? You've got to make up your minds. But anyway, anyway --

Q: Well, Kuwait has Kuwait and Iraq has Iraq and --

AMB. SHOVAL: I'm sorry, I think you wanted to raise a question, I'll answer to that. Violence has to stop. Hundreds and hundreds of Palestinians were murdered by fellow Palestinians during the Intifada. Why? Because they wanted to live in peace with Israel. This is something which has to stop.

Now, there are extremists on both sides. On your side, also on our side. The best way to stop extremists in their tracks is by making progress on peace.

Q: I'm not sure you totally answered the basic thrust of that ladies question. I'm Jim Anderson of (GTA?).

Let me paraphrase it. The Palestinian spokeswoman said that these talks do not exist in a vacuum. That's what is happening here is affected by what's happening elsewhere. Particularly in the West Bank. And she suggested that these evictions in Sedoin (ph.) and the very harsh curfews in Ramallah and Perev (ph.) were not coincidental. They are in fact, perhaps a symptom of what you described as a lack of consensus within the Palestinians that that same kind of lack of consensus exists on the Israeli side.

The point being that it appeared to them that these actions, together with Prime Minister Shamir's statement that the Israeli delegation did not have a mandate to negotiate any substance during this session in Washington, suggested to them that the Israeli's were not coming here in good will. I think that's the thrust of what she was asking.

AMB. SHOVAL: Well, anybody can have anybody's guess, of course. From day one, from day one -- I reiterate that -- we wanted to talk about the agenda. The agenda means substance, of course. What does the agenda mean? When do we have breakfast, when do we have lunch? The Palestinian's refused to talk about the agenda. That means they refused to talk about substance in the joint delegation.

All before we accepted the split-up. Now, consensus or not, Israel is a state of law, is a democracy and what the government decides holds. And the Israeli delegation here came with very clear instructions to make progress. And the proposals which we handed over to the other side -- and nobody will be able to deny this -- even on the Palestinian side, were very forth coming. And therefore, I am more hopeful than pessimistic, basically. If the Palestinian's and the Jordanian's really decide that the way to achieve a settlement is with us and not with somebody else -- that is the pre-condition.

Q: Well, excuse me, you didn't answer the part about Prime Minister Shamir's statement that the delegation had no mandate to negotiate substance.

AMB. SHOVAL: The Israeli delegation had proposed from the very first moment on, and that's a fact. And I say it again, you can ask anybody on the Palestinian side to discuss the agenda with concrete proposals.

Q: -- (off mike) -- why did President Bush ask Mr. Levy to get into substance?

AMB. SHOVAL: He didn't asked Mr. Levy, he asked all the sides. And as I had an opportunity to say still in the White House, you express our view. We wanted that from day one. But as the famous saying goes, you need two to tango. Now, in the Middle East, we don't dance the tango, we dance the death count. You need more than two -- six, seven, eight, I don't know. And that's the problem: for the Arabs to get their act together. I hope they will overcome that difficulty.

Q: Linda Scherzer with CNN. Mr. Ambassador, you said that you have grave doubts about Syria's intentions about making peace with you. If that's true, what is the reason that you are continuing these talks? If the gap is so wide, why -- do you think the Syrians are coming back? Why are you coming back to talk with them, and how are you going to communicate with them about the time and the venue for the next round of negotiations?

AMB. SHOVAL: Well, we are coming back because we, contrary to the Palestinians, will never miss an opportunity not to miss an opportunity of peace. We have tried that all these times, all these years.

Why do the Syrians come back? Well, I can only guess. The Syrians have lost their Soviet patron. The Syrians have to put themselves in a better relationship with the West and, principally, with the United States for economic reasons, for other reasons -- political reasons. And I don't think that the Syrians are very eager to annoy the United States.

In Madrid, it was touch and go. They tried not to have even the first meeting with us. But even the other Arabs -- Saudi Arabia, Prince Bandar, who was there, and the Americans probably put pressure on the Syrians not to break up this process before it even started. I don't know how it will continue.

Now, the third part of your question: we also proposed to the Syrians that the Syrian ambassador in Washington would communicate with the Israeli ambassador in Washington. Whether that will work out or not, I wouldn't put too much money on that, but who knows?

Q: When do you expect, though, that these talks are going to continue? Not --

AMB. SHOVAL: Well, we have said -- I mean, we have agreed, not we have said. The date -- the proposed date was the 7th of January for all delegations, and we have agreed with that, so if there are no further delays, that will happen. That will be the 7th of January.

Q: Jeffrey Winograd from Focus Israel Newsletter. Mr. Ambassador, there are rumors that have been circulating Washington for weeks that the United States government is considering removing Syria from the list of states which sponsor terrorism. How would your government respond if the American government took such an action?

AMB. SHOVAL: Well, I personally think that the American government will not do that, nor would the American Congress allow that or the American public. And I refer you to the New York Times article the day before yesterday about the situation in Syria. I mean, removing Syria from the terrorist list would, of course, be preposterous.

Q: Do you have a venue in mind for January 7?

AMB. SHOVAL: Well, you know that Israel's long-standing position is we should move these talks to the region. It would be good. It would be good. It would be good for all parts, for all sides. It would be good for us for logistical reasons. It's very difficult for us. The more -- the closer we are to home, the quicker the process will be because if we are close to the region, we could have a meeting once a week or once every two weeks. If we are in Washington or some other place far away, the delegation could stay here for a week, 10 days, would have to go home for a number of weeks, and the whole process would be slowed down.

Maybe also there is a greater willingness now or -- I don't want to speak the name of the Arab delegations, but there may be a greater understanding that their insistence of Washington was really, I would say, misplaced. Maybe the Palestinians thought that in Washington, PR exposure would give them an extra advantage, or perhaps they believed that the closeness or the nearness of the American government would play a role in that, but I don't see the opposition as adamant as it was in the past to moving eventually to the region. That's also the American position. That's also the American position. Hopefully, we can work something out in that respect.

Q: Mr. Ambassador, let me ask you a couple of questions somewhat apart from the discussions that have been held in Washington. My name is Joe Polakoff. I write for Jewish newspapers. First of all, let me ask you whether or not the vote at the United Nations General Assembly the other day was not a second declaration by the United Nations that Israel is a sovereign state that was declared first of all in 1948. So, it's sort of a second rebirth in the eyes of the world body, much more overwhelming in the vote than it was in 1948.

AMB. SHOVAL: Well, that is one way of looking at it, and I would say not a wrong way of looking at it. Of course, Israel is a sovereign state with or without the United Nations. Israel has had its presence in that part of the world for 4,000 years. Next year, we are going to celebrate 3,000 years to the declaration of Jerusalem as the capital of the Jewish people. We are the only people who have been in that part of the world without a break. No other people has ever had a state in that part of the world except for the Jewish people. There never was a Palestinian state or a state in Palestine on the land of Israel which was not a Jewish state. So, we didn't really need the United Nations for all that. But, with the United Nations reiterating their support for the Zionist ideal, which is one of the great ideals in modern history of a people, downtrodden, reestablishing their nationhood. I think you're right. I think that the symbolic moral, very, very important.

Q: Let me ask you another question, if I may. There is some talk in some parts of the press to the effect that the peace process that's now taking place really results from the Intifada. And I was wondering whether or not this is actually the case, or whether it wasn't -- there weren't other developments, such as the collapse of the communist empire and so on and so forth.

AMB. SHOVAL: Well, we can go into a philosophical, historical debate. Of course, the Intifada did have something to do with it, a great deal. Because Intifada among other things demonstrated a sense of frustration on the part of the Palestinians in the territories with the fat cats in Tunis, with the PLO, who had always told them, "Don't accept compromise. Don't accept any negotiating process with the Israelis. Because, if you hold out, you will get everything."

And they saw, in the territories, what the situation was. The economic situation declined, deteriorated. There was a lot of violence. Lots of Palestinians were killed, as I said before, mostly by fellow Palestinians. And you had a growing sense, especially among the younger generation of Palestinians in the territories, Palestinians and Israelis will have to live together in that country forever. There are two peoples there. Both of them have claims -- legitimate claims. They'll have to compromise, not to fight each other. So indirectly, the Intifada did have something to do with it. Of course, the Intifada should stop now, because you cannot, as I said before, continue peace talks under the threat of terrorism, and terrorism not just against Jews -- Israelis -- but also against Palestinians who talk to us.

Q: (Name inaudible) -- from Middle East Broadcasting Center. And I'm also a Palestinian who live under your democracy, Mr. Ambassador. First of all, the Intifada have started to create something. I mean, because of a lot of reasons, the Intifada started, because of a lot of suffering of the people. It started not because people like to be a terrorist and to --

AMB. SHOVAL: Of course. Of course.

Q: -- you know, it start because a lot of people live under pressure, a lot of people suffer from occupation, and from -- I'm not saying that all Jewish people are bad. I live in West Bank --

AMB. SHOVAL: I know. And there are lots and lots of good ones.

Q: -- and we live together. But all what we see -- I mean, all the Jewish we see is a soldier, young soldier, carrying their guns and shooting people. And when you talk about terrorists, Palestinian killing Palestinian, mostly, that's not true, Mr. Ambassador.

AMB. SHOVAL: The numbers are there.

Q: Most of the Palestinians -- excuse me.

AMB. SHOVAL: One hundred sixty-eight were killed by fellow Palestinians --

Q: Well, okay, but --

AMB. SHOVAL: -- since the beginning of this year alone.

Q: -- okay --

AMB. SHOVAL: The statistics are there.

Q: -- but how many --

AMB. SHOVAL: Look at the United States report on human rights --

Q: Well, how many -- how many --

AMB. SHOVAL: -- in the territories.

Q: But how many hundred of Palestinian were killed by Israeli, how many houses demolished by Israeli, how many days of curfew by Israeli -- ?

Q: Do we need a debate here?

Q: Excuse me, sir.

Q: Look, we came here for a press conference --

Q: Excuse me sir.

AMB. SHOVAL: Okay --

Q: -- to ask questions, not to run propaganda.

Q: Well, I want to ask a question.

AMB. SHOVAL: Well, let's -- let's --

Q: Just put the question mark at the end, it will be a question.

Q: Okay. I am -- he can --

Q: I do have a time limit. Let's get through with this.

Q: Well, excuse me. I'm talking to him. He had time, so --

Q: Yes, I understand. But I'm taking your --

AMB. SHOVAL: That's all right. Look.

Q: I'm taking my time.

AMB. SHOVAL: That's all right.

Q: Well, okay, sir. I don't want to ask question.

Q: What is your question.

Q: No. Go ahead. It's okay. No, no. I don't have a question.

AMB. SHOVAL: Let me just make one remark. I really welcome the presence of Arab journalists here. We had a problem. I don't know if you know that. I'm sure you do. Our journalists, the Israeli journalists here in Washington, interviewed Dr. Majali, the head of the Jordanian- Palestinian -- Jordanian delegation. And I think -- and others -- and members of the Palestinian delegation. None of the Jordanian journalists were allowed to interview any Israelis.

Q: Who told you that?

AMB. SHOVAL: I tell you that, because we

Q: No, that's not true. No.

AMB. SHOVAL: -- we proposed to them, and they said --

AMB. SHOVAL: -- please --

Q: No, no, no -- some Jordanian journalists went to your press conference --

AMB. SHOVAL: No, no, no --

Q: Yeah, that's true.

AMB. SHOVAL: There were two interviews set up with me that were canceled. We then -- our press people, our press person is sitting here, we invited Jordanian journalists to come and interview members of the delegation; they said, "only through the Jordanian press office," and the Jordanian press office was never heard of again. The fact is, look for one interview, you won't find one. MR. : I would like to hear your question -- you say you did have.

Q: Well, I do have a question but I'm not saying propaganda, I'm saying facts. Okay.

Q: Well, you decide and he decide -- not he. I mean, he's sitting like me, so -- (Cross talk.)

Q: My question: You were saying that the Palestinian are the only people who will lose and who are, you know --

Q: Because there is a Palestinian -- there is an Israeli state and there is a Jordanian state, so who cares? But the Palestinian care -- because they are looking for their identity, and this is what they want.

So no matter how long it take the talks -- I mean, what we want is a state and are you going to give us a -- This is what -- the question. My question is --

AMB. SHOVAL: There was a question.

Q: There was a question.

AMB. SHOVAL: There was a question. I will reply to it. Israel does not intend to permit the creation of another state in the very, very narrow -- you know how wide this whole country of Palestine is between the Sea and the Jordan River? Probably much, much shorter than Connecticut Avenue --

Q: But the --

AMB. SHOVAL: I'm sorry, no, no, no, I didn't interrupt you.

Now, there is not going to be a separate Palestinian state right -- if you excuse the expression -- in our guts, 10 minutes from Tel Aviv, a minute and a half from our only international airport, a second and a half from the center of our capital. We're not going to permit that.

BUT, we have not said to the other side, once negotiations start on the permanent status three years down the road, you're not allowed to bring up your demand or your request for a Palestinian state. This is not part of the process right now, because as you know, we are discussing now interim self-government. That's the way it's being described and the American government has also stated very clearly that America does not support the creation of a separate or an independent Palestinian state. You will come and talk to us about that. We will have our position; you will have your position. We don't raise any preconditions for the negotiating process. We have our views, but that's all.

Q: Mr. Ambassador, do you feel that the postponement of the $10 billion loan guarantee has any effect on the peace talks, and what effect does it have on the political and economic situation in Israel?

AMB. SHOVAL: Well, the delay was unfortunate. We think -- we can't prove it, but we think that the delay at the time increased the intransigence especially of the Syrians because it was after the announcement of the delay and after the controversy between us and the administration here about the loan guarantee that the Syrians announced that they will not participate in the multilaterals and that they do not agree -- and they have not agreed until this very moment -- that the declared aim of this process is peace treaties between Israel and Syria. This appears in the other sets. It does not appear in that set. So I think the influence was not fortunate.

Now that you mention that question -- I did not want to bring it up. The President has declared there would be a delay. This is for the American people, for the American government to decide. Our request is there. The need is very urgent. The situation in the Soviet Union could be potentially tragic. I don't think that refugees should be held hostage to political squabbles or to political considerations on the Arab side, putting pressure on America not to go ahead with that. We think that would be unfortunate. So we do believe, we do hope that request will be forthcoming.

And let me add to that, because there's a lot of misinformation about that. We are not asking for one cent of American money. We are not asking for one cent of the American budget -- or any cost to the American taxpayer. As a matter of fact, if we compare -- if we judge by the $400 million housing guarantee which we got last year, more than $200 million of those funds raised under that guarantee were spent here in the United States on raw materials, on finished products, creating a lot of additional jobs in this country. I believe that if the $10 billion immigrants absorption guarantee will come forth, there will be a lot of new job creating in this country for the benefit of both countries.

Q: Mr. Ambassador, what happens if you do not get the loan guarantee?

AMB. SHOVAL: We will not sacrifice the security or life of any of our Jewish brethren from the Soviet Union. It will create a much more difficult economic and social problem in Israel, but we will not fail them. I think we have all learned the lessons of the Holocaust when we thought -- everybody thought -- there was more time on our hands. We are not going to repeat that mistake.

Q: Can I follow on that subject? In a perfect world, there would be no connection between these peace negotiations and the loan guarantee consideration. We live in an imperfect world. To what extent do you think the consideration of it will be influenced by what happens or doesn't happen in these negotiations? And a corollary question: at any point in this process, would Israel be willing to suspend further expansion of the settlements?

AMB. SHOVAL: Well, I hope that this basically humanitarian question -- and it is a basically humanitarian question -- and I would say that the emigration of a million Soviet Jews after 70 years of repression and persecution in the Soviet Union is one of the great miracles in this century of the human spirit being able to overcome repression. And I certainly hope these two things will not be linked. Now --

Q: To what extent do you think they are?

AMB. SHOVAL: -- with the world not being perfect, which I assume you must be right on, there may be some who believe that, although this is a humanitarian issue and though it would also probably enable Israel over time to be less reliant on American foreign aid, maybe some people think that there should be a connection. This is not the view we have heard from the American administration.

And let me make one practical addition to that. This peace process, even in the eyes of us optimists, is going to take a long time. Even with the best of hopes, for instance, the negotiations on the Palestinian interim self-government arrangements will take no less than a year, in the best of circumstances. The other ones, with the Syrians, who knows? So, this is not something which can be held up for such a long time.

Q: (Off mike.)

AMB. SHOVAL: Oh, with regard to the settlements, Israel's position and policy is well known about that. But let me perhaps elaborate and say the question of the settlements is, of course, not the settlements; it is the future of the territories. Now, the future of the territories is going to come up in the third year of this process, according to the precepts, according to the rules. This is disputed territory. If that weren't a fact, if there were no fact of a dispute over these territories, there would be no problem. So, we say we are going to be there. We have a right to live there. We have 750,000 Arabs living in Israel. There should be no apartheid situation where Jews will be forbidden to live in the territories because they are Jews, whatever the political formula will be. But the Palestinian side may have a different opinion about that. That will come up in the third year of the negotiations.

Let me -- you didn't ask that, but I will add something by my own -- on my own initiative. People always say, "But Mr. Begin at the time agreed to a three-month freeze on settlements." He did, but when? After the signing of the Camp David agreements. After the signing. Not as a precondition for negotiations. So, let's not forget that, either.

Q: You said that you're going to celebrate the 3,000 years of Jerusalem as the capital and that you're talking about history today. And then that means -- you know, the Arabs were in Spain for 700 years and that we can claim Spain for us these days. What do you think of that?

And the second question is that how long the Soviet Jews have been living in Israel, how many years, how many days, how many weeks? And now they're becoming Israeli citizens.

AMB. SHOVAL: Well, the State of Israel, of course, was established, among other things, or mainly to be a safe haven for persecuted Jews from all over the world. That is the purpose of the State of Israel. We didn't come there because we looked for oil or because we wanted to exploit another people. We are not colonialists. We did not look to build our economy on Arab labor.

Q: So that --

AMB. SHOVAL: Our -- I'm sorry. You must let me finish a sentence. The Zionist forefathers made it a principle to establish our economy on our own labor, which was not always easy, but we did that. Yes, every Jew coming to Israel can automatically become an Israeli citizen. There are 22 Arab countries, Arab states in the world, and all the Arabs living in Israel have completely equal rights with the Jews, except for one thing. They do not have to serve in the army.

Q: Why?

AMB. SHOVAL: Why? Because they don't want to. They don't have to serve in the army because they say, and we can understand that, if there is another war and members of our own family, certainly of our own ethnic group, are on the other side, we don't want to kill fellow Arabs. Okay. We agree to that. So, our boys and girls serve for three years in the army, cut their private or civilian life short by three years. The Arabs in Israel do not. But they have completely equal rights -- judges, members of Knesset, everything. Some people say they have more rights, but I don't accept that, necessarily. So, that is the situation.

And once we come to an arrangement with the Palestinians in the territories, it will be a future of coexistence, not of one side or the other side excluding the other side. That's the only future for this country which hopefully will come to peace one day.

Q: Mr. Ambassador, a follow-up to the loan guarantee question. Could you explain to us exactly what has to happen, where the ball is now? Does your government have to make a request? Does the Congress have to do something, the administration?

AMB. SHOVAL: No. We have made our request as long as -- September ago - - this September, and we look at the six point which were announced at the time of the delay by the American government, meaning that the President does not intend to request a further delay after the 120 days are over.

Now the way the administration or Congress are going to deal with it are an internal, American matter and we are not going to interfere or try to interfere or express any opinion of that in any way. Any further questions?

Q: Just one that still puzzles us after the talks are over. Given the history of the Intifada and given the security concerns of Israel and given the -- one would have thought the intent to encourage moderation among the Palestinians, what's the calculation in allowing them to go back basically with their credibility -- yeah, I'm Barbara Crosett (sp.) from the New York Times, sorry I didn't say that -- to allow them to go back with their credibility perhaps damaged because nothing was achieved? Is there some sense that there may be -- that that might be - - there may be some sort of backlash to that?

AMB. SHOVAL: Yes, I am afraid there may be, and I think that that possibility is worrying the Palestinians in the delegation because what will happen, those who are moderate, and I think that's the majority -- moderate is perhaps not the right word, but those who have understood that they must come to some sort of accommodation with us will be disappointed. The extremists will say, "Ah, we told you so."

So I think that is unfortunate and this may be the reason why in the last few hours we had a feeling that there was some sense of regret that they had insisted so much on these procedurals and not gone down to the actual negotiations. But again, let's be optimistic and say that until the 7th of January, it is a rather short break, it's two weeks or so, they will work out their act in the meantime. Perhaps we will have direct contacts with them through me or by any other venue or way in between, and hopefully they will be able to say to their people, "Look, this time was not wasted, we made some progress and we will start from a higher plain once we start again on the 7th of January."

Q: Mr. Ambassador, if the Arab negotiators were to call you up or representative of the Israeli government can say, "Hey, we agree to meet on" -- they call directly and say, "We agree to meet on the 7th of January but we want to do it in Washington," how would your government respond?

AMB. SHOVAL: Well, I think my government would not make the place or the venue an issue which would prevent the continuation of the talks. But we would like at the same time to have the rapport, to have communications with the Arab delegations about how and when we knew for the follow up after the next meeting, even if it does take place in Washington. I think that would be a very important point.

You know that on the 15th of November the Palestinians wrote a letter to the Secretary of State, included in which there is a sentence, "We don't want to have direct communications with the Israelis on any level. We are going to communicate only with the sponsor." That was a very unfortunate omen for the peace talks.

I think -- I hope anyway, that that lesson has been learned and that we will have direct contacts. I think that would be very, very helpful.

Let me perhaps, sir, conclude in saying that I am especially happy to have had the opportunity to meet two Arab journalists here, or perhaps more than two, and I would certainly welcome the opportunity to continue the dialogue, not just as journalists, but as Palestinians and Israelis.

Thank you very much.