AMBASSADOR SHOVAL: Thanks for the compliment. When I was at Berkley was the Korean War, not the Vietnamese War. (Laughter.)

Dr. Rodman, ladies and gentlemen, the timing of this lecture was certainly propitious, but so is every lecture dealing with the Middle East. There is always something going on. As somebody has said about a completely different subject, if you're not confused, you don't know what is going on. (Laughter.) But with the renewed violence in the Middle East on the one hand, and the fourth round of the peace talks just started, just having started in Washington. As a matter of fact, I rushed here from a meeting with the Palestinian track in the Jordanian- Palestinian delegation. With that renewed round of talks, on the other hand, I think the timing may actually have been more timely than usual. But before turning to the matter immediately at hand, let us perhaps ask ourselves, notwithstanding the Arab-Israeli peace process, which will go on, how certain are we by now, a year -- a little bit more than a year after the Gulf War, whether there really is a new Middle East, the sort of new Middle East people everywhere -- in America, in Israel -- took to be almost exhumatic as a result of the war? For instance, has it become more democratic? Hardly. Has it become more stable? Well, to a certain degree, it has. But for how long? It remains to be seen. And Saddam Hussein is also still around.

Yes, the peace process does indeed make a difference, but even there, there can be an immediate rejoinder. Only the future will tell if the Arabs -- and let's not forget that in any case, we are not talking about all the Arab states.

There's not only Iraq, which I mentioned already, but Libya and Sudan and Algeria and Yemen, not to mention the Hizbullah, for instance, which has been in the news these days and which opposes not only the peace process, but Israel's very existence. All these are in no way involved in the peace process. But even the others -- those who are, do they come to the negotiating table because they genuinely desire peace, as Ben-Gurion used to say, "real peace", or just because they believe, rightly or wrongly, that with the changed world situation -- and there's a resulting shift in American priorities -- they now stand a better change of attaining a tactical or even a strategic advantage in their long struggle against the state of Israel?

Is that -- it has been said that the fundamental premise of American policy was during the Gulf crisis that, by defeating Saddam Hussein, this would discredit radicals, strengthen moderates, and enhance regional stability. As a matter of fact, our distinguished host, Doctor Rodman, stated at that time that there was a new sentiment in the Middle East that new forms of democratic governments were needed. I wish that were completely true. I sometimes wonder whether the sentiment which Doctor Rodman mentions -- or mentioned wasn't more prevalent in Washington than in the Middle East itself. Pity, for wars have never broken out between democracies. And so long as Israel remains the only truly democratic state in the Middle East, moderation and peace and regional stability will remain relative terms at best.

I would just say a few words about the part of the peace process which relates to Syria and Lebanon, mainly because there are just very few words to say. Not a great deal is going on right now. One still wonders what Syria's actual intentions are, whether their aim, their strategic aim really is to achieve peace or not. There are some views in favor of that, but there are many others against it. We will have to find out.

With regard to Lebanon, of course, the question is a lot more simple and a lot more complicated. Were it for Lebanon alone, there would be no problem to achieve peace within half a day, I suppose. But Lebanon is not free to act on its own. And therefore as long as nothing will be achieved with Syria, I am afraid the chances for making progress with Lebanon, all in good spirit, by the way -- the chances are not very big.

But about the Jordanians and Palestinians, things may look more promising. As regards to Jordan, and were it only Jordan itself, there never was and there isn't now much of a problem. We may, perhaps, even be on the verge of agreeing on the setting up of working groups or subcommittees, whatever the name will be, in order to deal -- how should I call it -- with the building blocks which may lead over time to a real peace treaty between us and Jordan.

With regard to the Palestinians, the interim self-government solution concept, in short, ISGA -- formerly called autonomy, but now having undergone a name change -- is a wise one not only because it will, hopefully, create a political breathing space during which the Palestinians in the territories will be able to evaluate what is achievable and what is not, and it will also afford the Israelis the possibility to assess how orderly the new world order really is as far as the Middle East is concerned, and whether all Arab states are really serious about making peace with Israel. And, of course, it will be a time when it will be possible to evaluate whether the Palestinians in the territories do or do not accept the principle of Israel-Arab coexistence, which is our guideline in this whole process.

Yes, we shall make important, far-reaching, we think generous proposals to the Palestinian Arabs in the territories, which would give them the opportunity to manage their own affairs in most walks of life, run their life, but not threaten our lives. And we have submitted a number of papers, a number of documents, one a 10-page-long document and a rather shorter one accompanying it, which address most of the problems which relate to what I would call normal government functions in any other country, but security will continue to rest in our hands. It is certainly less than the Palestinians -- certainly the Palestinian extremists -- are hoping for. It is a great deal more than they ever got from the Jordanians or the Egyptians who occupied the West Bank and Gaza for 19 years.

Permit me -- I will come back to that subject later on, but permit me at this juncture to make a more general observation. Some Middle East commentators have tried over the years to depict the Palestinian problem, or the Israeli-Arab conflict as the main or even only reason for instability in the Middle East. Though Saddam Hussein's aggression against Kuwait and his threats against Saudi Arabia have provide ample proof to the contrary, this sort of "don't confuse us with the facts" concept is still very much on some people's minds. This, by the way, in spite of the fact that most conflicts in the area over the years have erupted between Arabs and Arabs, Moslems and Moslems, and not between Arabs and Israelis. This is something which people who believe that arrangements between the Arabs and Israel would overnight create comprehensive peace and stability in the region should keep in mind. And I haven't even mentioned Libya and Iran yet.

One also often hears about the need for, I quote, "reconciliation in the Middle East." This is certainly so, but reconciliation may actually be an inappropriate term, for it implies that somewhere, sometime, in the past, the Arabs and Israel had actually lived in peace. Well, unfortunately, as we all know, this is not quite so. So, it isn't the question of territories, after all. There was no peace prior to 1967 before Israel repulsed Arab aggression and occupied the territories from which that aggression was launched.

Thus, we believe that the primary, fundamental prerequisite for peace between Israel and her neighbors is still for the Arab Moslem world to change its basic illegitimizing attitudes towards Israel and to the Jewish people.

Can one see in the present peace process some positive signs in that direction? If one tends to be optimistic, the answer is yes. If one tends to be pessimistic, the answer is not necessarily. The only thing that has happened is that the Arabs, and especially the Palestinians, have become a great deal more sophisticated and adept at public relations and at making their case acceptable to the public, not least to the American and even the Israeli public.

I, for one, would like to be an optimist, but I shall qualify my optimism with a dose of healthy caution. The jury is still out. You must remember that in the Arab Moslem world there is very little tolerance for independent nationhood for non-Arab or non-Moslem peoples. Therefore, the Kurds, who are Moslem but not Arab, are not entitled to a state and, similarly, the Christian Lebanese who are Arab, but not Moslem. Well, Israel is neither Moslem nor Arab.

And now, a few comments about Israel's long-standing and, I believe, still very valid security concerns. In the last two years, there have been far-reaching changes of the aspects of Israel's strategic framework. The facts are known: the end of the Cold War, the dissolution of the Soviet Union, the changes in Eastern Europe, and so on and so forth. Other developments, however, such as the march of democracy, which seems to be making considerable progress not only in Eastern Europe but also in Latin America and Africa, have not yet reached the Arab Moslem societies in the Middle East.

Now, as you know, President Bush has proposed last year an outline of his plan for arms control in our area. And that plan will probably be considered as one of the items in the multilateral talks, the first of which has started in Moscow a few weeks ago. Let me say that Israel has welcomed the President's initiative and we shall certainly hope that it can go forward. But we must remember that, contrary to the situation between the East and the West even while the Cold War was still going on, in the Middle East we have a dissimilar, a different situation because one of the sides has still not acquired complete legitimacy in all the eyes of the surrounding states.

Therefore, we believe there must be first a profound positive change on the part of the Arab world towards the Jewish state. In a continual atmosphere of hostility, any weakening of Israel's capability of deterrence would most probably bring about further wars in the future and not peace. What's more, the immense and increasing concentrations of modern, even conventional, not to mention unconventional arms in the hands of the Arabs, is an ill omen for the future stability in the area. And Israel must take into account that at a certain point, quantity becomes quality -- all of which could be aimed at her. Thus, geography, topography, strategic depth -- use any term you like -- or let's just say territory, are still and will continue to be a major factor in the country's ability to deter aggression or to defend itself in case such deterrence has failed.

Kuwait was conquered within a few hours. And had Saddam Hussein gone on to invade Saudi Arabia, it is that country's very size that would have afforded its American defenders sufficient strategic depth to eventually reverse the situation.

It's therefore only natural that there exists a basic common denominator among most Israeli defense experts, whatever their political leanings, that Israel, within her pre-1967 borders, does not possess sufficient strategic depth in order to be able to defend herself. This would be even more significant in a future missile war. Scuds and similar missiles are basically terror weapons aimed at the country's civilian population. They do not determine the outcome of a war.

But, as you know, Israel's army is mainly a civilian reservist army which has to be mobilized over several days while a missile attack could easily delay the process of mobilization. During that time, our very small standing army would have to exploit the defensive barriers provided by strategic depth all the way to the River Jordan in order to stall the aggressor. Therefore, it should be clear that in any political peace formula which may eventually be arrived at, Israel, I believe, will insist on maintaining an effective military and infrastructural presence in Judea and Samaria, and probably in the Gaza Strip as well.

This, at least in the past, let me remind you, has also been the traditional position of the United States. Indeed, in 1982, President Reagan declared, and I quote, "I have personally followed and supported Israel's heroic struggle for survival since the founding of the state" so-and-so many years ago -- he said 34, and in the meantime it's 43. "In the pre-1967 borders, Israel was barely ten miles wide, within artillery range of hostile Arab armies. I am not about to ask Israel to live that way again," end of quotation.

As you know, it was agreed by all sides that Security Council Resolution 242 should be the basis for these peace talks. You also know that 242, almost like in a religion, means different things to different people. It is our view, a view which is borne out and shared by statements of those who formulated Resolution 242, that it is certainly not synonymous with land for peace, wording which is nowhere even mentioned in the UN resolution, just to mention one point. Any possible Israeli withdrawals from territories must surely be predicated on the security angle, which is mentioned explicitly in Resolution 242.

Thus, Israel at the time could consider withdrawing from all of Sinai, with the hundreds of miles of desert stretching between her and Egypt, plus the Suez Canal, as a reasonable security risk, while withdrawing from areas which are at a distance of -- not flying distance, driving distance -- of 12, 15 minutes from Tel Aviv, or 1-1/2 minutes from Ben Gurion Airport, or 1-1/2 seconds from the center of Jerusalem, not to mention the Golan which overlooks most of northern Israel, as a risk which it can never afford to take.

The other day I found a quotation -- I want to be bipartisan -- that was from Reagan, now it's from FDR -- back in 1941. He said, "Old-fashioned common sense calls for a strategy to prevent an enemy from gaining a foothold from which he can mount a later attack." Well, in that case, we also prefer old-fashioned common sense.

There has been some talk, including from good friends, that the US may be willing to extend security guarantees to Israel. While we do not want to seem to be ungrateful, I think whether there will be such a guarantee or not, Israel will not and should not change its long- standing policy, based on principle as well as practicability, that we do not want American soldiers to shed their blood for us. And let us not forget that had Kuwait been Israel -- and that, after all, was the role intended for it by the aggressors in 1967 -- Israel, after six months, contrary to Kuwait, would never have had the chance to come back another day. There just wouldn't have been any Israelis left.

A word about the future. I, for one, do not or did not share the view that the strategic aspect of the US-Israeli relationship was the most important one. I think it is the shared moral values and spiritual ties which form the basis for the close, and often stormy, links. But even with regard to the strategic aspects of our alliance, whatever the importance of temporary coalitions with this or that Middle Eastern state -- and we have nothing against that -- one thing is absolutely clear. Real, long-lasting relationships can only exist between democratic countries, only where the public will support them, and where democracy ensures stability and continuity. They may not be viable in countries that are ruled by dictators or by narrowly-based political or military cliques or families, which not only can change their policies at the flip of a coin, but can themselves be overturned by this or that sudden event.

Now, conventional wisdom holds that the Soviet Union out of the way, the American-Israeli strategic alliance or reliance has become irrelevant. I think this is taking a rather short-sighted view. Although politics usually does not pay too much attention to the past, especially to the recent past, or as Henry Adams once said, "Practical politics consists in ignoring facts," it is worth noting or remembering that if the Soviet Union, the former Soviet Union, did not make any real headway in the Middle East when it was a superpower, and most Arab countries were either neutral or in the Soviet camp, it was to no small extent thanks to Israel and to the American-Israeli strategic alliance.

As to the future, it is true that the character of a potential adversary has changed, and the threat to the region no longer comes from a Soviet Union which doesn't exist. But for instance, a combination of Moslem fundamentalism and tyrannical military oriented nationalism in parts of the Moslem world, both being pathologically anti-Western, certainly anti-American, is potentially at least as troubling as the former communist threat.

And don't we have to think about Iran? I think we do. As Dr. Martin Indyk, Director of the Washington Institute for Near East Policy has recently written, I quote, "Just as US administrations in the past allowed their antagonism towards Iran to blind them to the rising danger of a powerful Iraq, so too it is important to avoid allowing an obsession with Saddam to blind American policy makers to the dangers of the balance tipping in favor of the revisionist Iran." He even warns about the possibility of an Iraq-Iran rapprochement on the basis of their common concern to remove the American presence.

What about the 60 million or so Moslems in the former Soviet Union? Which direction will they take? Will they become secular and democratic as we all hope or will they join the ranks of the fundamentalists and rabid nationalist states? Who is to say? Indeed the dangers emanating from this direction to American and Western and Israeli interests may be greater than the old Soviet Union have represented. They're hoping that none of this will ever come about. One cannot escape the conclusion that when it comes to the crunch, the US and Israel do not really have many better alternatives, except their close strategic and political relationship.

This may be even more important now in an age where the US is intent to make effective defense cuts of its own, defense arrangements with Israel, including large-scale prepositioning of American arms and equipment in Israel, to borrow a term from another field, in a user- friendly atmosphere is probably the best way to go about it. Of course, Israel has its own very serious economic constraints. Our number one priority -- priority challenge promise is to successfully absorb the one million emigrants from the from Soviet Union whom we expect till the end of 1995, 1996 -- 400,000 have already arrived as you know, and this is indeed the challenge, unprecedented anywhere, anytime. But nor can we ignore the realities around us, whether they are political or military.

And back to the peace process. Israel, no less than the US, it determined not to let the peace process falter. Anybody who can doubt that does not understand the reality in which we live. Anybody who can doubt that the people of 4-1/2 million, facing 117 million Arabs in 22 Arab states, would not want peace as a first priority -- yes, peace with security -- is either not aware of the facts, or is willfully distorting them. So we are hopeful, but we are also realistic about it.

One thing must, however, be clear. Whatever solution there will be, it must be based on compromise, and not on the demand for total renunciation by the parties involved of all their interests and aspirations. Of formulas of compromise, there are more than one. Israel has not a priori ruled out any one of them. As you know, there are different formulas, some are accepted the Labor Party, others are accepted by the Likud and other government coalition parties, but all of them include the element of compromise, whether there is territorial compromise, favored by the Labor Party, or whether we are talking about functional compromise of one sort or another, and there are different expressions and interpretations of what functional compromises mean.

All Israeli parties -- I should say all Israeli major parties, because there are some on the fringe who have different views -- propose different formulas of compromise. And we are hopeful that the Arabs, too, are not going to repeat the mistake of rejecting out of hand what we propose to them, or what we are going to propose. Only if they recognize that compromise must be a two-way street, that the future of the territories must be one of coexistence not of mutual exclusion, will there be a real chance for a viable settlement.

So, in concluding, what can we say about the new world order? Should we hope for it? Yes. But is it already upon us? I'm afraid not yet. And not only in the Middle East. And here we have people like Mr. Fukuyama (sp.) telling us that history has reached its end, as if that were possible. If we just look at what is happening these days in the Balkans or in the Caucusus, we actually see a replay of history, hopefully with a different finale than last time.

We're also being told that ideology is dead. Indeed, how does one define ideology? Is nationalism -- nationalism, which has become the dominant force in most countries of Eastern Europe and the former Soviet Union -- not a form of ideology? A dangerous, potentially destructive ideology perhaps, but then many many ideologies have turned out to be harmful to someone. And what about Islamic Fundamentalism or the less attractive aspects of religious revival in Russia? Are they expressions of some tame, enlightened form of liberal democracy or consumerism? I think not.

The power realities in the world may have changed, but the realities of power and of what makes people act this way or that way have not disappeared from this earth. So I suppose before we shall see a new world order we shall still see a great deal of world disorder. And as the representative of what we think is America's principal ally in our rather dangerous neighborhood, let me say America's role as the leader of the world now may be even more important than before, to the world and to itself.

Thank you. (Applause.)

MR. RODMAN: Thank you very, very much. We already have a number of questions, and they're still coming in. I'll leave them uncensored so that they'll be heard by everybody. The microphones are working here and here.

A couple of questions, as you would expect, about the loan guarantees. One of them is as follows: Israel can settle most of Russian Jewry with the 10 billion [dollars] in loan guarantees. Why does Israel regard its territory as that important that Israel would risk the 10 billion [dollars] in loan guarantees?

AMB. SHOVAL: One by one, or -- ?

MR. RODMAN: No.

AMB. SHOVAL: Okay.

MR. RODMAN: One at a time.

AMB. SHOVAL: Well, this is exactly the quandary we find ourselves in. We do see the absorption of the Jewish immigrants from the Soviet Union -- not just they Soviet Union. They are the bulk. There are also some people coming in from Ethiopia quietly and from other countries in the Arab world and other places, but the bulk is from the Soviet Union.

We do see this, without any doubt, as our immediate number one and number two -- if you want, to number 10 -- priority because this is an historical opportunity, there is an urgent need, the dangers of anti- Semitism in the former Soviet Union or at least in parts of the former Soviet Union are increasing, we have -- all or some of us -- have experienced similar situations in the past when the world was not aware of the dangers lurking to the Jewish population and chances which were missed, without comparing the two, and there is a real urgency.

Now, the question of the territories is a double-edged sword. On the one hand, as I tried to explain briefly in my lecture, if we lose the territories -- or if we lose an effective presence in the territories, to use a minimalist term -- we are not sure whether we can guarantee to our country the optimum amount -- there is no maximum if security is concerned -- but the optimum security which we will need in order to safeguard the people who are coming to Israel ourselves, the future of the Jewish state.

Therefore, and I will be very candid with you, one of the purposes of the settlements -- there are others. There are other purposes. There is ideology involved, history involved, sure. The main purpose is to prevent these territories ever to become a Palestinian state in which Israel would have no presence whatsoever, militarily or otherwise, or if we shall not be successful for some reason and there will be a Palestinian state, at least to create a situation where it will be less threatening to us, where it will be further away from our main population centers and economic centers. And anybody who has been to Israel, and been, for instance, in the Sumarian Mountains -- hills -- mountains -- hills, he would see one-third of Israel, all the way from Ashdod, Tel Aviv, Netanya, all the way almost to Haifa like the palm of his hand. This is something which we cannot risk. So we are, as I said before, in a quandary. Now, the second aspect which I would like to mention, the settlements, the future of the territories, that is the very focus of this whole peace process between us and the Palestinians. That's what these talks are all about: the future of the territories -- as far as we and the Palestinians are concerned. Syria, Lebanon -- that's something else. This is disputed land.

Now, we have always said, "Let the Arabs come and sit down with us and negotiate with us." The Arabs were reluctant to do that in the past because they have always had the hope for America to, quote, "to deliver Israel". They tried it under the Carter administration unsuccessfully. America never did that. America always said, "You negotiate with Israel."

If the Arabs were to get one of their major, major aims in this whole process -- not as a result of a quid pro quo for us, not as a result of negotiating with us for a long time and we could get this but to get this, and they could get that -- but as a result of American pressure on Israel with regards to immigration, with regards to economic aid, I believe, knowing the mind of our neighbors, they would become more intransigent, not less. They would become less flexible, not more. And I am afraid we see already signs of that.

So that is our argument with regards to the loan guarantees to America. We think that the American stance in this respect is mistaken. We also try to remind them that we are an ally and have been an ally and will be an ally, and there should be some consideration for that. But we are still negotiating.

Nothing is final yet, and being an incorrigible optimist, let's hope something will be worked out.

MR. RODMAN: Do you ever envision a day when Israel will no longer need financial aid from the United States?

AMB. SHOVAL: Oh, yes. The American financial aid to Israel is not very considerable. And I want to put these things in proportion.

America's civilian financial aid constitutes 3-1/2 percent of Israel's budget. We are very appreciative of that. It's $1.2 billion civilian aid. All of it, by the way, goes back immediately to America as payments of interest and principal on former security loans, because most of the financial aid which we get from the United States, the $1.8 billion per year, is military aid, which, I think, was for a good purpose, will continue to go on for a good purpose. I think it serves America's interests. Certainly it serves Israel's interests. It serves the security and stability in the area. It is not so large when you compare it to the equivalent amounts spent by the United States in other areas of the world, only there it didn't come under the heading of foreign aid, it came under the heading of American defense expenditure. We are appreciative of that. We thank America for that. But we should see things in proportion.

Now, one further addition to that. This is the very point. Israel could, within a few years, stand on its feet -- on its own feet economically. In the modern world today, what counts is not raw materials. There are plenty of countries in Africa and other places which have raw materials and are poor.

What counts today is human resources -- knowledge. And Israel has one of the largest accumulations of highly skilled, scientifically skilled, technologically skilled manpower in the world, per capita of course -- even before immigration, certainly after immigration. So, if we get the necessary financial means, I believe that Israel, by the end of this century, will be one of the great economic success stories in this world. And, certainly, we shall be able to do without American foreign civilian aid, and I hope we shall certainly be able to do without it by that time. It's not convenient for us; it's not convenient for the United States.

MR. RODMAN: How can you term Israel a democratic state when it deprives all those living in the occupied territories of any political rights for almost 25 years? Isn't Jordan, which had elections, democratic?

AMB. SHOVAL: I don't think so. And we are certainly very happy that we have a relatively moderate neighbor to our east, in spite of Jordan's position or stance during the Gulf war. But democracy, in my eyes at least, is when the people, through its representatives, determine the composition and the policy of its government and can change that government the next time when elections come around the next time. That's at least one of the principal tests. There are other tests, the rule of law and so on and so forth.

I'm talking about the state of Israel. In the state of Israel, all people of whatever creed or sex have equal rights, including Israel's 800,000 Arabs, who vote for the Knesset and are elected to the Knesset, are judges, everything they want, except for one thing because they chose not to do that. They do not have to serve in the army, although Christian Arabs, Druze, and Bedouins do, on a voluntary basis.

The territories are not part of the state of Israel. We are in the territories because we were attacked in 1967 out of these territories. And we are now in the process to negotiate the future of these territories, which did not, as you know, legally belong to any other state in the past. Jordan imposed its rule over the territories, Egypt in the Gaza Strip, which was not recognized by this country or any other country, except for two, Pakistan and Britain. It was occupied territory by the Jordanians. We conquered it in 1967 as a result of aggression against us. We shall now negotiate the future of these territories in which we believe both peoples have rights.

In the territories, the people who live there do not live in a fully democratic regime. Of course, they do not. Still, we have voluntarily set a precedent which has never existed in the past anywhere in the world and in any similar situation. The population in the West Bank and in Gaza can appeal to the Supreme Court of Israel, just like any Israeli citizen can. And, for instance, if the Israeli army makes a certain decision, which the population or people in the West Bank, Gaza Strip are not happy with, and there are many, they can appeal. And there are many cases when the Israeli Supreme Court has overturned a decision of the military government. And there is no precedent for that in Europe or anyplace else after a war and after a country has taken over a certain territory as a result of the war.

MR. RODMAN: Please comment on Seymour Hersh's book, "The Samson Option," which, if I recall, is a rather unfriendly discussion of Israel's nuclear weapons program.

AMB. SHOVAL: Well, nuclear weapons are not very friendly, but I haven't read the book, so I can't comment on it, I'm afraid.

MR. RODMAN: Would peace in the region be enhanced by a global moratorium on the selling of arms by the major nations -- the US, Russia, China -- to all other nations, and in particular to those in the Middle East?

AMB. SHOVAL: I believe that ultimately yes, but we must remember that the amount of military implements, arms and others, in the Middle East is unbelievably big. I believe, I may be wrong, you may correct me, it's bigger than NATO ever had, it's bigger than the Warsaw Pact had. The Syrians are now spending the $2 billion or so which they got for whatever they did in Desert Storm on busily buying Scud missiles, improved Scud missiles, improved Soviet tanks, and the amount of armaments streaming into the area is increasing, not decreasing. So the question is, how do you control it, how do you stop it, how do you cope with the armaments already in the region, which are immense. But in principle, yes, I agree.

MR. RODMAN: There are a couple of questions about the Golan Heights. One of them asks, is there any possibility of the Golan Heights being declared an enforceable demilitarized zone? The other question is, what are the prospects for an Israeli-Syrian condominium or power-sharing of some sort on the Golan Heights?

AMB. SHOVAL: I don't know. We are now in the process of negotiating with Syria and I do not want to state any position about the future -- about possible future arrangements. As you know, we are in the Golan basically for security concerns; otherwise we wouldn't have been in the Golan in the first place. The situation with regard to the Golan is different from the situation with regard to Judea and Samaria and Gaza - - West Bank and Gaza.

But at the present time we still have to be convinced whether the Syrians actually talk about peace or just about withdrawal, of Israel withdrawal from the Golan. We're not sure about that. As you know, the Syrians have refused even to mention the sentence that the goal of this whole process would be peace treaties. They have not participated in the multilateral talks in Moscow. We are not convinced yet, but we are talking. As long as talks go on, everything is possible.

MR. RODMAN: Do the Israelis feel threatened by the receptivity by the West of Hanan Ashrawi?

AMB. SHOVAL: Well, I think that some of the members of the Palestinian delegation feel threatened from time to time. (Laughter.) They're always looking over their shoulder.

I don't want to personalize anything. I said I think the Palestinians have become very, very successful at public relations and they have also become very successful at sometimes rewriting history.

Now, I always say, if you take me, a reasonably educated person, and you ask me about the intricacies of the situation in Cambodia, I won't know a great deal about that except for what I read from time to time in the newspaper.

And if you go on telling people we want the Israelis to give us back sovereignty, I'm sure several people or many people will think there was a Palestinian state or a Palestinian national entity, which Israel conquered, was sovereign and sovereignty should be reestablished. Of course, there never was a thing like that.

Or if people speak about Arab Jews without mentioning the fact that already 150 years ago the Jews in East Jerusalem, in old Jerusalem, there was none in Jerusalem, where the single largest ethnic or religious entity, not to mention that by the end of 1890 or so, before the birth of political Zionism, the Jews in Jerusalem were the actual majority. But when people hammer into your heads Arab Jerusalem, Arab Jerusalem, people create a certain mindset with which we have difficulties sometimes to cope.

So, yes, this problem of a changed image does hurt us from time to time, we have difficulties in coping with it, but again let's be optimistic and forget for a second this or that person. Maybe, maybe there is a chance of a new generation of Palestinian leadership in the territories, which have understood by now that the PLO to any sort of mentality has not brought them anything, has always told them, "Refuse any compromise, refuse any compromise, because you're going to get everything." Maybe they have learned their lesson. And we -- some of the people we sit with, we can talk, we can have a common language.

So I'm not ruling out that in spite of this or that spokesperson we may eventually reach an arrangement with them.

MR. RODMAN: On a related topic, why won't Israel re-open Palestinian universities if it truly believes it is being fair to the Palestinians?

AMB. SHOVAL: This is another case in point -- point in case or case in point? Whatever. (Laughter.)

MR. RODMAN: Case in point.

AMB. SHOVAL: Okay, case in point. Nobody, of course, remembers or reminds us that before '67 there wasn't a single Palestinian university on the West Bank or Gaza. The Jordanians never permitted it. All these universities -- I believe there are five now; I may be wrong -- were open under Israeli military governments since 1967. Unfortunately some of them have from time to time become centers of terrorist activity, not of academic activity.

Since Madrid, or even before Madrid, all except for one, I think for Bir Zeit have been reopened. Bir Zeit has not. If Bir Zeit's student body and the faculty will refrain from terrorism, there's no doubt that the university will be reopened immediately, like the one in Hebron and other places, Gaza and so on and so forth.

MR. RODMAN: What is or should be the role of the United Nations in maintaining peace in the Middle East?

AMB. SHOVAL: Well, that depends really on the future of the United Nations. Our experience with the United Nations has been mixed. I'm just talking about the peacekeeping role. Let's not forget that back in 1967 the United Nations was in charge of the -- of the southern Sinai tip of free passage through the Aqaba straits. And when Nasser ordered them out, they left within, I think, ten hours or seven hours or four hours or whatever. There were no further United Nations troops there.

But if in the future the United Nations will really represent the will of its members to maintain peace, perhaps it can play a role, which I don't want to define at the present time.

MR. RODMAN: Recent press accounts have noted that there is a ship bearing missiles from North Korea en route to Syria. Will Israel act to stop that ship and its cargo from reaching Syria?

AMB. SHOVAL: I'm not privy to that information. If I were, I might not say it here.

MR. RODMAN: I was hoping I'd get an answer to that one. (Laughter.) On another -- on a less dramatic --

AMB. SHOVAL: They don't keep the ambassadors so well informed. (Laughter.)

MR. RODMAN: I'm shocked, I'm shocked. Some questions on economics. We can agree on the potential of the population for economic growth, but how can you hope to achieve it within a statist centrally planned economy?

AMB. SHOVAL: Well, I entered politics basically because I wanted to fight statist central economic uses or habits or whatever in the Israeli economy. So, I think I'm -- I will not be suspected of being partisan in that. But I'd like to keep facts straight. Israel was never a socialist economy in the real terms as it is understood. Israel, even under a labor government, which after all ruled Israel up till 1977, never nationalized anybody's private property, or private enterprise, or anything like that. Israeli governments established economic enterprises, some for real needs, some for less real needs. The total ownership of the Israel economy directly in government hands amounts to about 18 percent of the economy, which is still too much. This includes some things related to security, and so on and so forth, but it's still too much, and the present government has decided, and has embarked on a program of privatization which I hope will go on, not only successfully, but also as quickly as possible. Now we were very centralized, or centralist -- that's correct -- not by direct ownership, but by the government controlling the capital markets and the financial markets, which made many private enterprises dependent on the good will or ill will of the government. This has changed. The capital market has been completely liberalized. The government does not play a more important role than the United States Treasury, for instance, does in the American capital markets, so I think that the infrastructure for economic development is certainly there.

Economic growth -- I say this very schematically -- is dependent really today on three factors: manpower, knowledge, and capital. The manpower and knowledge we have plenty of, we need the capital. And I think we'll do a good job of it.

Q Can you tell us something about Israeli proposals in the multi-lateral talks on cooperation in the Gulf of Eilat or Aqaba region?

AMB. SHOVAL: Yes, we -- and not just in the multilateral -- we have also made some proposals, unofficially at this time, in the bilateral talks with the Jordanians. There are several questions, or several matters related to the proximity of Jordan and Israel, the Gulf of Eilat, the Gulf of Aqaba. There is a question of pollution. Where isn't there a question of pollution? And there is a serious one, because the two cities of Aqaba and Eilat use, unfortunately, the Red Sea as a drain. And this is something we would like to address jointly.

There is a question of tourism. We don't need two airports in two cities which are, I mean, at shouting distance from each other, really, seriously -- very close. We could use one, big international airport. Other tourist arrangements which would serve both countries. We have proposed these things as a concrete step in the multi-lateral talks. Hopefully we'll make some progress on that.

MR. RODMAN: It's 7:30, and I'm very sorry to cut it short now. As you can see, there is a stack of questions, we could have gone on for quite a bit longer, but I think we -- it's time to release you, and extend our thanks to you for a fascinating presentation.

Thank you all for coming, and thank you, again, Mr. Ambassador.

(Applause.)