SECRETARY DJEREJIAN: Al, thank you very much for your very generous remarks. I consider you a true friend, and I think on the high note of your introduction, I will now conclude my remarks. (Laughter.)

I also want to say how much I esteem the Israeli Ambassador to the United States, who I also consider a good friend. Israel could not have sent a better representative at this time to the United States.

I think the Rabbi framed what Zalman and I are going to be talking about -- the peace process -- in most eloquent terms that I certainly could not emulate. I would like to make a few remarks about where we are on the Arab- Israeli peace process, say something about US-Israeli relations, and make some brief conclusions in the time allotted.

This certainly has been a very busy month in the history of the Middle East peacemaking. We've concluded the fifth round of direct, bilateral negotiations between Israel and all of its Arab neighbors -- immediate neighbors. We're now in the midst -- and concluding as we speak now -- the five multilateral working groups in the multilateral phase of the Arab-Israeli peace process, to which we attach a great deal of importance, because what these multilaterals are doing is what the Rabbi was talking about -- is going into the essence of what an eventual, comprehensive peace settlement between Israel and the Arabs could be in terms -- in human terms, in resource terms, in economic terms.

We've had the economic development working group meet in Brussels; in Vienna our experts met on the water issues; refugee group met in Ottawa; the environment group, in Tokyo, will be proceeding with its deliberations as we speak. And we concluded the arms control and regional security working group here in Washington.

I can tell you that in all of these groups, the tone -- and this is very important because, remember, this is a historic first -- we have Israel, the Arab countries with which it is negotiating directly -- not all of them came - - Syria and Lebanon did not come, the Palestinians are there, and about 11 other Arab countries from the region, plus the participation of Europeans, Japanese, and other countries, interacting in functional discussions on all these areas I've mentioned, and beginning to frame a structure in which, when peace is achieved at the bilateral level between Israel and its Arab neighbors, that the development of the region in whole can be approached by hitting the road running.

In ten days, the Syrian group will meet in Lisbon. This is the coordinating group of the multilateral negotiations, and I will chair that group along with my Russian colleague, and plan and coordinate the next steps for the multilateral phase of these negotiations.

An interesting thing has happened. The peace talks, now that we've come into this phase, have become commonplace. They are no longer the overwhelming concentration of the meeting. It's now taken as a natural course of events that Israel is sitting down in direct, face-to-face negotiations with the Arabs and the Palestinians. This is good. This wouldn't be the case a year ago, and it certainly wasn't the case in the last 44 years.

The Palestinian representation issue has been resolved in the bilaterals on terms which accommodated Israel's concerns with people from the territories in the bilaterals. We do have a disagreement on Palestinian representation in the multilaterals, which I'll mention a little later. The Israelis and the Palestinians are discussing interim self-government arrangements, exactly what Camp David promised. There is no international conference lurking behind the scenes. Indeed, much of what Israel has wanted in the last 44 years has been achieved by this process.

And we need to put this all into perspective, especially, if you allow me it, my own personal perspective. One year ago, Secretary Baker was doing the third shuttle into the Middle East. We had just recovered from our engagement in Desert Storm. That war took its heavy toll not only in human lives and material damage, but also in collective energies of us government officials who had worked all out for nine months to put together and hold together this US-led coalition. President Bush at that point ordered us to engage immediately in the Arab-Israeli peace process, and we evidently saluted. (Laughter.)

But everyone recognized the odds on bringing about peace talks. It was a question mark whether or not there was an attitudinal change either in Israel or among the Arabs which would allow movement toward peace. That had to be tested. Israel was recovering from Iraqi aggression which enjoyed Palestinian support. Syria was part of our coalition, but we were unsure whether this meant anything for the peace process. Jordan was vacillating during the war. There were some positive signals from the Saudis, but we were unsure whether these were real or not.

But there were some signals that were worth exploring. Prime Minister Shamir told us that he wanted to pursue peace, but needed Arab states, just not Palestinian, partners. President Assad of Syria was telling us that he was serious about peace. The Saudis had begun to open up. The Palestinian insiders seemed ready to assert their role, something that we had not seen before. And, at a latter point, the Egyptians proposed a tradeoff between settlements and an Arab boycott, which received wide Arab support.

So, we looked at these positive indications, weighed them against the negative factors, and plunged ahead in what looked like murky waters. But with the strongly held views of President Bush and Secretary Baker that there was a unique window of opportunity following the war in the Gulf to launch a peace process and to build on the ambience created by the reversal of Saddam Hussein's aggression against Kuwait, so we plunged ahead. The Secretary made his shuttle voyages to the Middle East. We had very deep discussions with Assad in Damascus, covered the entire range of our relations, as well, of course, as the peace process.

I want to make clear that no deals were cut. There were no winks. There were no nods. Nothing was given away. We described the peace process on our own terms and described our bilateral concerns on their own terms, the terms of US-Syrian relations. Through persistence and patience in our discussions with all the parties, we overcame very serious procedural issues.

And you'll remember, when the peace talks actually started, the weeks that were spent on a couch. Zalman remembers those weeks on the couch very well.

The only thing Zalman and I did not succeed to do is buy that couch because I wanted to have it auctioned off at Sotheby's. That's a very historic couch. (Laughter.) But there is the financial disclosure that I have to -- (laughs).

But, in any case, through this persistence and patience in our discussions with all the parties, we overcame these issues and, in all cases, we reached agreements on terms Israel could favor and could accept. There were no Jerusalemites on the Palestinian delegation. The UN would be there only as an observer. The reconvening of the conference could take place only if all the parties agreed. And no third parties in the negotiations could participate unless the parties themselves directly concerned agreed.

Now, I emphasize all of this to share with you a fundamental personal and professional perspective; namely, that we have achieved something that was unthinkable a year ago in structuring a peace process which accommodates Israel's concerns and seeks a comprehensive peace on all fronts. I saw things up close in Syria for three years, as Al mentioned. We saw that the global change in East-West relations was impacting very dramatically on the Middle East as a region. The zero-sum game in the Middle East rapidly became over. And we detected very important shifts in strategy and tactics in terms of the leaders in the area, especially on the Arab side.

We entered into a substantive dialogue with the Syrian leadership which helped produce positive results which served US interests. The civil war in Lebanon was ended. Syria joined the Arab League moderates against Saddam Hussein and joined the US-led coalition in the war against Saddam Hussein, something that would have been unthinkable a couple of years ago. And most importantly, in my view, Syria said yes to the letter that President Bush sent him, that Secretary Baker delivered, we deliverd to the Syrian Foreign Minister in Lisbon, and joined the peace process. That moment was one of the two historic breakthroughs. Once Syria said yes, that meant that one of the most important aspects of the peace process was established, Israel's ability to negotiate peace with all of its Arab -- immediate Arab neighbors. We then had to work on the Palestinian equation to establish the second track of Israeli- Palestinian discussions.

I'd like to mention in this context that there have been other very positive developments that have occurred for US israeli relations in wihcn the US has played a major role. And I think I'm especially well placed to talk about this. First, an overwhelming majority of states joined in a repeal of the UN resolution equating Zionism with racism. That was an initiative that President Bush took in the middle of the peace process.

Last October, Russia resumed full diplomatic relations with Israel, something we've been working on for years.

This year, Turkey and India upgraded relations to full diplomatic status, and China established relations with Israel for the very first time.

The United States assisted Israel in Operation Solomon, the airleft of over 14,000 Ethiopian Jews to Israel. The ongoing immigration from the former Soviet Union was fully supported by our government.

And then, as Al mentioned, the decision by President Asad to grant freedom of travel to Syrian Jews, and also to allow Syrian Jews to dispose of their property as every other Syrian citizen can was a major positive step in an effort that we made on humanitarian grounds with the Syrian leadership for several years.

Let me give one example from an area that I think many suspect is undergoing change; namely, the US-Israeli security relationship. Let me make clear that strategic cooperation continues and will continue. Our strategic ties with Israel remain very important. Israel's stability is something to be counted on in our view, especially in times of global and regional change. Secretary Baker has recently reiterated the administration's unshakable commitment to Israel's security. Let me make clear: We will continue to support maintaining Israel's qualitative edge. (Applause.)

On the other side of the ledger, it is true that we have seen some things differently, and we have to be frank about them. We disagree over settlements and loan guarantees. We differ over such procedural issues as the involvement of Palestinians from outside the occupied territories and the joint Jordanian- Palestinian delegation at the refugee and the economic development working groups in the multilateral talks.

Most of the time our disagreements are conducted in quiet channels, and many of them get resolved. And the man we deal with most of the time is sitting right here at the table. The occasional leaks from both sides are clearly irresponsible. But disagreements and leaks are not where this relationship is. The US-Israeli relationship is solid. From where I sit, I see the scope and depth of that relationship in every field, from major economic and military assistance to cooperation and consultations on economic matters, cultural and scientific exchanges. And I have a list here that I'm not going to bore you with, but a list of all the commissions, all the institutions, all the cooperative arrangements that we have between the United States and Israel that cover the whole panoply of relationships between two countries. It is the closest of relationships.

So let's look ahead. We need to keep the focus on the peace process and the unique historic opportunities afforded by the negotiating process. I don't want to minimize the tough decisions that Israel and the Arabs will face but I don't want to diminish the prospects for peace, security and recognition that can emerge from a successful peace process.

For my part, I am confident, and I don't say this as some foolish idealist, I am confident that we will make progress in this peace process. At the end of the day what we have instituted is in the highest interest of Israel and its people, and that of all the countries and people in the region. And it also serves US interests. With a little help from G-d, just short of miracles, we are determined to make it succeed. In effect, I think the US-Israeli relationship is actually maturing. This relationship has to be a two-way street and we have to treat each other always with respect. It's a mistake to gauge this relationship through the prism of our differences, over settlements and loan guarantees. That cannot and should not be the litmus test of this relationship. You know we have major differences with other key allies -- the UK and France. Those differences do not translate into a crisis of confidence which questions the whole relationship nor should our relations with Israel.

The US and Israel -- and this, I think, is the most important -- have shared values, shared values -- democratic values. Secretary Baker made it clear -- I remember I was there when he said this the first time -- it was in Damascus -- that the United States can only have close relations with those countries with which it shares fundamental values. And this was obviously a direct reference to Israel.

Our commitment to Israel goes beyond strategic cooperation. I think this is very significant. It is a moral commitment, personified by President Truman's fundamental decision to recognize the state of Israel 44 years ago. That will never change.

Thank you. (Applause.) (Applause.)

AMBASSADOR SHOVAL: Thank you, Ed. And let me say at the beginning I agree with every word that Moses said about our friend, Ed Djerejian. I enjoy working with him, and I feel that whether we agree or disagree, we can always be frank with each other. And there's always an effort on his side, perhaps also on my side hopefully to find solutions and not to find problems.

I certainly agree with what has been said about the progress which has been made in the peace talks. Even if there were ups and downs, this is to be expected. There will be further downs and further ups. This is a long, drawn- out process. This is a conflict, which according to the optimists has been going on for 100 years, according to the pessimists, for thousands of years. (Laughter.)

And you don't solve this overnight. That, by the way, Ed is an old Middle East hand, so he would not make that mistake, but there are some people in America who are convinced that their own culture who look at the problem, you analyze it, you suggest solutions and you solve it overnight. Not in the Middle East. (Laughter.) Not in the Balkans. Not in the Caucuses. So let's not expect anything too quick because this could be something which would lead to ultimate failure, G-d forbid.

The late Prime Minister Begin used to say peace is inevitable. And there is another historosophical position which says, no, peace is but an interval between wars, historically, not just in the Middle East. Well, I don't think that either of these definitions is quite accurate about the peace process, about peace between Israel and the Arab world. And that is the real question, not the Palestinian conflict, important as it is. The Palestinian conflict would have been solved, could have been solved, would be less fierce than it is had there been peace been Israel and the Arab states and the Arab world. But I would say peace is not impossible. And that my realistic, low-key assessment. And we should make everything in our power to make it possible. America has contributed a great deal in setting this up. The effort of Secretary Baker, his aides in the State Department, in the administration has been -- would have been irreplaceable.

But it is very important, first of all, we have to remember that this has not necessarily always been so historically. Sadat's initiative came on the strength of Sadat's and Begin's and Moshe Dayan's prior agreements before America got involved in the process. This time around, it's a different situation. It's a different situation because I believe that the primary motivation of the Arabs -- the Arab states, especially, to engage in these talks was to redeem its -- their relationship with the United States, and peace with Israel as a secondary, perhaps desirable, but secondary result. Therefore, America's position and role in this process is more important even than it was at the end of the Egyptian-Israeli process, namely, in the months leading up to Camp David and in Camp David itself.

The problem, of course, if we don't want to delude ourselves, is that the real problem of peace between Israel and the Arab world is not the problem of borders or territories or even settlements. Have you noticed that there is a lot more -- there are a lot more protests, propaganda on the Arab side against immigration than there is against settlements, because there are those in the Arab world who understand that settlements may be a physical fact. And Israel has always said that we do not say that the settlements, about which we believe we have a right -- some will say a better right, some will say at least as good a right as anybody else -- to establish in parts which were never part of any Arab sovereignty, but this is a factor which will come up in these negotiations once we discuss the permanent status three years down the line.

But immigration in the eyes of the Arabs and, of course, in everybody's eyes, this really changes the situation. Jews are coming to Israel. And there still exists a deep cultural problem in parts of the Arab world. I don't want to generalize. In parts of the Arab world. There is still some questioning of Israel's legitimacy, of the Jewish people's right to have their own sovereign state in an area which they consider, according to their cultural roots and beliefs -- wrongly, but they consider -- as a Moslem area.

And you see analogies. The Kurds are Moslem, but not Arabs. They are not given separate statehood. The Lebanese Christians are Arabs, but not Moslems. Their existence as a national entity is put in doubt. And you have a much worse attitude towards the right of the Jewish people. Unless that changes fundamentally, all other questions, important as they may be, will not assure the permanence of peace. Therefore, the multilateral talks are important, because the multilateral talks do create a certain infrastructure of both de facto and de jure attitudes towards day-to-day problems.

You may not like each other but you have to work with each other. Otherwise there will be pollution in the Gulf of Elat, Gulf of Aqaba. If you don't share the scarce water resources in the area, nobody will have enough water. The Gaza Strip doesn't have enough water without Israel. Israel's water resources are dependent, too, up to a point, on those in Judea and Samaria. Jordan's water resources are tied in with those of Syria and those of Israel, Lebanon. You can go forth -- Syria, Turkey, Iraq.

So maybe, maybe we can create, through these multilaterals, a certain web of interrelated, intertwined interests which will create the sort of change which we need in what I referred to as cultural attitudes.

America's role in this peace process will be important -- more than important -- not just as a sponsor. America is not in the negotiating room, but it's very much in the building. And never mind where that building is. Today it's in Washington, the other -- later on it will be in Rome. Hopefully, the talks themselves will really move to the region, and I understand that even some of our Arab negotiating partners are beginning to understand that only if we can away from the limelight, if we can really be in the region itself and talk to each other in a less obtrusive manner perhaps, is there a chance, prospect, for advancing peace talks. But America's role will be very important because of what it does, and because of what it will understand that it does not do and should not do.

Now, the next few sentences that I will say I will say with a question mark, I will put a question mark at the end -- not just because it's safer to do that -- (scattered laughter) -- but also there's a real question mark in my mind. Could it be that there is a perception, at least in Arabs' minds, that here the American administration has decided that in order to advance the peace process they have to be -- well, what's the term? -- evenhanded -- but evenhanded in such a way that will always be detrimental to Israel, because Israel is this small endangered country facing a huge Arab world which will has to come to terms with Israel's existence?

Israel in effect is the underdog, although we are sometimes being made in the media as if we are a superpower. As Levi Eshkol used to say -- (in Hebrew) -- Poor Samsom. And could it be -- could it be -- that some people in the Arab believe that what America is trying to do is to lean over backwards and even go to the point where it will endanger the very heart of Zionism, the very heart of what Israel is all about, ingathering Jewish refugees from an endangerd area.

And there is no argument between the State Department, Ed, the Secretary, ourselves that it is an endangered area, the former Soviet Union. And we frankly admit that without the loan guarantees, we will have a very difficult job of absorbing the additional 600 [thousand] or a million Jews who have applied for visas, but they're holding back because of the economic situation in Israel. And this is playing with time and playing with fire. In the Arab minds, this may look as an American concession to them.

And then we have this question -- Secretary Djerejian referred to it -- of the multilaterals. And I don't want to go into details, this or that, but the latest flurry, flap, about 194. We're talking code words and mystical sorts of numbers. Ed, if I were American and I would see in a resolution passed by the United Nations in 1948 which calls for the right of return, which is just a euphemism for hundreds of thousands of Palestinians coming into Israel, not the West Bank, which is another aspect, into Israel, as they say Jaffa and Haifa and so on, meaning really not endangering, much worse than that, annihilating the state of Israel from inside, if war is the continuation of policy by other means, this would be the continuation of unsuccessful war by other means. But that's not all. In that resolution, we have the internationalization of Jerusalem, including Maza (ph). We have UN authority over Nazareth. This resolution calls for a de facto dismemberment of the state of Israel.

Now, we know this is not the intent of the United States. We accept at face value every time America says, and we believe it, we know that it is so, that America supports Israel and its qualitative edge and the alliance. But one cannot go and say we continue to support a resolution like that in such a situation. Now, we do have assurances. We do have assurances from the administration that this is not the intent, this is not the interpretation.

But what do the Arabs see and hear? Well, maybe America would in the future abandon Israel or not fully support it. And, in that case, why should we, the Arabs, be more willing in coming to peace with Israel? Who knows whether the stability and permanency of Israel will be assured in the future if it does not have that relationship of trust and mutual credibility that was always part of the strategic calculations, both of Israel and of the Arabs in opposite ways? Therefore, all this has been put with a question mark and as a hypothetical assessment, but it has to be kept in mind here in Washington if we are going to attain the common aim of peace and stability in the Middle East.

Let me just add in concluding, I fully share Ed's statement that in all other spheres, or in many other spheres, relations are close, are friendly. We don't even mention them because they are part of our daily lives. I always say that the relationship between America and Israel are based generally on three things; yes, the shared values and the shared ideals, especially in an area where there isn't a single real democracy around. Yes, also the shared political strategic interests. And don't be in any way swayed by all these learned theories the Cold War is over. Yes it is, fortunately, but the Middle East has not become a Benelux, and oil interest are there, and Moslem fundamentalism is growing. And we have just seen in Azerbaijan, which is not part of our area, a communist president being reestablished. And nobody knows in what direction all these countries will go. And if it really comes to the test, America knows full well they only have one country and one people which unhesitantly and without any doubt will always be on America's side. (Applause.)

And the third point is something which may sound strange to you. I call it -- this is my own terminology -- constructive inertia. How can inertia be constructive? Well, it can. When you have so many common agendas, every day there isn't a single item or field or activity in which Israel and America doesn't have some sort of cogency, agreement, or interrelationship with the United States, whether it's in cultural activities, economic activities, agricultural activities, intelligence activities, military activities. All these things, thank G-d, are going on. Some of them are becoming stronger. Some of those people in the field understand that, politics notwithstanding, these are the real things that count.

Therefore, I believe that though we may have disagreements, and some of these disagreements will probably become stronger with the progress, with the progress of the peace process, not the other way around, because as you know, there are some basic disagreements between all American administrations and all Israeli governments ever since '67, whether it's Jerusalem, whether it's the territories, whether it's settlements. Never mind if it's Likud or Labor, never mind if it's a Democrat or a Republican. But I believe that we must find a way not to let these differences interrupt or disturb or sabotage the relationship between our two countries, because in the final analysis, neither of us has a substitute for the other. Thank you very much. (Applause.)

MR. MOSES, Moderator: In view of the time, what I'm going to ask is that those of you who wish to ask questions, let's see if we can get three questions up and asked, and then we'll call on the Ambassadors to respond to the three questions. Richard, if you would say to whom your question is directed, please.

Q: This is for Ambassador Djerejian. We heard Ambassador Shoval say that his government had been given assurances that the United States was not calling for international controls of Jerusalem and was not calling for the repatriation or right of repatriation of 2.6 million or refugees to Israel, to wit, Resolution 194. Can you, on behalf of my government, give me those assurances today and further state that at best or at worst, those issues are to be determined as to whether they want to be discussed by the parties in the peace process?

SEC. DJEREJIAN: Esther, are you up for a question?

Q: Mr. Secretary, I don't understand your use of the word "vacillating" with Jordan. As I recall, Jordan was a full-fledged ally of Hussein's, helped create the blockade. I was horrified recently when a dinner at the White House was given for this King whose hands are still covered with American blood, not related to Israel, but American blood. How do we justify this policy and talk about vacillation? (Applause.)

SEC. DJEREJIAN: Jason, I'm sure in your even-handed way, you have a question for Ambassador Shoval. (Laughter.)

Q: I regret to say that I do not. (Laughter.)

Q: Secretary Djerejian, I have a question about your comments about the -- (Off mike comment followed by laughter.)

Q: Of course, either Ambassador could answer this one -- a question about your comment on America's commitment to Israel's qualitative edge, and I was hoping that perhaps you could define a little more precisely the extent of that commitment, whether when billions of dollars in arms are flowing to other Middle East nations, we will protect Israel under all circumstances, with that commitment to qualitative edge. David Levy and Secretary Baker agreed to a committee or a working group that would examine the qualitative edge question. I wonder if there's further flesh that's being put on that agreement.

SEC. DJEREJIAN: Who said there's no free lunch? (Laughter. Applause.) I don't know the gentleman who asked me the question on what Zalman very aptly referred to as a code word of 194.

Q: Richard Westin (sp) of Los Angeles.

SEC. DJEREJIAN: Richard Westin of Los Angeles. But I knew you were going to ask that question and I have a response. But given how this issue has been really blown totally out of proportion, I'm going to read you my response so that every word, as it's being recorded, will not hopefully be misinterpreted. And I'll do it in English. (Laughter.)

Now of course, you all know what the position of the United States is on Jerusalem. I mean that is a perfect example of how this issue has gotten distorted. And why we're just not going to get drawn into interpretations of the specific terms and elements of 44-year-old resolutions.

Let me simply repeat, what is important here is what the partis themselves decide through this historic process of direct negotiations that was launched at Madrid. The parties themselves will decide what they raise and how they resolve it. So let's keep our eye on what is important, direct negotiations between the Arabs and the Israelis themselves. We must not be diverted from the historic opportunity we have within our grasp, a process which can lead to a comprehensive peace settlement between Israel and all of its Arab neighbors.

And that is my response to that question. (Applause.)

On Jordan vacillating, what I meant by that is that after Desert Storm and the defeat and reversal of Saddam Hussein's aggression against Kuwait, we set out on two major thrusts of our policy. One was the Arab-Israeli peace process, which I have outlined, and that Zalman has made his very important comments on. The second was what do we do in the post-war period against Iraq.

And so on that basis we went to the key countries in the region, including Jordan, including King Hussein, and we got the commitment from King Hussein that he would support the United Nations Security Council resolutions on sanctions against Iraq. That was important. I'm not going to comment on the past. That decision was important.

The second decision that King Hussein made that was equally important was that he would support fully the President's and Secretary Baker's initiative on the Arab-Israeli peace process and would assure that Jordan played a key and constructive role in that process.

Now, what I can tell you is that Jordan's participation in this peace process has been very important. It is playing a constructive and central role. The fact that we were able to create a joint Jordanian-Palestinian delegation and work hard at that with the State of Israel to come up with a formula that would be acceptable to both sides, Jordan played a very key role in that.

And Jordan's role in all of the multilateral negotiations, despite the fact that other Arab countries have boycotted, Jordan's at the table negotiating peace with Israel.

So, there are important strategic interests involved here. That's why -- what I mean when I say we've got to keep our eye on the ball. I am not making any judgment on the past. I'm simply saying what is in all of our interests to promote.

On the qualitative edge, I think it is well known what our policy is. When we say qualitative, our commitment to maintaining -- helping maintain Israel's qualitative edge. And when I say helping -- and the word helping there is because Israel does a lot for itself, and the United States is there to help Israel maintain its qualitative edge -- means against any conceivable alliance of potential, actual enemies against the State of Israel. So there should be no ambiguity on that -- the scope or the determination behind that commitment. In response to part of that question -- how do you justify all these -- the volume, the monetary dollar value of all these arms sales to other states in the region -- we look at this very carefully, we judge, we balance, we analyze the balance of forces, and every decision that is made is made within the context of the qualitative edge. We will do nothing to disrupt that qualitative edge. And as I quoted Secretary Baker, our commitment to the security of Israel is unshakable. Those words should not be taken lightly.

(Applause.)