AMBASSADOR SHOVAL: Thank you, Seymour. (Applause.) Thank you very much. President Schiner, members of the dais, friends. I don't know if you noticed that when President Bush was speaking they put me on his right. Now they put me on the left. There must be some deeper meaning to that. (Laughter.) Friends, I would like first of all to report to you about the peace process. As you know, in addition to my job as ambassador to the United States, I'm a member of the negotiating team with the Jordanian-Palestinian delegation. And I think this is a good opportunity to tell you a bit where we stand, where we think we stand, where we hope we are going.

I must say that one additional reason to try not to have wars is to avoid these lengthy, tedious peace talks. (Laughter.) But it's not an easy job. Not everybody understands sometimes that we are trying to settle a conflict which has been going on for a hundred years -- some people say more. And, of course, many of the problems can't just go away, be made to go away, and this will take time. But we are hopeful.

I would say that on the positive side, there has been some progress in the last two weeks. With regard to the Palestinians, we may be nearer an agreed agenda. But on the downside, one must also mention that we had perhaps expected some more realism, some more reciprocity on the part of the Palestinians. And though they were or they are toning done their rhetoric and the atmosphere was good, they still again presented us with a framework for self government arrangements -- and that's what we're talking about right now, what used to be called autonomy, which in all but name is an independent Palestinian state. But on the agenda, we may be nearing a possible modus vivendi.

I must also confess that I was somewhat disappointed by the words of the head of the Palestinian delegation when he said by way of criticism that the Israelis are still rooted in their zionist program. (Light laughter.) Indeed we are, and always shall be, for zionism is the movement of the Jewish people's national rebirth. It is the fulfillment of a promise and a prophesy. And it is perhaps the greatest expression of the determination of the Jewish people never to say die, never to give up. And when one sees the hundreds of thousands of Aliya of immigrants which have come, which are coming from the former Soviet Union and other formerly communist countries, coming home to the land of their forefathers, we may indeed be witnessing one of the greatest victories in modern times of the human spirit over age old despotism and persecution. And I think we can justly exclaim, with an exclamation mark as well as with a question mark, and say, where is communism today and where is zionism? Ladies and gentlemen -- (interrupted by applause).

In recent years, especially in the preceding year -- and Seymour (sp) alluded to that a bit -- there were those who had sometimes questioned the permanence, the solidity and warmth of the American-Israeli relationship. Some did this out of a lack of understanding as to the real nature of this relationship, and others did this because they wanted to destroy the relationship.

And let me say in the context of the peace talks, the peace process, I think that another prerequisite for peace in the Middle East is the continued close, special -- yes, indeed, special -- relationship between Israel and the United States of America, not because we will ever want American boys or girls to fight for us -- we never did and we never shall -- but if the Arabs were ever to believe, for whatever reason, that America is no longer basically Israel's friend, Israel's ally -- and until recently some Arabs misread the map in that respect -- if that perception were allowed to take root, I would say that the Arabs would stall on the peace process and perhaps one day even consider renewed aggression against Israel. But beyond that, it is important for the American people, for members of Congress, Jews and non-Jews alike, to know, to fully understand that both the preservation of the common moral and democratic standards which the two countries share, and maintaining a strong and viable state of Israel in that rather unstable neighborhood called the Middle East are not only Israeli interests but also very important American interests.

Yes, indeed, there are also common interests -- call them interests, call them any other way, there are common interests. Conventional wisdom holds that with the Soviet Union out of the way, the American-Israeli strategic alliance became irrelevant. But isn't this taking a rather shortsighted view? The character of a potential adversary has changed. The threat does not come from a non-existent Soviet Union. But couldn't, for instance, a combination of Moslem fundamentalism, as embodied by Iran, and tyrannical military-oriented nationalism in parts of the Moslem world, both being pathologically anti- Western, be potentially at least as troubling as the former communist threat ever was? And what about the 60 million or so Moslems in the former Soviet Union? Which direction will they take? Hopefully, they will go into the secular, democratic direction, but we have no guarantee of that. And though Moslem fundamentalism may not constitute an immediate, imminent military threat, the very fact that what Moslem fundamentalism represents is a total rejection and vilification of anything related to Western values of democracy and human rights and tolerance, I think, should give room for worry because it is not out of the question that against a common Western, American, Israeli enemy, even Moslem fundamentalists could ally themselves with a different Arab regime like, for instance, the regime in Iraq.

In this context of the Israeli-American relationship, let me say that though this was surely not the intention, looking back at last year's controversy about the loan guarantees, maybe that squabble even set back the peace process, at least for a number of months, for as Tom Friedman, whom we saw this morning in the audience, has recently written, the Arabs, the Syrians, the Palestinians, and so forth, were sitting around last year watching Israel- bashing, and they drew a conclusion from that that they were not expected to make any compromises. And maybe now they had a rude awakening. And I think it is very important for the Arabs to know that although the United States rightly plays the role of an honest broker, this does not mean the United States does not continue to be a friend and ally of the state of Israel.

I mentioned the Syrians before. I understand Prime Minister Rabin addressed that question yesterday over the satellite. You know that the present Israeli government has declared at the outset of this round that we do accept the applicability of Security Council Resolution 242 as the basis for negotiations also with the Syrians. So, there has been some improvement.

Atmospherics have improved, and that is important in itself. And the Syrians submitted to us at the last round a paper -- diplomats call it, for some reason, a non- paper, but it's a paper -- and I must say that in spite of the fact that nowhere in that paper is there a specific reference to the state of Israel, there is a reference to peace, but in a rather abstract fashion. And I don't want to go into the details of the contents of that paper.

I think it is important that this thing has occurred. Still, we have not seen in that paper a basic change of the Syrians, not yet, not yet, anyway, and in fact, it is in this context that Prime Minister Rabin has said we are willing to discuss with the Syrians also interim arrangements if the Syrians would welcome that, and we shall see how they react once the talks resume in about five days from now.

Having said all that, let me, however, also stress that when we see the Syrians spending hundreds of millions or more of dollars on the most modern available Scud missiles and Scud launchers and tanks from Czechoslovakia, and modern planes from the former -- well, from Russia, we ask ourselves against whom is all this arsenal directed if they really want to talk peace to us. The jury is still out.

Coming back to the Palestinians, we have not yet had a clear- cut answer to our proposals, and we can only hope that the Palestinians are beginning to understand that only by negotiating with Israel, not by fighting her, can they achieve anything. I wouldn't say that the situation is bleak, but nor is it going to be roses all the way. We have made to the Palestinians the most concrete, the most far-reaching, the most general proposals to run their own lives. They have never had proposals like that in the past. But let there be no mistake; we want them to run their own lives, not to endanger our lives. And this may really be the wrong way of putting it because when they were under Jordanian occupation or Egyptian occupation, of course, they were never offered anything. We have submitted to them a detailed plan for the interim self- government arrangements, 15 different spheres -- somebody else could call it 15 different departments -- in most walks of life, excluding however security, which will remain in our hands, excluding foreign affairs, and excluding these areas or these topics which relate to the Jewish inhabitants of Judea, Samaria, and Gaza.

We have proposed to them general free elections, the only place in the Arab world. We have proposed to them a timetable. We said if we can come to an agreement, and we don't mind whether we change one word or another; we are not wed to this or that formulation, but if we can agree on the concept, we are proposing a timetable. Let's have elections early next year, perhaps as early as April or May. And it's really up to them.

The Palestinians have some problems. Some of those problems are self-made. And we sometimes have a feeling that the PLO, with all its destructiveness, probably being afraid that if progress in these talks will be too fast they, the Tunis crowd, would be out of a job, that they are sometimes influencing the delegation here in a rather negative way. And also the Palestinians still try to bring up issues like Jerusalem and the Jewish settlements, which are not part of the Madrid formula, which is the underlying basis for this whole process.

However, as I said, we have made proposals with regard to a common agenda, and when they get back here in five days, we hope they will have made up their minds to engage us seriously in trying to find an acceptable solution to what is, after all, mainly their problem.

All this, my friends, is something which also the Arabs must inculcate into themselves if peace and prosperity, no less for them than for us, is to have a chance. They must come to understand that the land of Israel is our land, by right, by history, by international law. It always was, it always will be, and we shall never allow the Arabs to rewrite history, something they are very good at. Like talking about an Arab Jerusalem, which never was, or a return, a return, of Judea and Samaria territories to an imaginary Palestinian sovereignty which never existed.

But even if there will be some disappointments, Israel will not give up. It will never relent on the pursuit of peace. (Applause.) Yes, yes, this land is ours. But we have offered -- (applause) -- but we have offered to share in it. We are willing to compromise. We are willing to make concessions, not because the land, all the land, isn't ours, but because anyone who will look at the peace process, including the Palestinians, and peace is the goal, should know very well who is willing to make sacrifices for peace and who is not.

But it should be just as clear to everyone, friend and foe alike, that we shall never again put ourselves in the position we were in just 25 years ago. The way Uzin Arquist (ph) described it this morning, when Israel was all of eight miles wide, when had it not been for the mistakes of the Arab aggressors and had it not been for the boys and girls of the army of Israel, our country could have been cut in two, for ours was the fate intended by Saddam Hussein for Kuwait, only worse -- much worse.

So let me reiterate loud and clear: we shall never to back to the pre-'67 borders. (Applause.) Nor, let me add, will there be a Palestinian state, and I was glad to hear President Bush this morning saying that he and the United States continued to oppose the creation of a Palestinian state. (Applause.) Thus, security will continue to be our main concern. And there someone had said, even if the lion lies down with the lamb one day, we'd rather be the lion. (Laughter and applause.)

So may -- the question may come, am I optimistic? You know there's a definition of an optimist which says that an optimist is someone who doesn't have all the facts. (Laughter.) But Israel cannot risk not having all the facts, or for it to make mistakes, the sort of mistake a great power can sometimes do, and does. So we would be putting our very existence in jeopardy.

I think it was Ambrose Beards (sp) about a hundred years ago who wrote -- who defined peace as a period of cheating between two periods of fighting. (Laughter.) That is not the way we see peace or want to see peace between us and the Arab world. And I say, peace is possible. But first, we have to remember there can be no peace without security. Security is the key to peace, not the other way around -- especially in the neighborhood we live in, as I said before. We also have to be realistic about stability in the Middle East.

Stability in the Middle East is not like stability in North America or in Western Europe. For centuries there have been conflicts in the region that had nothing to do with Israel or the Jewish people. And even if the present peace process will bear fruit, as we all pray it will, let us not forget that nowhere in the Arab world is there democracy. Israel is the only democratic country in the area, surrounded by a cultural, religious, and political environment which is hostile to the very concepts of democracy and respect for human rights. For us, for Israel this is not just a philosophical or even political question. It is a very practical issue. For wars -- just think of it -- have never broken out between democratic states. And as long as Israel remains the only democracy in that area, peace and stability and moderation will be relative terms at best in the Middle East. One could indeed add, after the great stride democracy has made in recent times in so many parts of the world, why is there so little emphasis on furthering democracy in the Middle East?

In conclusion, my friends, let me say then -- and it has been said by others before me -- we do indeed live in miraculous times. The great story of the new Jewish exodus from the former Soviet Union, from Ethiopia, these days from Yugoslavia, unfolding before our very eyes is perhaps no less a miracle than the original exodus ever was. I don't know who it was in Israel who said if we don't believe in miracles we won't be realists. But for miracles to be completely realized, we have to help them along. That's part of Jewish tradition. And right now we have to mobilize all our strength, all our available resources to bring the miracle of the new exodus to its ultimate conclusion.

We must make certain that all the remaining hundreds of thousands of Jews -- maybe more -- who are still in the former Soviet Union and other countries in Eastern Europe and Asia, will come to the land of their fathers and be successfully absorbed there. Not just to come, but to come to Zion in dignity, as our prayers tell us. This must and will be our number one priority in coming years.

The economic problems involved are immense, and they have been made worse by the delay in the loan guarantees. We shall continue to face major unemployment for at least another two years, if not more. But now, with the loan guarantees hopefully going forward in the next few days, there will be new and I would say exceptional opportunities to make Israel economically independent.

Of course, in order to succeed, the loan guarantees won't be enough. There have to be additional major investments. There have to be substantial economic reforms in Israel herself. And the US -- and this was mentioned also in the morning -- the US and the European countries should make a much more forceful effort to stop the criminal, illegal Arab boycott, which is still being enforced by all Arab states except for Egypt, including America's allies in Desert Storm, including Saudi Arabia. And I think whatever will happen on other issues, it should be a prerequisite that the boycott, which hurts the American economy as well, should be stopped. Certainly, somebody who is not willing to abolish its state of war with Israel should be told in no uncertain terms that that would be a prerequisite for the United States in any decision the United States may take, for instance, with regard to the F-15s.

I would also say to your wonderful organization that it would be a good thing if your organization, like others, would concentrate in coming years very much on the economic sphere. For as great as our challenges are, so are the opportunities. Israel has the highest concentration per capita of highly skilled technological and scientific manpower and woman power in the world today. If we can utilize that great natural human resource, I believe that Israel could, by the end of this century, be the new great economic success story of the world.

Friends -- (interrupted by applause) -- now that the political sun -- if we can put it like that -- is shining once again upon us, let me say that when the clouds were darkest last year it was the unity of the Jewish people, exemplified by people like you, by organizations like B'nai B'rith, and other organizations, other Jewish organizations, that gave us strength when strength was mostly needed, and made us see the many, many silver linings beyond the dark clouds; the silver linings of solidarity, of commitment, of courage and, ultimately, of determination not to relent on your and our just cause. And for this, all of us thank you from the bottom of our hearts. It is now, I understand, the 150th anniversary, at least the 150th year of the establishment of B'nai B'rith. So I can't say till 120, I'll say till 240. (Laughter.) Keep up the good work. We need each other.

Thank you very much. (Applause.) Thank you. (Continued applause.) Thank you. Thank you very much.

MODERATOR: Thank you. The ambassador is going to take some questions, but I think the last -- if I could have your attention. (Pause.) I think the last words of the ambassador were so fitting when he said we need each other, we need B'nai B'rith, and surely we need Ambassador Zalman Shoval, and he has demonstrated that to us today. (Applause.)

There are two microphones, I understand, on the floor if you have a question. We'd like you to be brief -- pose the question and identify yourself by name and where you are from so we can get a sense of the broadness and internationality of B'nai B'rith.

Q: Bernard Goldstein, New York City. Ambassador, you thanked us. We want to thank you for your persistence, too.

The question that I have for you is one of an analysis, if you will, being a very astute person with respect to Israeli politics. Is there a sufficient strength with the election just passed to make a meaningful peace and perhaps surrender some territory for peace? Are the Israeli people ready -- or do you feel that the Israeli political situation is suitable for that kind of a peace?

AMB. SHOVAL: If I were really astute, I shouldn't talk about Israeli politics. (Laughter.) Let me say the following, Bernard. I think the commitment and the desire of the people of Israel, and I would say all its government, and most of its political parties -- the commitment to peace should not be questioned, although there may be different approaches -- how to reach the goal of peace.

Now the question, of course, is what sort of peace will that be, and there are different ways to deal with that question. I think that most Israelis -- most Israeli political figures, right or left, center -- except for the fringes -- have always understood that peace cannot divorce itself from the concept of some compromise. However, compromise must be a two-way street, not like the Palestinians in that article by Tom Friedman, which I mentioned before, where he said that they were shocked -- the Palestinians and Syrians were shocked to understand that concessions and compromise were expected also from them. The whole of last year they thought somebody is going to deliver Israel.

Fortunately, that was never true, but that was their perception. They hope that perception is changing now.

What sort of compromise will remain to be seen. There is absolutely no wisdom for any Israeli, before negotiations will actually start on the permanent status three years down the road -- because right now we are only talking with the Palestinians about interim government arrangements, autonomy, I don't think it would be very wise for us to say what we shall or shall not agree to before the negotiations have even started. So let's keep this in our minds, in our hearts, and think when the moment comes what we can offer to them. But after having said that, I would like to repeat and underline the main factor, the main prerequisite for peace in the Middle East is not what Israel will or will not be willing to compromise on, but is for the Arab and Moslem world to recognize our right to maintain our sovereignty and an independent state, and although one can say, okay, so they talk to you, but as I mentioned before, even that Syrian paper, which is very welcome, doesn't say peace between Syria and Israel. So we have not yet reached that stage, and I think that's all I'm going to say about that. (Applause.)

Q: (Len Wasserstein ?), Beverly Hills. With the United States lowering its defense budget with what has happened in the Soviet Union and around the world, Israel -- even if peace is signed with the Arab neighbors, will Israel, faced with the F-15 request, et cetera, et cetera, will Israel ever be able to lower its guard, to put funds from defense industries into the economy of Israel? Will it ever be able to be in that kind of a position?

AMB. SHOVAL: I will answer the question in a somewhat different fashion. Israel, you are right, Mr. Wasserstein -- Wasserstein?

Q: Yes.

AMB. SHOVAL: Okay. (Off mike.) (Laughter.) Israel for the foreseeable future -- and the foreseeable future will probably mean many, many, many years -- will have to maintain a very strong military capability to defend itself. Even after we signed our peace with Egypt, our defense budget in real terms didn't go down. What we should strive for is to increase our economy to make the economy grow so that the defense outlay will be a smaller proportion of our overall budgetary outlay. This has already happened. I remember the days not so long ago when about 25 percent of gross domestic product, of the GDP, were spent on defense. Now it's much less. It's around 13 or 14 percent, I think. Not because defense outlays have gone down, but because the economy has grown, and that is where our effort should be concentrated. (Applause.)

Q: (Off mike.)

MODERATOR: Can't hear you. Take your hands off the mike. Push the button back up. We'll repeat it. Go ahead. We'll repeat it. Pose the question. Pose the question. We'll repeat it here.

Q: We now have -- B'nai B'rith now has its third mission to Israel, touring Israel now, the third mission.

AMB. SHOVAL: Wonderful.

Q: (Off mike) -- hosted a luncheon for the world headquarters in Tel Aviv. Next year, God spare us, we have two more missions, during which time we hope to have three busloads touring Israel. That's the way B'nai B'rith makes -- (inaudible).

AMB. SHOVAL: No answer, just applause. (Applause.) Thank you.

Q: (Name inaudible), Minnesota Regional Council President from Minneapolis. This is slightly different, but is there anything -- is the US doing anything to try to move their embassy? Are we trying to do anything to get them to move their embassy to Jerusalem? And also, after (44 ?) years, apparently the Vatican is thinking of recognizing Israel. Is there any movement on that?

AMB. SHOVAL: Well, with regard to the embassy, it's still in Tel Aviv. And I don't know why the United States and other countries unfortunately who follow the lead of the United States don't even officially recognize West Jerusalem as part of Israel. And I think this is something we would all urge whichever administration there may be to do, to move -- all the talks are going on in Jerusalem. When the Secretary of State comes to Israel, all the talks are in Jerusalem, as it should be. So, why not do the normal thing and move one's embassy to the capital of a state -- of the state, of the state of Israel? (Applause.)

What was the other question?

Q The Vatican.

AMB. SHOVAL: Oh, Vatican. Well, we all read, I think, that the Vatican has proposed setting up a commission or a committee to study the possibility of not recognizing Israel, because they recognize Israel, but of setting up diplomatic relations with Israel. But, beyond that, so far nothing has happened. We hope it will happen. We understand that -- not that we accept that, but there is a problem. Of course, there are many Arab Catholics, and some of the Catholic church's princes of the church are Palestinians and other Arabs, which have negative political influence on the Vatican. But I think that just like other countries, like India, like China, who have a very close relationship with parts of the Arab world, came to the conclusion that they had to establish relations with Israel, I hope that the Vatican will follow suit. But it has not yet happened.

MODERATOR: We'll take two more questions. Hans.

Q: Hans Mueller (sp), from Sidney, Australia. Mr. Ambassador -- Mr. Ambassador, we hear that the disunity within the Palestinian delegation at the talks is an impediment to the progress. Could you please elaborate on that?

MODERATOR: Why don't you repeat it?

AMB. SHOVAL: Well, Hans from Sidney said that he had heard or you have heard that disunity in the Palestinian delegation is an impediment to progress. I would prefer not to criticize or comment on the composition or on the behavior of a negotiating team with whom we are sitting across the table, so I'll skip that question. (Applause.)

Q: Matthew Brown (sp) from New Jersey, District 3. In the absence of peace with Syria, what do you see as the potential for a situation arising very similar to that which we had with Iraq this past few years? And the second part of that is what do you see as the solution for the Lebanese situation, not the solution, but how do you see that coming into play with this peace (process ?)?

AMB. SHOVAL: Well, I don't think that there is -- I may be wrong, but I don't think that there is an imminent danger of war with Syria. The Syrians have lost their Soviet patrons and they know exactly what would happen to them if they would start a war with Israel. (Applause.)

We have our questions, as I said before, about their massive rearmament, but still let's take perhaps a cautiously optimistic view. There are some people who think that Syria has had a strategic change of heart. We have no proof of that yet, but maybe not out of the love for Israel perhaps, but because of a concern with relations between Syria and the United States of America, and if President Assad and the Syrian government can be induced to consider peace as a real opportunity for them, not just for Israel, then of course we would welcome it and I want to direct you to -- refer you to what Prime Minister Rabin said about that, and I don't want to go into further details.

With regard to the other question, Lebanon, well what can you say? (Laughter) Lebanon is a tragedy. We have absolutely no territorial claims on Lebanese territory. What concerns us is security, security, security for the northern part of Israel. And if the Lebanese government or a Lebanese government after the Syrians get out, if they get out, would be able to extend its effective control all over the country, I think this would be a good thing because we are not doing what we are doing in Southern Lebanon because we want to be there for the scenery, although the scenery is very nice. That's not why we are there. Whether Lebanon can really solve its own problems remains to be seen. But in that context I would like to say that opposing a Palestinian state west of the River Jordan in the territories is not opposing that possibility, it's not just because Israel is opposed to it. The United States should look at what's happening in Lebanon and what's happening in the former Yugoslavia and avoid by all means to create another ministate of that sort which is bound to create irridentist instability in the Middle East, taking into consideration that most Palestinians don't even live there but live in Jordan. To avoid the possibility of a Palestinian state is not just in Israel's interest, it should be in the interest of the United States for its own sake because one of its aims, declared aims of foreign policy is to create stability and putting up -- creating a Palestinian state would go counter to these interests.

Thank you very much. (Applause.)