Israel's Unsettling Settlement Policy

NOW that the huzzahs of praise for the Israeli government's new settlement curbs - and the settlers' cries of outrage - have died down, the prevailing noise in the occupied territories is once again that of bulldozers and cement mixers.

The construction of settlements continues, even under Prime Minister Yitzhak Rabin's new Labor-led government. And its decision on Tuesday to finish 9,500 houses in the territories has sharply disappointed both Palestinians and Labor's left-wing political partners, while reviving questions about United States loan guarantees to Israel.

After a frantic two-week review of the legacy that the former Likud Party government had left in the settlements, Housing Minister Binyamin Ben-Eliezer announced this week he was canceling plans for 5,364 units, on which work had not yet started, but allowing the completion of all those on which significant construction was under way.

"This certainly falls short of our expectations," says Hanan Ashrawi, spokeswoman for the Palestinian negotiating team at the Middle East peace talks. "If the new government wants to signal that it is a clear departure from the Likud, it has to stop all settlement activities."

Settlers too are angry with what spokesman Yechiel Leiter calls "the gleeful enthusiasm" with which the government canceled some building plans. The Israeli secret service has provided around-the-clock bodyguards to four ministers threatened by right-wing zealots.

To Mr. Ben-Eliezer, "if the left wing is not exactly happy, and the settlers are not exactly happy, that means our decision was balanced."

At the same time, Mr. Rabin conceded at a Monday meeting of Labor's Knesset (parliament) faction, "legal problems are involved. Investments were set in motion [by the last government] that make it difficult for us to do what we intended to do. We cannot simply put the film projector into reverse and recoup the money that was poured into the settlements."

But it is by no means clear that the settlement curbs will fully meet Washington's conditions for granting $10 billion in loan guarantees to help Israel provide jobs and housing for new immigrants from the former Soviet Union. Rabin warned the Knesset in a debate over the government's settlement policy that "not all the issues between us and the US regarding the granting of loan guarantees have been worked out.

"I am not sure - I hope - they will be given," he added. "But not at any price."

The US does not accept Rabin's distinction between "political" settlements, which the Israeli government is prepared to freeze, and "security" settlements it says are vital to the country's military safety. Nor is Washington satisfied with Rabin's insistence on continuing construction in settlements close to Jerusalem, such as Efrat and Maale Adumim, specifically excluded from the settlement curbs.

Labor's coalition partner, the left-wing Meretz party, is still pressing for further curbs, demanding that of the 9,500 units being completed, 3,000 that are in the early stages of construction be abandoned.

Aside from political considerations, the government's decision to slow building both in the occupied territories and in Israel proper was prompted by fears of budget problems, since under the terms of contracts signed by Likud Housing Minister Ariel Sharon, the government is obliged to buy from contractors any home not sold on the market.

When the government removes mortgage and tax subsidies from the settlements, as it plans to do next month, "demand for homes in the settlements will decrease dramatically," argues Meretz Knesset member David Zucker. "The government will be paying to complete houses, then paying to buy them, but they will remain empty. I don't see why we should do this."

Settler leaders, although angry at the government's new moves, are making the most of what Rabin has left them. More than half the houses under construction have been sold, they say, and they look forward to adding 50,000 settlers to the current population of 110,000, in houses built with government financing or through private deals. Privately built houses are untouched by recent government decisions.

That prospect horrifies the Palestinians. "Curtailing settlements is better than expanding them," says Ms. Ashrawi, "but the whole principle of settlements is illegal, and no progress in the peace process can be made without a cessation of settlement activities."