MORTIMER B. ZUCKERMAN: In September 1993, Yitzhak Rabin and Yasir Arafat shook hands on the White House lawn, symbolizing a breakthrough for peace in the Middle East. Two years later, much of the optimism associated with that moment has deteriorated with the rise of terrorism. What is the future of the Middle East peace accord? Joining me now from Washington, Israeli ambassador to the United States, Itamar Rabinovich. I'm very pleased to be able to discuss this with you, Mr. Ambassador. Could you give us an assessment of where we are now, since we seem to be on the verge of what is popularly referred to as Oslo II, but in effect, another major agreement between the Palestinian Authority and the Israeli government.

ITAMAR RABINOVICH, Israeli Ambassador to the U.S.: [Washington, D.C.] Yes, we may be very close to the signing of the interim agreement, which would be the implementation of the second phase of the Oslo agreement, and once we do that, that would be, of course, a very important landmark in the implementation of the agreement. If I may refer to what you said at the outset, the aura of optimism and sense of elation that have accompanied the signing have been dissipated, mostly by terrorism, but yet there is a sense that what was signed is working, that reality in the Middle East and in the Israeli-Palestinian context is changing, and that we are on the road to implementation.

MORTIMER B. ZUCKERMAN: Well, in effect, as I understand it, a number of the major villages or cities in the West Bank that are virtually entirely Arab are now going to be turned over to the Palestinian Authority. Is that correct?

ITAMAR RABINOVICH: Turned over in the sense that they will be under Palestinian administration. They will not be under Palestinian sovereignty. Sovereignty, ultimate control and other issues of final status will be discussed beginning May 1996, and what will happen once the agreement is signed and implemented with regard to the major towns and the heavily populated rural area is that the Palestinians will administer themselves in the West Bank, or in parts of the West Bank, as they have been doing since May of last year in Gaza.

MORTIMER B. ZUCKERMAN: Now, there are widespread concerns within Israel, certainly, that there are groups within the Palestinian community - Hamas and the Islamic Jihad, for example - who remain opposed to the peace agreement and indeed to the- any kind of serious peace with Israel. Many people also are concerned that the Palestinian Authority under Arafat are not doing enough to confront these groups, and therefore they have lost some confidence in the real intentions of the PLO, a confidence which has been further undermined by some statements that Arafat has made to his own people that still seem to speak of jihad, of joining everybody, including himself, to be one of the so- called martyrs - that is, the, the bombers, et cetera, et cetera - and so there has been, I think, an erosion of confidence within the Israeli body politic about the intentions. Could you comment, in a sense, on how that reaction is in fact affecting what is happening with Israel, and whether or not the Israeli government at this point is satisfied with the security efforts undertaken by the PLO under Arafat?

ITAMAR RABINOVICH: Up until about four month ago, we, the Israeli government, had our own reservations and doubts concerning the, the willingness of the Palestinian Authority in Gaza to take on Hamas, Islamic Jihad, and other groups bent on destroying the agreement and conducting terrorism against Israelis to take them on fully. And about four month ago, we were persuaded that Arafat has changed his tune and has taken them vigorously - not, perhaps, as vigorously as we would have done, but quite vigorously - and it was then that we resumed the negotiations in full steam with regard to the implementation of the agreement that hopefully will be signed now.

And you pointed to question marks that Israelis have. They do have them. They have them with regard to the issue that we just discussed, and with regard to the atmosphere that emanates from the leadership of the Palestinians with regard to the ethos of the new relationship. We continue to press- I would define the bottom line grade that we, we give to this conduct as satisfactory. It's not optimum. It's not ideal. It's satisfactory. And we continue and will continue to press in order to get the Palestinian Authority to fight even more vigorously against Hamas and such groups and to send a different message to, to their own people. I would like to emphasize that this is an agreement that is implemented in phases. The transition from one phase to the other is not automatic. We are a year behind schedule, and we have kept it a year behind schedule because for almost a year, we were not happy with the way things were being implemented. We are the more powerful partner in, in all of this. If- a couple of weeks ago, when we were not pleased with something that happened in Jericho, we put a blockade around the, the town of Jericho. We have the wherewithal to do it. This is not something we wish to do, but this is something that we can do.

And therefore, I am, I'm confident that we have the ability to make sure that implementation occurs, and I'm also persuaded that as time goes by, the self- will of the Palestinians will continue to navigate them in the same direction.

MORTIMER B. ZUCKERMAN: You know, I don't think we in America quite understand what it's like to live with the kind of terrorism that has been, in effect, launched against the Israelis. I mean, it would be the equivalent, in terms of the number of people who were killed, as if 6,000 people were killed in the United States and 20,000 injured. Now, that has got to have a huge effect politically on the attitudes of the Israelis. You have an election coming up, I believe, in November of 1996. The Israeli prime minister, Rabin, has said that his electoral future is going to be dependent on whether or not Hamas can set off a number of terrorist bombs within Israel in the 60 days prior to the election. How in the world do you, A, live with it, and B, cope with those kinds of almost deadly assaults against the ordinary aspects of life - taking the bus, going to a restaurant, going to school. I understand the parents of the schoolchildren this year literally went on strike because they wanted to make sure that their schools had some kind of protection. Describe to us how you deal with that and how you live with that.

ITAMAR RABINOVICH: You know the- you don't necessarily have to go very far. If the attack against the World Trade Center in New York would have been fully effective, New Yorkers might have been treated to that effect. What happened in Oklahoma City in a different context. I think these are, I think, vivid illustrations for Americans as to what life, life can be like. The fact that Israelis in Israel and in pre-state Israel have lived with war, conflict, and, and terror for many decades now does not reduce the impact of this and the type of suicide terrorism, suicide bombs that Israelis inside Israel proper have been treated to in the past few month and couple of years have brought this ef- sense of terrorism, the effect of terrorism to a new and unprecedented height. Israelis know what it means, and while it, it terrorizes people, it also enforces the sense that there has to be a solution to all of this. And in a paradoxical way, this is also an engine that drives the peace for- the peace process forward because people realize that there are police and intelligence approaches to terrorism, but the solution has to be a combination of political solution with the continued security campaign that, that we have been, have been launching. Now-

MORTIMER B. ZUCKERMAN: Go ahead. One, one- I'm sorry. Let me- why don't you just finish, and then I want to talk to you-

ITAMAR RABINOVICH: Yeah. I-

MORTIMER B. ZUCKERMAN: -briefly about Syria, because we don't have too much time left.

ITAMAR RABINOVICH: Fine. I just wanted to say that in terms of the personal feelings of Israelis, we know that the single most important determinant of the attitude of Israel as a society and individual Israelis to the peace process is the sense of personal security or the absence of personal security, and what we witness is political cynicism by Hamas and such groups who are trying to exploit this sense in order to derail the peace process.

MORTIMER B. ZUCKERMAN: In about 30 seconds, as an expert on Syria - I'm going to ask you to condense your answer - but can Israel accomplish peace in that area without Syria?

ITAMAR RABINOVICH: Israel can accomplish a degree of peace in, in the region without Syria. We, we have accomplished peace with Jordan. We have a framework agreement with the Palestinians. We have a growing degree of normalization with the rest of the Arab world. And these are all important achievements that stand on their own.

MORTIMER B. ZUCKERMAN: I want to thank you very much for sharing your thoughts with us.

I want to also say on behalf of Charlie Rose - I am not Charlie Rose, even though I would like to be. I'm Mort Zuckerman, the editor of US News & World Report, substituting for Charlie Rose - thank you all very much for joining us. Goodnight.