AMBASSADOR SHOVAL: Ladies and gentlemen, in this auditorium, which we usually reserve for cultural events, I had to make an announcement that tonight, Washington time, during the night in Israel there has been an unprovoked attack by Iraq launching scud missiles, or perhaps improved scud missiles, at purely civilian targets. It's not a new edition of Orson Wells "War of the Worlds." It's just to remind us that exactly one year ago in this auditorium -- some of you may have been here -- I commented upon the scud attacks on Israel while the Palestinians were dancing on the rooftops. And here we are, one year later exactly to the day. Now, all this may seem to some ancient history. For us, this is still very much the present. God forbid, it could still be very much the future.

I would like to say very clearly that in our view, too, America has had a tremendous victory in Desert Storm and that has achieved a great many of its aims. We thought so at the time. We think so now. But the dangers as far as Israel is concerned, and not just Israel, are still very much there. Saddam Hussein is still there, and his intentions with regard to Israel have not changed. Only last week with Yasser Arafat at his side, his ally in the war against America, his ally now, he again bragged about the Scud attacks on Israel.

The good news is that the Gulf War hopefully has created a new situation in the Middle East which will prove more conducive to peace between at least part of the Arab world. One should never forget when one speaks about comprehensive peace in the Middle East, there are many countries which are outside of the orbit of this whole process, not just Iraq. There is Libya, there are others, there is Iran, which is not an Arab country, but is certainly a very important factor on this equation.

But it has created a new, more hopeful situation between parts of the Arab world and Israel. The window of opportunity may not be as large as we had hoped at the time. Some things are still going on. If you remember, I think everyone assumed, almost as a foregone conclusion that at least the allies of the United States in the war would immediately, automatically cease the illegal Arab economic boycott of Israel, that they would perhaps declare an end to the state of belligerency. These things have not happened, unfortunately, so far, but I think at least a small, perhaps even not so small window of opportunity has been opened and we, as far as Israel is concerned, will certainly make its very best, do its very best not to let that window of opportunity be shut again.

The last round of peace talks here in Washington, which we concluded yesterday, may not have been a breakthrough, but actually we are not looking for breakthroughs. We shouldn't be looking for breakthroughs. What we need is to avoid breakdowns, and we avoided breakdowns, and on balance, the results of the last round have been, perhaps, even better than expected.

What has been achieved? Well, one, it was established that when need be, the parties can reach agreement, bilaterally, directly, without outside involvement, without outside interference. I would say that agreement, to the extent that it was achieved, was achieved because the sponsors refrained from interference.

The second positive point is that the agreement on procedurals -- and you remember the controversy, the squabbles about procedurals during the last round, when we spent our time in the corridors, and on the sofas, and so on and so forth -- that there was this time agreement on procedurals, not just to move from the sofa to the rooms, but even how to proceed to substance, and I think that was something which Israel had tried as of day one of the previous round, but it was achieved on the second day, I believe, of the present round.

The third point, I think, which is significant, is that it was made very clear -- also I'm happy to say -- by the American sponsors, that the only chance to make progress was by sticking to the ground rules -- the ground rules of this whole process. In the previous round, there was an attempt on the part of the Palestinian component of the joint Jordanian- Palestinian delegation to rewrite the ground rules by splitting that delegation into completely separate delegations. That's why the last round didn't achieve more than it did. This time around, it was made very clear that in order to make progress, everybody has to stick to the ground rules, and that position was also supported -- actively supported by the American sponsors.

Also, we did exchange, as you know, agendas with both the Jordanians as well as with the Palestinian components of the tracks. These agendas will be studied by the respective sides, and at the next meeting, we shall hopefully begin to exchange views in a more concrete fashion, both the Jordanians -- with the Jordanians about ideas and components of full and stable peace, perhaps peace agreements between the two states; and with the Palestinians about the nature of ISGA, which means Interim Self Government Arrangements, which as you know is the goal and the basis of this process with regard to our talks with the Palestinians.

Also, it has been agreed in principle that the next round will take place in February. It has not yet been finally or conclusively decided where that next round will take place and exactly on what date we shall meet, but this is something which will be clarified in negotiations between us and the Arab delegations in between. And I don't see any reason why we shouldn't reach agreement on that.

Now, I don't want to paint too upbeat a situation, upbeat a picture. There are of course many, many problems still ahead, both with regard to the peace process itself, and also problems of a much wider range. After all, we do have different concepts as to what ISGA means, what the interim self-government arrangements mean, what should come after that. We have completely different interpretations of that.

We also are, in a different sphere, in a different matter, are disturbed by the continuation and even increase in violence and terrorist activities in the territories. And our feeling is that the Palestinian leadership either cannot or does not want to control that violence. We do not think that this is helpful, to put it mildly, to the peace process.

And as I said, on a wider range of problems, we are very worried by the lack of democracy in the whole Arab world and we are not stating this just as a matter of political philosophy or idealism but because the stability of any arrangement, any agreement which would eventually be arrived at with this or that Arab country is of course precarious as long as the regimes in these countries could change their position or be overturned overnight because of the lack of democracy. So we are worried about that, we are concerned about that.

Q: (inaudible.)

AMB. SHOVAL: Well, there are really two very dissimilar issues. The matter of settlements as we see it is part and parcel of the future of the territories, the territorial question, the question of borders. Now according to the precepts of this process, the matter of the territories, the future of the territories will come on the table in the third year of the process and we are definitely going to agree to negotiate the question or to address the question of territories once the territorial question, the question of borders comes on the table.

Now the matter of violence, or intifada, or terrorism is something completely different. You cannot come with a gun in one hand and with a branch of olive leaves in the other hand and make Israelis -- or really convince Israelis that there is a genuine will for peace on the other side and I think this is not healthful.

There may be an idea, I am not privy to that, but there may be an idea on the Palestinian side that just like with the Vietcong at the time, peace talks will proceed more swiftly or Israel will be more forthcoming if it is at the same time under threat of terror and violence and so on and so forth. It will not work with the Israelis. It may affect the opposite -- the opposite effect, so I think that sooner or later, or rather sooner than later, the Palestinians must stop the violence.

Now there may be an answer which says those people can't control these organizations. First of all that wouldn't be unfortunately completely correct because we know that in some of the recent terrorist attacks Fatah was involved, Yasser Arafat's own home base organization, with instructions, for instance the Fatah group which was apprehended, most of them were drowned near Gaza with written instructions to attack civilian centers in Tel Aviv and Ashdod and other places, bus stations and so on so forth, but even beyond that, if this Palestinian leadership cannot control other elements what certainty do Israelis have that once we reach an agreement that that agreement will actually be maintained? So there is a problem here which I think the Palestinians will have to solve.