LOU DOBBS, Anchor: Well, joining me tonight from our studios in Washington, D.C., to talk about what lies ahead for Israel is Israel's ambassador to the United States, Zalman Shoval. Mr. Ambassador, good to have you with us.

ZALMAN SHOVAL, Israeli Ambassador to U.S.: Good evening. Good to see you again.

DOBBS: The results -- those polls had suggested weeks ago that something was in the wind, but are you surprised by the size of what appears to be the Labor victory?

AMB. SHOVAL: Well, I wasn't astounded by it, but I was surprised somewhat by the size. We have to see the final results, of course, but it does look as if Labor has a definite victory.

DOBBS: Did you sense that this would occur?

AMB. SHOVAL: There was a sense -- I think I had a sense of an anti-incumbency mood in Israel, something which is known [unintelligible] in other countries as well, and I think that part of the massive vote for the Labor Party is due to that.

DOBBS: Prime Minister Shamir was accused basically of outright indifference to the Mideast peace process, to even the problems of unemployment in Israel. Do you see those as the two primary issues in this campaign?

AMB. SHOVAL: Well, that's probably unfair. Prime Minister Shamir started the peace process. He may have had different priorities; unemployment is a very severe problem in Israel, and it is not a problem which can be solved easily or quickly. We are part of the recessionary situation in the Western world, and in addition to that, we had 400,000 immigrants, and that created a special situation.

DOBBS: The issue of settlements -- the Bush administration leaning very hard on Israel; you are in direct conflict, if I may say, with the administration and the, of course, the Likud government. How big a role do you think that played in the vote?

AMB. SHOVAL: Well, I don't know. I think it was basically an, as I said, anti-incumbency vote on the one part, a protest vote, and the government or party which had been in power for a very long time -- there may have been personalities involved. It's too early, really, to analyze that, and it's also too early to say exactly what sort of government we shall have, because as you know, we have a coalitionary system, and it will take some time to see exactly how the new government's going to be made up.

DOBBS: According to what we're being told, coming out now out of Jerusalem and Tel Aviv, just about everyone in Labor is saying that this will mean that Israel will be a different country, after 15 years of effectively Likud rule. Is that too strong a statement, do you think?

AMB. SHOVAL: That's probably too strong a statement. There will certainly be differences in attitudes, in emphasis, in personalities, but the basic problems or the basic challenges of Israel are there whether there's a Likud government or a Labor government.

DOBBS: At this point, with the prospect of Labor and Rabin leading Israel, the settlements -- will they in effect, do you think, be frozen, as he promised? Is that a possibility?

AMB. SHOVAL: I don't know. I can't predict that. I know that Mr. Rabin has said very clearly that he has different priorities; he's only in favor of security-related settlements, but he didn't speak about a freeze. I don't know what the policy of the new government's going to be, but whatever the policy will be, for purely economic constraints, I think there will be less investments in settlements.

DOBBS: Do you think that there will be as a result, however, of this vote, more foreign investment in Israel?

AMB. SHOVAL: Well, I hope so, that there will be more foreign investment in any case. I mean, on the one hand, there's the victory of the Labor Party, but Mr. Rabin is no wild-eyed socialist, and I believe that the new government will continue the free market privatization policies of the previous government. I hope there will be further investments -- bigger investments -- once the election is over, once we have a new government.

DOBBS: As you say, he's no wild-eyed socialist --

AMB. SHOVAL: No, he's not.

DOBBS: -and one of the great criticisms has been of, in effect, the Shamir government has been that too little of the Israeli economy has been privatized.

AMB. SHOVAL: Yes.

DOBBS: What do you think will be the implication --

AMB. SHOVAL: I would probably say that the Likud was and is committed to a free market economy, but wasn't perhaps not effective enough in the eyes of some in implementing it, for different reasons -- constraints or policy reasons. And I do hope -- and I'm fairly confident -- that the new government of Israel, whatever its ideologies, will go on and perhaps even intensify privatization. That's certainly what most people in this country - - businesspeople, investors, potential investors, and we Israelis who are active in the economy -- would look forward to.

DOBBS: Okay. Mr. Ambassador, we thank you for being with us here. Good to see you again. Ambassador Zalman Shoval.

AMB. SHOVAL: Thank you very much. Thank you.