Good morning. I'm John Sudergan (sp), assistant publisher of Defense Week and chairman of the Morning Newsmaker Committee at the National Press Club. I'll try to keep my comments short. I think we all know why we're here and what the topic is. So, I won't be redundant.

Ambassador Shoval has served as a member of the Knesset for about a dozen years representing the independent RAFI Party. In '77 he served as a member of Israel's delegation to the UN General Assembly. In April of '78, he was appointed head of Israel's Foreign Information activities. He also holds the rank of Lieutenant Colonel in the Israeli army -- reserve, rather.

The closing of the most recent round of peace talks hasn't played heavily in the press. We've had an election somewhat in our own hands. And unfortunately a major player in these activities, Mr. Baker, having dropped out a short time ago, probably has kept the press away as well.

A lot has happened. There's a lot going on and a lot the Ambassador has to say. So, without further ado, Ambassador, please.

AMB. ZALMAN SHOVAL: Thank you very much. Good morning first of all. On the 29th or the 30th of this month, the Arab Foreign Ministers, including Foreign Minister Amre Mousa of Egypt, may convene in Beirut -- although it isn't certain yet, I understand -- in order to discuss the peace process -- where it stands, where it is -- and in particular, and I'm just basing what I say on press reports, discussing the next round which as you know is going to start - - is supposed to start in Washington -- on December the 7th.

The indications are that the Arab ministers and the Arab parties will decide - - and we are very glad about that -- will decide to attend the next round. As you know, Israel has already given its affirmative answer to the invitation extended by the sponsors during the last few days of the last round.

Dr. Abdul-Shafi, my friend Dr. Abdul-Shafi, the head of the Palestinian component in the Jordanian-Palestinian delegation as you know wrote us a lengthy and detailed letter at the last session. And I just want to quote one sentence out of that letter. What he says quote, "There is no doubt that our discussions have been more constructive," he says, "but unfortunately, the session ends without our being able to point to the nucleus of an agreement" end quotation. Well, factually that is correct. And factually, I agree with them that that is very unfortunate. But I think the question one must ask oneself is why there was no more progress in these talks. We all hear sometimes that the Palestinians in the territories are frustrated by the lack of progress. I must say, I can understand their frustration at not seeing results. But let me say that the results could be theirs for the asking if their delegation had engaged us in more serious, in more concrete talks while these negotiations were going on.

I also want to add that we are not always very happy -- not we from Israel's point of view -- but we as peace negotiators are not always very happy with the way the progress or even the lack of progress in these talks is being reported by the Palestinian press persons to their own constituencies back home through the Palestinian, through the Arab press. We don't believe that it is very, very helpful for the peace process itself when one goes about incessantly and presents to the people at home only the dark side of the sun. There's a bright side as well -- or the dark side of the moon if you want to . There's a bright side as well.

Why should the people psychologically at home not be frustrated when that's the way things are being presented to them. Here they see apparently one year after Madrid and no real progress. This is bound to insight violence and encourage rejectionism, in which I'm sure most of the Palestinians -- certainly the part that the members of the Palestinian delegation are not interested.

The truth is we have made little progress, but we have made a little progress. And there's a difference between the two. Not enough, but we have had small, informal get-togethers -- let's not call it committees, but get-togethers of negotiators from both sides. We talk about the overall aspects of the concept, the concept of ISGA, Interim Self Government Arrangements, which after all is the one and only purpose of these talks.

We did talk a bit about land issues. We did talk about human rights. But I agree, we did not talk to the extent that speedy progress towards an agreement would require.

We also note that Egypt is trying to play the positive role in this respect -- both President Mubarak and Minister Amre Mousa -- urging the Palestinians not to drag their feet on reaching an agreement, on trying to reach an agreement on the interim phase, and we welcome that.

So, we hope, coming 7th of December, we hope that in the next round we shall be able to engage the Palestinians in more serious negotiations about the conflict -- about elections, which we have proposed to them.

Just by way of illustration, one example about one very pressing situation in our view -- pressing situation for the Palestinians much than for us in the economic sphere. I don't know if you know that, but almost 40 percent -- 4-0 -- of the GDP -- the gross domestic product -- of the Gaza strip, derives from Gaza labor working in Israel. In the West Bank, it's a bit less; it's about 30 percent. Thirty percent of the GDP in the West Bank -- in Judea and Samaria -- is derived from Palestinian workers working in Israel. From Israel's point of view, this is -- from its own economy, it's an insignificant part. Our economy does not have a lot -- it does not play an important role in our own economy. On the contrary, some people will say it's an economic and social burden. Only six to seven percent of the total Israeli labor force is Palestinian -- comes from the territories.

Now, why do I mention that? We, at every round almost, bring economic experts, not political people -- economic experts, bankers, officials -- with us to the talks in order to engage the Palestinians in serious talks about their economic problems -- about their economy which is in pretty bad shape, among other things as a result of Intifada. Unfortunately, we know that. We have, as you know, -- I'm going to say a few words about the Jordanians. We have started engaging the Jordanians very seriously on some economic topics -- not with the Palestinians. It's the same things with regard to water experts whom we have with us -- and so on and so forth.

I'm afraid that the Tunis-based PLO -- certainly Arafat -- is probably the single greatest obstacle to the progress in our talks with the Palestinians. Arafat thrives on the status quo. Any change for the better -- any significant progress toward the implementation of the interim self-government arrangements and the creation of a democratically legitimate elected Palestinian leadership from the territories would make his own redundancy more and more obvious. That is all I have to say at this stage about the Palestinians. I will briefly refer to the Jordanians.

We are in the process of implementing in a practical fashion the common agenda. I think this is not unimportant. And I don't want to go into details. I can answer questions if you want to later on. But, as you know, we sat in several working groups -- informal working groups -- during the last round as well as the preceding round, and I think we have made progress.

With regard to Syria, let me refer back to the speech which President Bush made at the Madrid Conference, and I know that some of you here were there at that time. President Bush on that occasion made it very clear that the object -- the aim -- of this process would be full peace, with full diplomatic relations, full normalization of relations, with all the trimmings -- trade, tourism, open borders -- and so on and so forth. This has not been the attitude so far, I'm sorry to say, taken by the Syrians.

In the next round on the 7th, we would like to conclude with the Syrians -- we would like to try to conclude -- we have done this before -- we've tried this before -- at least a joint statement of principles. We want to make it clear that in our view peace with Syria ought to stand on its own two feet unrelated to other issues. And of course, like everybody else, we have some question marks with regard to the real intentions of the Syrians. We cannot ignore the fact that many terrorist organizations, including Palestinian terrorist organizations, still have their headquarters in Damascus -- not to mention the Hizbullah who have, of course, their sectors of training and bases, and so on and so forth -- in the Syrian- occupied and fully controlled Beka'a in Lebanon. But having said that, we believe that's the way we're going to be motivated; that also with Syria, peace is irreversible. And we hope that progress will be made.

I would like to say just a few words about the Montiletros(ph) which do not take place in Washington, and they do not necessarily start on the same date. But early in December, the steering committee of the Montiletros(ph) will meet in London. Many questions -- many aspects, I'm sure, are going to be discussed. And our general view is that if the talks in the different Montiletros committee groups will not become too politicized, there's a chance that they will create the necessary backdrop -- the necessary infrastructure beyond politics for the real -- for a real stable peace in the Middle East which would benefit all the people living in that region.

I would like just to read -- or repeat to you -- Israel's stance in regard -- with regard to that has been outlined in the government's -- the Israeli government's policies -- the basic guidelines: "The Israeli Government will work toward the creation of the new Middle East in which resources are not longer devoted toward the arms race, but the development grounded in economic, cultural and scientific cooperation. Progress in the peace process must be accompanied by the creation of systems for regional cooperation. Israel will expend every effort to make this vision a reality as indeed we shall."

So, to conclude, we believe that there is no alternative -- that there certainly should be no alternative to peace. We hope that there our negotiating partners share that view. Everybody will have to take risks, none more than Israel. But, who is that said -- I think it was Nietzsche -- "living safely is dangerous." Thank you very much.

Q This isn't directly related to the peace progress. I'm Barbara Opal with Defense News. And I was hoping you could tell us in your view what concrete steps you believe the US administration is taking to fulfill its commitment to ensure Israel's so-called qualitative military edge, and if you satisfied with the steps taken?

AMB. SHOVAL: Well, the question does relate to the peace process because I think everybody understands that a strong Israel and an Israel which enjoys the friendship and the lines and support of the United States of America are really a prerequisite for peace and stability in the Middle East. Now, we have worked out, over the last few months -- the last few weeks, and that's no secret -- several items in the field of our strategic cooperation, and including items, the main aim of which is to ensure Israel's continued qualitative edge. We believe that these undertakings and these agreements will be long-lived and that there will be continuity from one administration to the next one.

Q: I have a question. Actually, if you would clarify a bit on continued qualitative edge, I'd be interested in knowing what that is. But, also, what kind of contact there has been with the new transition team, how they would be active in this next round anyway coming up in a few short days? Has there been any activity in that vein at all?

AMB. SHOVAL: Well, as President-Elect Clinton has said, there's one president; that's President Bush. And this is the administration. And we deal with this present administration and with its officials, obviously. But, we have also had meetings with people of the incoming team, but purely I would say as a learning process. It's our intention to brief people who are involved -- may be involved -- and to facilitate the activity of the incoming administration once they take over. But, with regard to the other part of your question: who will deal with what, that question can't be addressed to me. It has to be addressed to the Clinton people, of course.

Q: I understand that the head of the -- Hi. Larry Kohler(ph) from Washington Jewish Week. I understand that the head of the same negotiating team, Mr. Rabinovich, is expecting --

AMB. SHOVAL: I think it's Mr. Allof(ph). The Syrian negotiating --

Q: The head of the Israeli negotiators who are dealing with Syria is expected to be named as your successor.

AMB. SHOVAL: Right.

Q: And I further am told that the transition may take place as soon as January 20th, but I'm confused about what's happening when.

AMB. SHOVAL: Well, I'll deal only with the simple problems like the peace process and the Arabs, not with Israeli politics tonight -- today.

Q: So, you can't tell us if or when he will be coming here? AMB. SHOVAL: No. No. I don't purport to -- (inaudible) --

Q: -- (inaudible) -- Ambassador, when you speak about cooperation with the United States, do you mean you are going to have more arms, more equipment, more military aid, financial aid? What kind of --

AMB. SHOVAL: Well, as I said toward the end of my introductory remarks, we would like to see the future of the Middle East not in terms of an increased arms race. We would like to lay the foundation for cooperation between the peoples of the area. But, at the same time, we cannot ignore reality. And the reality is that Israel is still a very small and isolated country in an environment not all of which participates in the present peace process. I'm not talking about the countries necessarily with whom we sit at the table. There are Arab countries, there are some Muslim countries who do not participate in the peace process.

Egypt itself is a victim of some fundamentalist terrorist excesses. There is the very heavy rearmament in Iran which worries all of us, including the United States and including other countries. It worries Israel. A very heavy military outlay in Iran. Iraq is still around.

So we cannot wholly depend on what we plan to do in the future. And Israel's only option to defend itself from that point of view, because we can never compete quantity wise, is to have a qualitative edge. How this is going to be achieved is, of course, part of an ongoing relationship between Israel and the United States.

Q: Mr. Ambassador, my name is Joseph Polakoff. I write for Jewish newspapers. There have been reports to the effect that the Arab and Israeli delegations and our embassy people have approached former Secretary Baker and asked him to be an intermediary in the peace process. This has been denied at the White House but the State Department perhaps has indicated something else. And a question that still is nagging is what is the position of the United States in your view as to what does 242 mean, actually?

AMB. SHOVAL: Well, there are two separate questions here. We have not approached anybody about anybody playing a personal role or an official role, and this is obviously up to the outgoing administration and the incoming administration at the appropriate time.

With regard to 242, I'm just repeating a truism everybody knows, that there are different interpretations. Yesterday there was a very interesting symposium here in Washington on 242, but that is really not very cogent at the present time because when we sit down, if we talk about the Palestinians, when we are going to sit down and negotiate about the permanent status according to the Madrid formula, and that is only going to be three years after agreement on the interim status. 242 will be part of the terms of reference.

With regard to the Arab states with which we negotiate at the present time, yes, 242 is part of that, but in effect, it only applies to Syria because we have no territorial claims on Lebanon and there were no territorial changes in Lebanon as a result of the Six Day War. 242 refers specifically to the post- Six Day War situation. Nor was there anything with Jordan except for the territories, which were, of course, Jordanian controlled at the time.

And the Israeli government at the beginning of this part of the process has stated, as you know, that we agree that Resolution 242 will be applicable also to our negotiations with Syria. We have our interpretation of that. We believe that's the correct interpretation and that's the way we're going to proceed.

Q: Fred Bowman (ph), United Press International. You said earlier that Yasser Arafat was the single most destructive element in the peace talks and yet it's no secret that he's the heart and soul of Palestinian aspirations.

AMB. SHOVAL: Of the what?

Q: Of Palestinian thought and aspirations; leadership. Indeed, my question is do you feel that Israel can make progress with the Palestinians with Yasser Arafat in the picture? And if not, how do you plan to take him out of the loop?

AMB. SHOVAL: Well, we don't take him out of the loop, but we are negotiating with the Palestinians in the territories and their representatives. We agree that it would perhaps be helpful if the Palestinians in the territories, as proposed to them, would hold free general elections which would then probably -- what's the word -- give that delegation or give whichever team will be elected, whichever council, the required legitimacy or the additional legitimacy which it may or may not need.

But I'm not giving any sort of qualitative appraisals of anybody. I'm just stating a fact that Yasser Arafat's meddling has not been helpful.

Q: -- Pacifica Radio. Is the change in leadership at AIPAC, is that representative of the shift that's being seen with the group moving away from Likud and closer to the Labor Party?

AMB. SHOVAL: You must ask AIPAC. AIPAC is an American organization.

Q: On the question regarding hardware, I guess in terms of a qualitative force in Israel, money of course is a factor and United States hardware is not known to be terrifically cheap. Will we find Israel shopping around Eastern Europe and Russia in the coming months?

AMB. SHOVAL: I don't believe so. I don't want to mislead you because maybe I should have done my homework on specifics. I don't think this is Israel's interest. Israel's military equipment is either American manufactured or Israel manufactured and developed. And I don't think if I were a professional general I don't think that I would be very much interested in changing or not even changing but in acquiring components or equipment or items which would not fit into the general way our army is being equipped.

So I don't really think so. I don't really think so. Israel cannot afford anything but the best. We are too poor.

Q: Mr. Ambassador, you didn't really answer my previous question about whether you were satisfied of ongoing administrative efforts to ensure Israel's qualitative edge. And I'd like to maybe give you a frame of reference in light of the recent sale to Saudi Arabia and the planned additional package of F-16's to Egypt.

AMB. SHOVAL: Yes. I want to say this very specifically. We are satisfied with what has been accomplished and a great deal has been accomplished all over these last years. And specifically in the last few months. This does not mean that we shall not engage in ongoing specific negotiations with whichever administration will be in office at the time in order to keep track of what it means to have a qualitative edge.

Q: Without questioning the entire logic of Israel's position, let me just narrow it in negotiations with Syria. Why do you expect of Syria more of a peace than you were willing to take from Egypt and gave up everything to get and still don't have much of a peace? How do you expect the Syrians, who are the rejectionists, to give you more than Egypt, which you keep tipping your cap to as being the moderates and the conciliators? How can these talks stalemate on an Israeli demand for more from the Syrians, or archest enemy, than you were willing to take from the Egyptians and surrender all the land?

AMB. SHOVAL: Well, I could answer your question by saying if the Syrians are our archest enemy we must have more assurances with regard to their intentions towards peace.

You know, ever since 1948, ever sense Ben Gurion, even, I remember people saying that Egypt and Israel don't really have a basic conflict of interest. If it hadn't been for historical mistakes or accidents there would have been no reason for us to be at war. I remember that the Zionist movement was active in Egypt almost until 1948.

With Syria the question is different and if we want to be sure that if Israel does make concessions, as the government has indicated it is willing to do, we will have a complete and total peace. And with Egypt we have laid the groundwork. Certainly nothing is excluded in our arrangements with Egypt. We would like to see a bit more enthusiasm and tourism and so on, but trade is going on and it will improve.

Q: When you talk to the Syrians or when the negotiators talk to the Syrians, do they make any effort to define what they mean by peace?

AMB. SHOVAL: Not at this stage. Not the word peace.

Q: (Cross-talk.)

AMB. SHOVAL: They say the word peace and we would like to pin them down a little bit about what they mean, because we would like to see a great deal more than a glorified non belligerency. We would like to see real peace.

MODERATOR: Anyone else?

Q: Yes. Ambassador, according to Israeli newspapers there were saying about possibility of having banks from Egypt and Jordan in the occupied territories. Is this true or not?

AMB. SHOVAL: I said before that we and the Jordanians engaged in concrete talks on different economic matters. These economic matters included banking subjects. I don't want to go into specifics but I would say as a general observation, not only would we not object, but I would say we would welcome more intensified Jordanian banking activity and economic activity in the territories, because this is also the sort of positive concrete steps which create an infrastructure for people's living and coexisting with each other.

Q: The second part was on Egypt.

AMB. SHOVAL: Well, Egypt, I understand we talk about a bank whose head office is in Jordan in Amman right now; am I correct?

Q: Yes, yes.

AMB. SHOVAL: So there is no reason why that bank will not be dealt with in a similar fashion than any other Amman registered bank.

MODERATOR: Mr. Ambassador, I don't know if you'd like to make any closing comments. We seem to be short of questions today. Is there anything else you'd like to add?

AMB. SHOVAL: Well, I really have no closing comments at all. I think everything which has to be said has been said and everything which has not been said has not been said. So, thank you very much for coming.

MODERATOR: Thank you very much.