SPEAKERS: U.S. REPRESENTATIVE BENJAMIN A. GILMAN (R-NY), CHAIRMAN
                    U.S. REPRESENTATIVE WILLIAM F. GOODLING (R-PA)
                    U.S. REPRESENTATIVE JAMES A. LEACH (R-IA)
                    U.S. REPRESENTATIVE HENRY J. HYDE (R-IL)
                    U.S. REPRESENTATIVE DOUG BEREUTER (R-NE)
                    U.S. REPRESENTATIVE CHRISTOPHER H. SMITH (R-NJ)
                    U.S. REPRESENTATIVE DAN BURTON (R-IN)
                    U.S. REPRESENTATIVE ELTON GALLEGLY (R-CA)
                    U.S. REPRESENTATIVE ILEANA ROS-LEHTINEN (R-FL)
                    U.S. REPRESENTATIVE CASS BALLENGER (R-NC)
                    U.S. REPRESENTATIVE DANA ROHRABACHER (R-CA)
                    U.S. REPRESENTATIVE DONALD A. MANZULLO (R-IL)
                    U.S. REPRESENTATIVE EDWARD R. ROYCE (R-CA)
                    U.S. REPRESENTATIVE PETER T. KING (R-NY)
                    U.S. REPRESENTATIVE JAY KIM (R-CA)
                    U.S. REPRESENTATIVE STEVE CHABOT (R-OH)
                    U.S. REPRESENTATIVE MARSHALL "MARK" SANFORD (R-SC)
                    U.S. REPRESENTATIVE MATT SALMON (R-AZ)
                    U.S. REPRESENTATIVE AMO HOUGHTON (R-NY)
                    U.S. REPRESENTATIVE TOM CAMPBELL (R-CA)
                    U.S. REPRESENTATIVE JON D. FOX (R-PA)
                    U.S. REPRESENTATIVE JOHN M. MCHUGH (R-NY)
                    U.S. REPRESENTATIVE LINDSEY O. GRAHAM (R-SC)
                    U.S. REPRESENTATIVE ROY BLUNT (R-MO)
                    U.S. REPRESENTATIVE KEVIN BRADY (R-TX)
                    U.S. REPRESENTATIVE RICHARD M. BURR (R-NC)

                    U.S. REPRESENTATIVE LEE H. HAMILTON (D-IN), RANKING
                    U.S. REPRESENTATIVE SAM GEJDENSON (D-CT)
                    U.S. REPRESENTATIVE TOM LANTOS (D-CA)
                    U.S. REPRESENTATIVE HOWARD L. BERMAN (D-CA)
                    U.S. REPRESENTATIVE GARY L. ACKERMAN (D-NY)
                    U.S. REPRESENTATIVE ENI F.H. FALEOMAVAEGA (D-AS)
                    U.S. REPRESENTATIVE MATTHEW G. MARTINEZ (D-CA)
                    U.S. REPRESENTATIVE DONALD M. PAYNE (D-NJ)
                    U.S. REPRESENTATIVE ROBERT E. ANDREWS (D-NJ)
                    U.S. REPRESENTATIVE ROBERT MENENDEZ (D-NJ)
                    U.S. REPRESENTATIVE SHERROD BROWN (D-OH)
                    U.S. REPRESENTATIVE CYNTHIA A. MCKINNEY (D-GA)
                    U.S. REPRESENTATIVE ALCEE L. HASTINGS (D-FL)
                    U.S. REPRESENTATIVE PAT DANNER (D-MO)
                    U.S. REPRESENTATIVE EARL F. HILLIARD (D-AL)
                    U.S. REPRESENTATIVE BRAD SHERMAN (D-CA)
                    U.S. REPRESENTATIVE ROBERT WEXLER (D-FL)
                    U.S. REPRESENTATIVE STEVEN R. ROTHMAN (D-NJ)
                    U.S. REPRESENTATIVE BOB CLEMENT (D-TN)
                    U.S. REPRESENTATIVE BILL LUTHER (D-MN)
                    U.S. REPRESENTATIVE JIM DAVIS (D-FL)
                    U.S. REPRESENTATIVE ELLEN TAUSCHER (D-CA)
                    U.S. REPRESENTATIVE ROBERT BRADY (D-PA)

                    MARTIN INDYK, ASSISTANT SECRETARY OF STATE FOR NEAR
                              EAST AFFAIRS

        [*]

Today the Committee on International Relations is convening another hearing on developments in the Middle East. We are pleased to have Assistant Secretary for Near East Affairs Martin Indyk join us.

Good morning.

INDYK: Good morning, Mr. Chairman.

GILMAN: Our last hearing on Middle East regional concerns took place in early March. Today, over our months later, changes in U.S. policy on a number of matters have taken place. Of particular note are administration statements and actions regarding Iran, Libya and Iraq.

In her remarks on June 17th, Secretary of State Albright laid out a road map for improved relations between Iran and the United States. Yet, that map contains no landmarks or any road signs indicating what steps, if any, we should be taking to begin the process.

The missile test conducted on July 21st by Iran poses serious national security challenges for our nation and our allies in that region -- particularly a follow-on test (OFF-MIKE) allow that country to put a medium- and long-range missile force in place.

Iran appears to be going full speed ahead with its weapons of mass destruction programs, including the means to deliver them. There is little indication that Russian entities have stopped supplying Iran with key missile assistance and the technology needed to put its missile force in place.

Accordingly, the Iran Missile Proliferation Sanctions Act was adopted by overwhelming margins in both the House and the Senate. This legislation requires sanctions on foreign entities that assist Iran's ballistic missile programs. Yet, the administration vetoed the legislation on June 23rd on the grounds that it would be counterproductive in obtaining Russian government cooperation to stop the technology transfers.

The promise of an executive order delayed a congressional veto override. But an override is still possible.

We also have serious concerns about how to address the ongoing threats from Iraq. As you know, just a few days ago, the committee marked up a resolution finding Iraq in material breach of its requirements of the post-war cease-fire.

We differ also with the administration over how to support opposition efforts.

As for Libya, the administration has shifted course and now agrees to allow a Scottish court, sitting at The Hague, to try the two Libyan intelligence agents accused of masterminding the 1988 bombing of Pan American flight 103 over Lockerbie, Scotland.

That proposal was offered by Libyan leader Muammar Qaddafi in 1994, but our nation and the United Kingdom rejected it because we wanted the suspects extradited to Scotland or to the United States. We hope to learn more from Secretary Indyk about the administration's change in policy and what prompted it.

And as always, the Middle East peace process looms large. The Israelis and Palestinians are now in face-to-face negotiations, begun just as a Palestinian terrorist, thankfully, failed to detonate a car bomb on Jaffa (ph) Road.

Chairman Arafat, now in Austria, according to (OFF-MIKE), continues to call for international pressure on Israel on the heels of an Egyptian promotion of a joint initiative with France to convene an international conference that would further pressure Israel.

Additionally, the Jerusalem Committee of the Organization of Islamic Conference meets today at their foreign minister level in Rabat, Morocco, and the Tunisian government has apparently decided to close its trade office in Tel Aviv.

The Tunisian action follows the denial of entry visas to Israelis who wanted to take part in the European-Mediterranean meetings, as well as the Tunisian refusal of the United States request to host a Middle East-North Africa economic summit. It's unhelpful, and we'd like to know what the State Department is doing to reverse that decision.

INDYK: The Yemeni government has likewise condemned this terrible act; expressed its condolences directly to the sisters; provided assistance in the repatriation of the sisters' remains; and stepped up protection of Christian sites in Yemen.

The suspect is in custody and has been identified as a person with extremist tendencies. The first report suggested he acted alone, although the investigation continues.

In contrast to the responsible actions of the government of Yemen in this horrible incident, the government of Iran this week appears to have executed a person of the Baha'i faith.

We strongly condemn this action by the Iranian judiciary, which runs directly counter to Iranian President Khatami's commitments to freedom and to the rule of law. We note that there are some seven other Iranians of the Baha'i faith in detention in Iran and urge the government of Iran to avoid any repetition of the use of capital punishment against people of faith in that country.

We will be following this matter closely, and we are urging other governments engaged with direct dialogue with the government of Iran to express their concerns directly to the Iranian government.

Unfortunately, Mr. Chairman, too many innocent people are dying in the Middle East. That is one of the reasons that we continue to pursue vigorously a just, lasting, comprehensive and secure peace in the Middle East.

Last week, we reached a new stage in our efforts to achieve agreement between Israel and the Palestinian Authority on the package of ideas we have presented to both parties aimed at restarting the final status negotiations. Israelis and Palestinians have now agreed to discuss directly Israeli refinements to our ideas, which the Israelis are seeking.

We are in constant touch with both sides, but believe that it is essential for them to resolve these issues directly. As soon as they do so, we stand ready to involve ourselves directly in an effort to bring this dragged-out negotiation to a successful conclusion. We wish to do so as quickly as possible.

Iraq, under the brutal rule of Saddam Hussein, continues to be a potential source of instability in the region. But recent revelations about Saddam Hussein's continued deceit concerning his weapons of mass destruction program have reinforced our argument that Iraq is far from complying with the Security Council resolutions. And these revelations have helped counter pressure to lift sanctions.

Meanwhile, the expanded UN program to ensure that the basic humanitarian needs of the Iraqi people are being met, that program is in place, and the situation of the Iraqi people is now continuing to improve. Using money appropriated by this Congress, we have also developed a program of overt support for the Iraqi opposition designed to make it more politically effective, and to assist in its efforts to document Saddam's war crimes and to prepare the ground for an indictment of Saddam Hussein as a war criminal.

On Iran, as you both have noted, the secretary has laid out a process that, through a series of parallel steps by both governments, could eventually lead to a more normal relationship with this key regional power. The reaction in Iran to the secretary's remarks was predictably mixed, given the ongoing intense political debate in Iran. But this approach does offer a way forward, if the government of Iran is prepared to respond.

Meanwhile, people-to-people exchanges with Iran continue. Last week, Iran test launched the Shahab-3, a medium-range ballistic missile, heralding a new and potentially threatening development in the regional arms race. Although not unexpected, this missile test underscores the urgency of our efforts to shut down the flow of technology to Iran's WMD and missile programs, and the importance of helping our friends in the region develop defenses against this emerging threat, even while we seek to encourage moderation in Iran's international behavior.

As the 10th anniversary of the bombing of Pan Am 103 approaches in December of this year, we have also been preoccupied in recent months with the question of how to bring to justice the Libyan terrorists responsible. We are discussing with the United Kingdom, and the government of the Netherlands, the possibility of conducting a trial of the two suspects in a Scottish court in the Netherlands.

I should emphasize that the president has made no decision on this and will not consider the matter until we are satisfied that the large number of complex legal issues have been sorted out. I want to be very clear on one point, however. The United Nations Security Council resolutions call for the suspects to be tried in an American or Scottish court. We are exploring the establishment of a Scottish court in a third-country venue.

A Scottish court means a panel of Scottish judges, applying Scottish legal procedures and Scottish rules of evidence. It does not mean a World Court proceeding, and it does not mean an international panel of judges.

Our bottom line remains simple: We seek justice for the 189 American victims of Pan Am 103 and their families. Any arrangements agreed to will have to lead to this objective, or if it does not do so because Qaddafi decides not to deliver the suspects to this court, it will thereby help to strength -- help us to strengthen the UN sanctions against Libya.

Mr. Chairman, I have a detailed presentation here of these issues and others. I would hope that you and the other members of the committee have a chance to read them. And I stand very ready and willing to answer your questions.

GILMAN: Thank you, Mr. Secretary.

Mr. Secretary, I think you gave an interview to defense reporters yesterday, in which you said the additional -- that additional assistance is going to be required for Iran to deploy its 1,200-mile range Shahab-4 missile with -- what's the administration doing, and what does it need to do, to prevent Iran from making further progress with regard to that long-range missile?

INDYK: Mr. Chairman, we have been aware for some time of an aggressive Iranian effort to acquire technology from foreign sources for the purposes of developing its missile systems. For the Shabab-4 to be effectively developed, it will be dependent on significant help from outside sources of technology.

GILMAN: Where is it getting that help from?

INDYK: It is seeking that help from the usual sources -- Russia, China, North Korea. And therefore, our similarly aggressive efforts to shut down that technology flow have to focus on those countries.

As you are aware, we've been working very intensively at the highest levels -- from the president to the vice president, to the secretary of state, to the national security adviser -- with the government of Russia at the highest levels to get them to take strong action to shut down the flow of technology from Russian companies.

Some progress has been made in that regard in terms of the issuing by the Russian government of a decree against the export of this technology -- identifying nine companies that have been involved in this, announcing investigations of these companies, arresting certain individuals. And we, too, have now sanctioned seven of those nine companies for their activities in this regard.

So as I say, some progress is being made. What we need to see now is effective enforcement of the regulations that the Russian government has promulgated. And if it does so, we are hopeful that we can succeed in at least impeding and frustrating the designs of the Iranian government in this regard.

However, we should be under no illusions: The Iranians have strong incentives to develop these weapons systems and to deploy them. And this will be a long-time and full-time effort to try to slow and frustrate their attempts in this regard.

And I believe, Mr. Chairman, that regardless of who is in power in Iran, we will see them continuing to make this kind of effort.

GILMAN: Are we monitoring this situation closely? I note that the president today, or yesterday, imposed sanctions on seven of those Russian firms.

GILMAN: How are we monitoring the progress with regard to those sanctions?

INDYK: Well, we do that both in consultation with the government of Russia and by independent means. And we have a very intensive effort under way not only to try to discover what is going on, but also to ensure that steps are taken to impede the flow of this technology.

GILMAN: Mr. Secretary, a recent CIA report to Congress mentions of Egypt, in 1997, continued to obtain ballistic missile components from North Korea. What's your assessment of Egypt's missile program and why does Egypt need -- feel it needs ballistic missiles?

INDYK: Mr. Chairman, Egypt stands in stark contrast to Iran in this area. Egyptians have a Scud force. That is all that they have. In order to maintain that Scud force, they have been importing some parts from North Korea.

This is a subject of concern to us, and we have been engaged in intensive discussions with the Egyptians about this. But the -- as far as our assessment goes, we do not see Egypt now embarked on an active effort to acquire medium- or long-range ballistic missiles.

GILMAN: And Mr. Secretary, the Palestinian Authority's status in the UN has been upgraded to essentially that of a nonvoting delegate. Is this not a violation of the Oslo accords and what effect will it have on Israel?

INDYK: As you may be aware, Mr. Chairman, we strongly opposed this effort in the United Nations General Assembly and think that working with the EU member countries we were able to successfully dilute the efforts by the PLO to upgrade its status in the United Nations, so that it does not have the ability to act as candidate or the ability to introduce resolutions and now co-sponsor them.

But these are procedural issues, more symbolic than real in terms of its upgrading. Nevertheless, we are strongly opposed to it. We have registered our criticism and opposition to acts like these, which are unilateral efforts to predetermine the outcome of final status negotiations. And we have -- will continue to oppose those kinds of actions.

GILMAN: Mr. Secretary, one last question -- according to recent press reports, both our nation and Israel reached an understanding with regard to the shape and scope of the next further redeployment, and talks are currently being held between the Israelis and Palestinians with regard to that issue. And just last week, both the Israelis and Palestinians asked for American assistance in moving the discussions further. Are those reports accurate, and what can you tell us about those?

INDYK: As you are aware, we have, for many months now, been seeking to reach agreement between the government of Israel and the Palestinian Authority on a package of steps that both sides would take to implement their obligations under the interim agreement.

Israel has obligations to a further redeployments and the Palestinians have a series of obligations to fight terror. And there are other issues under the interim agreements that they need to implement.

This effort led to the president introducing our own ideas in this regard back in January of this year in an effort to try to reach an agreement. Since then, we have been working with both sides.

The Palestinians accepted our ideas in principle, I think back in March, and we've been working closely with the government of Israel since then to see if we can get their agreement to our ideas.

Those negotiations made considerable progress. There were two issues on which the Israelis sought refinements in our ideas. Because we said that we would stand by our ideas, we urged them to deal with those two issues in negotiations -- direct negotiations -- with the Palestinians.

We also felt it was important that the two parties engage directly, because we discovered in this long, drawn-out effort that they have lost the ability to talk to each other. And even small issues, such as who uses a particular road in Gaza, was something that they were calling upon us to resolve.

This, obviously, is a very unhealthy situation, especially in the context of what we're trying to do to relaunch the final status negotiations, because if they can't talk to each other and resolve matters between them on small issues, how are they going to resolve the very difficult and very sensitive and complex issues involved in the final status negotiations.

So for both reasons, we felt it was important that they engage directly with each other. After some back-and-forth and up-and-down that has come to characterize the nature of their engagement, they finally sat down to do some serious business last Saturday night when Defense Minister Mordechai met with Palestinian leader Abu Mazen.

And since then, at a lower level, the Israelis and Palestinians have been meeting to go over the ideas that the Israelis have now put on the table.

As I said in my opening remarks, if they can reach agreement on these issues, then we will re-engage directly in an effort close this.

We remain directly in touch on a daily basis with both sides and continue to counsel both sides. But in terms of responding to the calls of both of them for us to become directly engaged, we think it's very important at this time that they sort it out themselves, as they are proving themselves capable of doing, and then we will directly re- engage to try to reach a final agreement.

GILMAN: Thank you, Mr. Secretary.

Mr. Hamilton.

HAMILTON: Mr. Secretary, I was almost amused by your phrase in the first paragraph. It's a lot -- a lot has happened in your region, but not much of it is good. And that's certainly my impression. We all regret that, of course.

But we've had a string of Middle East leaders here. They're all in a kind of sour mood about events. It's very hard to see any clear accomplishments in this region in recent months. And there does seem, to me, to be a kind of a gloom that has settled over this area.

Three of the leaders in this area are very sick men. And they have been voices of some moderation in recent years. I am speaking of King Hussein and King Fahd and King Hassan of Morocco.

So I -- in this kind of a situation, I want to get a sense of your priorities. What are the most important things for the United States to achieve in an area now that's got this gloomy cast to it?

INDYK: Thank you, Mr. Hamilton. Let me, if I might, just comment on the leaders that you mentioned. King Hussein yesterday, from the Mayo Clinic in Rochester, addressed his people on Jordanian television. He explained to them that he has got cancer, lymphoma B; that he has begun treatment; and that the doctors are very encouraged by the response to the treatment, by his response to the treatment, and are hopeful that he will make a full recovery.

We, of course, send him our best wishes, and I'm sure you do, too. And we'll be doing everything possible to not only ensure that he makes a full recovery, but ensure that Jordan enjoys clearly and manifestly the full support of the United States in this time of concern.

In the case of King Fahd, he also is facing some physical difficulties. Crown Prince Abdullah, as the regent, will be coming here in September, and we'll be looking forward to, as I'm sure you will, to engaging in a discussion with him about many issues that we have in common.

King Hassan I can report to you, since I saw him recently, he's in very good shape and very encouraged by the way he has managed to bring the opposition into government -- Prime Minister Yuseffee (ph) taking over control there.

This has been a long project for him, and I think it's been a very successful effort. And King Hassan, in particular, expressed to me his desire and willingness to re-engage in the peace process now that he feels that things are in better order internally in Morocco.

But of course, he's made the point that other Arab leaders who have a stake in the peace process have made to us, which is that we have to find a way to move the process forward on the Palestinian track. And in terms of your question about priorities, that is our first priority and our most urgent one.

HAMILTON: Is the peace process kind of a lynch pin for everything here -- in other words, if it moves forward, many things become possible in the region, and if it doesn't move forward, they become much more difficult?

INDYK: Well, it is one of the lynch pins.

HAMILTON: And the others?

INDYK: The others are, I think, what happens with Iraq and what happens with Iran. But certainly, the prolonged stalemate in the peace process has infected all the other tracks of the peace process -- as you say, promoted a very sour mood in which our own credibility has been much affected.

HAMILTON: So the highest priority for the administration at this moment is to try to move the peace process forward?

INDYK: I would put the highest priorities on the level of moving the peace process forward. And let me just say, not just getting the Palestinian track moving, but resuming negotiations on the Syrian and Lebanese tracks, and also promoting the multilateral process as well. We'd like to use progress on the Palestinian track as a springboard.

But the highest priority...

HAMILTON: One of the things that impressed me about your statement and your responses to the chairman is how much responsibility you are putting on the parties here. In your statement, and then several times in your extemporaneous remarks, you have said the parties -- talking about the peace process -- must resolve their differences; they've got to sort it out themselves; they must reach an agreement. Over and over again, you've made that point.

Now, I'm kind of curious about that. Are you, with those statements, trying to -- I presume you are -- trying to put pressure on those parties to resolve their differences? There's not an awful lot to encourage us they can resolve those differences. Are you suggesting in those phrases that the United States is kind of going to be withdrawing from this process of intimate involvement if these parties can't reach agreement? What happens if they don't reach an agreement?

INDYK: Look, Mr. Hamilton, we do not have the option of withdrawing from the peace process. We -- it may be necessary to take a time out from the peace process if we cannot bring this particular effort to a successful conclusion.

We are, as we've said for some time, reaching the end of a very difficult road in this regard. But we have made the judgment that it is much more important to try to achieve a breakthrough than simply to stand back and allow the process to break down and wither away, because in those circumstances, other parties involved in the peace process will be under heavy pressure to take negative steps themselves and we could see a negative spiral take the place of what we have going at the moment.

HAMILTON: Why have we not made public some of the details of our plan? What's happened, it seems to me, is that the parties have been very selective about what portions of that plan they comment upon. And what -- it seems to me it might be helpful if we made public the entire plan so that they cannot be selective in their comments.

Why haven't we made that public?

INDYK: We haven't done so because we're trying to work with the parties to try to get an agreement. And we don't believe that putting our plan out in public, and therefore, stepping up public pressure for them to accept it is the best way to go while we feel that we still have a chance of getting an agreement through private diplomacy.

It's true that both sides have leaked various parts of our proposals. But we have been scrupulous in avoiding either putting them out or commenting on the accuracy of those reports, some of which are quite inaccurate.

I think that in general what we can say is that we are seeking a parallel process of implementation of all of the obligations on both sides. That means, on the Israeli side, the implementation of further redeployment. But it also means, on the Palestinian side, that they will have to implement the whole range of obligations that they also signed up to in terms of fighting terror, cooperating with Israeli security services in this regard, developing and implementing a work plan to go after the terrorist infrastructure, preventing incitement...

HAMILTON: So just to kind of sum up here from -- we feel that the parties now are making enough progress in their private discussions that it is not necessary for us to take the next step to make public our plan in full and we have no intention of making that plan public.

INDYK: Well, at the moment, while we believe that the parties are making progress and that we have a chance of reaching an agreement, we do not consider it necessary to go public. The secretary has said a number of times, if we reach the conclusion that we cannot achieve an agreement, then we will explain why.

And in that context, you know, we will have to make a decision as to what it is that we say.

But I just wanted to emphasize, Mr. Hamilton, that the effort that we are undertaking here is to get both sides to implement their commitments. And that means that there is a very detailed work plan that the Palestinians have signed up to for the implementation of their obligations on the security side.

So it's not a zero-sum game here where Israel gives away territory and gets nothing in return.

HAMILTON: I understand.

GILMAN: Thank you, Mr. Hamilton.

Mr. Blunt.

BLUNT: Thank you, Mr. Chairman. I'd like to follow that line of thought just a little bit further, Ambassador.

It seems to me that -- and I'm sure there must be something that I don't see here -- that we basically had two different strategies -- one in the spring and one now.

The current strategy is we're going to be ready to help with the implementation process. We're not going to come forward with the specifics of our plan.

The spring strategy, apparently, was to be publicly specific with our plan. And what -- is there an inconsistency there? Is that consistent and I don't see it? And I'll follow up.

INDYK: Well, I don't think it's exactly accurate to say that we had a spring strategy of going public with our plan. As I said, we've been scrupulous in avoiding going public, although we've been under a lot of pressure to do so and a lot of pressure not to do so.

BLUNT: What about the specifics of the 13 percent...

INDYK: Well, again, we have never talked in specific numbers publicly. And I'm not going to do so today.

BLUNT: That number was never discussed by the State Department publicly?

INDYK: No, it was not, sir. We have never taken a public position.

INDYK: The -- our ideas on this and other things have leaked out, but we have never confirmed them publicly.

BLUNT: Did the leaking out of that number do anything to push this process forward?

INDYK: I think that it -- if I tried to give an objective analysis, what one sees, without wishing to confirm the number that you have mentioned, that there is now a significant majority of Israelis -- consistently public opinion polls show roughly two-thirds of Israelis -- now are supporting that kind of redeployment.

That was not the case when the public discussion of that number first came out.

BLUNT: Once -- once the redeployment occurs and the transfer of authority is made, what can we do to help ensure that the Palestinian Authority then follows through with its security commitments? I mean, the land is transferred; the security commitment were made. But we really -- how do we help ensure that they follow through?

INDYK: That's a very important question, Mr. Blunt, and something that we have approached directly in our proposals in several ways. Firstly, as I was saying to Mr. Hamilton, there is a parallel process of implementation over a specified period. And we will be involved in monitoring the implementation on both sides.

But in particular, we will be involved in monitoring the activities when it comes to security. And this is something that the Palestinians have sought from us so that there will be an objective assessment of their performance rather than both sides trading allegations about this.

Secondly, I think it's important to understand that when transfer is -- or when authority is transferred, there are two kinds of arrangements. Zone A -- territory transfer to Zone A gives the Palestinians complete control and (ph) authority. Territory transferred to Zone B gives the Palestinians control of civilian affairs, but gives Israel overall security responsibility in those areas transferred to the Palestinians.

And that provides for a measure of assurance on the Israeli side that they, in transferring territory to Zone B, will have the overall security responsibility, so that the combination of monitoring of Palestinian implementation of their commitments and arrangements that allow sensitive areas to remain under overall Israeli security responsibility, together with our own indirect engagement in the monitoring process, gives us some assurance in regard to your question.

BLUNT: Can you tell us anything about the Palestinian security efforts, the improvement of those efforts, including the level of cooperation and linkage between the Palestinian security and the Israeli security efforts?

INDYK: In recent months, after a prolonged effort on our part to insist that the Palestinians do more to fight terror, Chairman Arafat and the Palestinian Authority have been acting against the Hamas, which is the main terrorist organization in the West Bank and Gaza. They have arrested a number of bad characters, people involved in terrorism. They have not released them, as has been their previous practice.

They need to do more. In particular, there has been close cooperation with some parts of the Palestinian security apparatus, but other parts have avoided, or refused, contact with their Israeli counterparts. And that is something that has to be corrected, and that is something we've also tried to impress upon them.

We believe that, in the context of an agreement, it will be easier to get that kind of cooperation under way. And so we will be directly involved in monitoring the implementation of what will be a detailed work plan for meeting the security concerns in this -- in these terms -- that is, enhanced security cooperation and detailed efforts to deal with the terrorist threat in the areas under Palestinian control.

GILMAN: The gentleman's time has expired.

BLUNT: Thank you, Mr. Chairman.

GILMAN: Thank you, Mr. Blunt.

Mr. Gejdenson.

GEJDENSON: Thank you, Mr. Chairman.

What's the alternative to taking a breather at this point? I mean, it seems to me that the administration, for an extended period of time, has tried to encourage, to support -- some might even say "cajole" -- the parties to come to an agreement at this stage. And it seems to me that at some point, one has to recognize that maybe you just need some time here for people to come to their senses.

But I guess my question is, what else can you do that you haven't done that would move the process forward?

INDYK: Well, we, as I said before, are really coming to the end of our ability to invent more things to do. But at the same time, we are also making progress in the narrowing of the gaps, so that there are only a few issues outstanding. And we believe that it is possible, with a serious effort on the part of both sides, to reach agreement on those issues and to wrap it up.

INDYK: But we have seen before in the Hebron negotiations, and we have seen in this negotiation as well, that both sides are capable of negotiating about everything in an endless process. And bringing it to an end is going to be a challenge even if we succeed in getting the two parties to resolve some of these issues.

GEJDENSON: And the recent vote in the Knesset to dissolve the (OFF-MIKE) Knesset an argument over the peace process. What does that do to the prime minister's hand in all of this? The fact that, my understanding is a vast majority by 20 points or so voted in favor of accelerating the peace process. Where does that leave Mr. Netanyahu?

INDYK: I think Prime Minister Netanyahu understands very well that the majority of Israelis, the vast majority of Israelis, want to see the peace process go forward. Interestingly, as the peace process has stalled, the number of Israelis that support the Oslo process has gone up significantly.

In the days of Prime Minister Rabin, it was around 49 percent, at best in support of the Oslo process. Today, it's 70 percent. And I think that as the stalemate has gone on, the pressure has grown to try to produce an agreement.

GEJDENSON: Let me switch now to Iran. Yesterday's news reported that the president of Iran wants to have a free press. That for democratic societies, he said that apparently more information is needed to the public. He wants to provide protection for religions, virgin religions in the country.

However, the country clearly still proceeds in trying to acquire weapons of mass destruction, delivery systems that could put in danger the entire region and American forces in the region. There still is this split between the clerics.

I mean, how do we make sure that we don't catch ourselves in the box that President Reagan was in seeking the moderate Iranians? On the other hand, how do we end up not being responsible for not giving, what is clearly someone who's trying to move Iran forward, some victories?

If all the victories, I understand that as long as they support terrorism, we clearly don't want to change our policy. As long as they continue to try to add to proliferation problems in the region, we don't want to change our policy.

On the other hand, how do we provide some, you know, besides applause for a president who's clearly risking some of his own political situation in Iran to bridge the gaps? What can we do without giving up our principle?

INDYK: Well, I think we have to walk and chew gum at the same time. On the one hand, we have to act vigorously to try to frustrate its efforts to acquire weapons of mass destruction, to oppose its sponsorship of terrorism, and to try to make clear that its opposition to the Middle East peace process is something that is counterproductive.

But, while we are doing all of that, we also want to make clear, and the president and the secretary of state have demonstrated this in their public statements, that we recognize that there is change underway in Iran. That the majority of the people in electing President Khatami, voted for greater freedom, a return to the rule of law, to civil society, and to moderation in Iran's foreign policy. Those policies pursued by President Khatami clearly are controversial within Iran.

And there is some, you could say backlash in terms of more conservative forces seeking to constrain that effort; forcing the resignation of his minister of interior, putting the mayor of Iran on trial and convicting him -- he's a supporter of President Khatami, closing down one of the more liberal newspapers. And as I have noted at the beginning of my remarks, now the execution of a member of the Bahai faith, something which the Iranian government has not done since 1992. And that is again, the judiciary responsible for that, the same people that put the mayor of Teheran on trial.

In that context, where there is clearly a very contentious debate going on within Iran itself, what the secretary of state wanted to make clear in her Asia Society speech is that we recognize that there is a desire for change there. And that when Iran is ready, we are ready too to welcome that change, to encourage it, and together, to establish a parallel process in which both sides take steps to meet the other side's concerns in a way that can delineate a road map towards a normal relationship with an Iran that seeks to play a positive role in the international community.

So, although there may appear to be inconsistencies between the two approaches, we feel that it's a coherent policy on the one hand to do what we can to effect Iranian efforts to acquire weapons and mass destruction and missile delivery systems. And on the other hand, to do what we can to encourage more moderate behavior in Iran, such that at some point down the road, if Iran has these weapons of mass destruction and delivery systems, they'll be in the hands of people that have an interest in maintaining international order and not disrupting it.

GILMAN: Thank you Mr. Gejdenson. Mr. Rohrabacher.

ROHRABACHER: Mr. Ambassador, just following through on some of the issues you were just talking about. When you look at the technology that's flowing into Iran and Libya and others from China and from the former Soviet Union, just what priority do we place on trying to stop that flow of technology?

INDYK: The highest priority. This is something that the president, vice president, secretary of state, the national security adviser, as well as other people that work for them have been intensively engaged in. Of course, the most recent focus for some time now has been on Russia.

But, we have also been engaged in an effort to shut down the flow of technology from China to Iran. And we've made some progress in that regard as well. The Chinese have declared that they will not sell missiles to Iran. They've already sold quite a few.

And we are actively engaged with them in efforts to get them to sign up to the MTCR regime so that they will, in that way control the flow of technology from their military industries.

ROHRABACHER: So, there is ample evidence, is there not that, although maybe some of it not public, that the Chinese and different elements within the former Soviet Union are providing, and continue to provide weapons of mass destruction, or technology that are parts of those weapons of mass destruction, to both the Libyans and the Iranians?

INDYK: Yes, we have evidence of that.

INDYK: Our most immediate focus on concern has been on these Russian companies, because they're the ones that are causing the immediate problems in the case of Iran.

ROHRABACHER: Right. And the Chinese -- am I -- is the information I'm getting inaccurate that the Chinese are also up to their eyeballs in this?

INDYK: I think it's accurate to say to a lesser extent, partly as a result of the efforts we've undertaken, partly as a result, I think, of the fact that the Russian system has been more open to penetration by the Iranians in a very aggressive effort to acquire this -- these technologies. And that's why we've been focusing so hard on getting the Russians to tighten up their own system of controls on this.

ROHRABACHER: I would hope to see more personal commitment on the part of the president on this issue and I'll just leave it at that. One area that we didn't discuss here and is Afghanistan becoming a narco-terrorist haven that will threaten the Middle East?

INDYK: I hope you will excuse me in sticking with generalities here, Congressman, because Afghanistan is not my area of responsibility. We are concerned about, as you call it narco- terrorism or the combination of those two phenomenon that in a fairly anarchic situation in Afghanistan.

One of the interesting things is that we have been working with the Iranian government amongst others in a contact group designed to try to bring more stability to Afghanistan and more control there.

One of the things the Iranians have been concerned about is precisely this narcotics trade and they have taken steps, continue to do so, to try not only to stem the flow of the narcotics into Iran, but also to control Iran narcotics trading.

ROHRABACHER: Over the Israeli-Palestinian situation, Asad recently took a trip to Europe and it seems to me that for the first time, in my memory, that Asad seems to be legitimately trying to find peace with Israel after decades of threatening Israel and doing nothing but being a belligerent party. Are you optimistic about that at all?

INDYK: As you may know, we engage very actively with the Syrian government and the former Israeli government under Prime Minister Rabin and Prime Minister Perez in an effort to try to reach agreement between Israel and Syria. We made significant progress there.

But some very important issues remain to be resolved. With the with the election of Prime Minister Netanyahu, the -- this current government of Israel adopted a different approach. They very much want to resume negotiations with the Syrians. I think the Syrians, also as you noted, increasingly in the last few months, have expressed a desire to resume those negotiations.

The problem is that this -- the starting point remains undefined. The Syrians insist that the negotiations resume from the point where they left off. The government of Israel says we're a new government and while we'll take note of where the negotiations left off, we're not prepared to sign up to the things that were offered by the previous Israeli government, because there was no agreement reached and therefore, that is not binding on us. So we have to find a way to bridge that disagreement about where the negotiations will -- the point from which the negotiations will resume. Because we have been focused on trying to get an Israeli-Palestinian agreement, we have not had the opportunity to engage in an active effort. We've certainly had discussions with both sides about how we would do this, but we have made the commitment to both sides that as soon as we get agreement on the Palestinian track, we will resume the effort to get negotiations going on the Syrian and the Lebanese tracks.

And that is a commitment on part which we've made to the Syrians. I think that President Asad has become quite impatient while he's watched this process drag on, on the Palestinian track without resolution.

ROHRABACHER: I'll just -- I hope that he understands that for many, many years people were very upset with the fact that he was dragging his feet and unwilling to take any steps forward.

(LAUGHTER)

And now I find it quite ironic that he's willing to take some steps forward and the Israelis are not. So I -- we all -- we are for peace here and I appreciate the hard job it is.

It's more like, not just walking and chewing gum, it's like walking, chewing gum and juggling and whistling "Yankee Doodle" at the same time while on one foot or something.

INDYK: And watching your back.

GILMAN: Gentlemen's time has expired. Mr. Lantos.

LANTOS: Thank you, Mr. Chairman. I want to commend Secretary Indyk for the outstanding job he and the secretary of state are doing, as well as on your previous distinguished service as our ambassador to Israel.

INDYK: Thank you.

LANTOS: I'd like to raise a few issues and I'd like your reaction to each of them. Perhaps you will choose not to react to the first one.

As you know, publicly and privately, I have advocated for a long time, the establishment of national unity government in Israel.

I think it's self evident that the present government, as currently constituted, will be incapable of reaching the final stage of the peace process, even if this interim stage is concluded successfully.

I find it that there is an almost pathological preoccupation with this interim stage of 13 percent in whatever formulation. And there is very little thought being given to the obvious fact that the Netanyahu government, as currently constituted, is incapable of reaching a conclusion of the peace process.

I fully understand that it is not appropriate for our government to interfere in internal political affairs of another country. But I think those of us in Congress have no restriction of any kind in expressing our views along these lines.

So let me state for the record, that since Israel is the only political democracy in the process of having to make existential decisions and since existential decisions by their nature cannot be made with a one fold majority being a parliament, we should do whatever we can in appropriate fashion to focus on the long term problem.

And that is to have a national unity government that would have the support of the large majority of the people, who then could -- which then could proceed in a significant way in concluding the peace process.

This 13 percent arrangement, whatever obstacles may still be in the way, is surely not an answer. It's an interim point and the real problems will begin only after this process has been successfully negotiated through this interim engagement.

Now while a great deal of criticism has been leveled at the Netanyahu government, I find it very distressing that practically no criticism has been leveled at the continuing anti-Israel propaganda and the continuing anti-Israel content of the educational institutions under Palestinian Authority control.

The most outrageous example, of course, of this was the recent Holocaust denial in the Palestinian Authority's newspapers. And I would have thought that our government would make a very public and very strong statement expressing our total outrage at this.

It is absurd to talk about a peace process while fomenting hate. And the fomenting of hate is going on, on a nonstop basis in both the supportive and opposition media of Mr. Arafat, in the educational institutions under his control, and by leaders in his own authority.

LANTOS: And I would like to ask you to react to it.

I would like to ask why the administration has not reacted to the financial assistance both Saudi Arabia and Kuwait gave Hamas. Hamas is hell bent on destroying the peace process. The peace process as you stated again a moment ago, is one of our highest objectives. Hamas is permanently dedicated to destroying that peace process. And here are governments which, had we not gone to the Persian Gulf War, would no longer exist. And we haven't even got the willingness to denounce their vast financial support for Hamas activities, when the Hamas leader visited both in Saudi Arabia and Kuwait.

I would like you to comment briefly on the -- to me, singularly counter-productive, proposal of the French and the Egyptians to have a new summit involving European and Arab countries. This could clearly result only in agreeing on the lowest common denominator, or the highest common denominator of ant-Israel approaches. And I think it's important for us to make it clear at the outset that we view President Chirac's and President Mubarak's moves along these lines counter- productive, and we will oppose them.

Finally, I'd like to make a brief observation concerning King Hussein, and Crown Prince Hassan. We all hope that King Hussein's health will return to the best conceivable level, and for all of the obvious reasons, we all wish him many, many years of continuing service in his role.

But I think it's important to underscore that Crown Prince Hassan has demonstrated remarkable capabilities of leadership in the region. And just as I believe Vice President Gore is being given a great deal of exposure, both in terms of his bilateral dealing with the Russians, the Egyptians and others, it would be very important in terms of Crown Prince Hassan's domestic prestige to give far greater attention to this singularly constructive Middle East leader than we have done in recent years, and I'd be grateful if you would comment on that.

INDYK: Thank you very much, Congressman Lantos, and you've covered a lot of territory and I'll try to respond as quickly as I can.

You're right that it would not be appropriate for me to comment on your proposal for a national unity government in Israel. I would just agree with you that the government of Israel as presently constituted does have difficulty dealing with the issues involved in the peace process, particularly when it comes to yielding territory in the West Bank. For many of the parties in the governing coalition, this is a fundamentally heretical proposition. That said, and agreeing with your general point, that we're down in the weeds talking about 13 percent, when there are those big issues out there, the final status issues. And the clock is ticking. May 4th, 1999, is a real date. That is when the interim agreement expires.

And if there is not some understanding reached between the two parties about these bigger issues by that date, then we are very concerned that bad things will start to happen. Whether it's a unilateral declaration of an independent Palestinian state, and Israeli responses to that in terms of annexation of territories to be negotiated over, that will lead to a very negative cycle, and it's something that we want to avoid.

But agreeing with you on that, nevertheless, it will be very significant if this government of Israel, as presently constituted, agrees to go ahead with the process of further redeployments from the West Bank. Because then, you will have the entire spectrum of Israel, committed to the Oslo process; committed to yielding territory in the West Bank in response to Palestinian commitments to peace coexistence, and fighting of terror.

And I would not underestimate on the one hand the painfulness of that process for them, but the significance of it politically and ideologically, if the prime minister of Israel is able to pull that agreement off.

I agree with you entirely about the total unacceptability of the kind of anti-Israel and anti-semitic propaganda that often finds its way into Palestinian press and other forms of communication. We have criticized that publicly, and condemned it. I'm glad to have the opportunity to do so again.

And we have issued instructions to our consul general to take up the particular issue of the holocaust-denial story, with the newspaper concerned, which is not a Palestinian authority newspaper. It's a privately-owned newspaper, although it's supported with the Palestinian authority.

That kind of thing is unacceptable, and we will make that very clear, both to the authority and to the newspaper itself. Within the context of this agreement that we are trying to reach, we also have put forward a proposal to deal with the issue of incitement, and Palestinian and Israeli responsibilities when it comes to the issue of incitement. And it is very important and we would, in the context of reaching an agreement, set up a mechanism to deal with this particular problem in a systematic way -- something that has not existed up until now.

In terms of financial assistance to Hamas, I hope you will accept my word on this, that we have taken this up very vigorously, not only with the Saudi and Kuwaiti governments, but other governments as well. They have committed to us repeatedly that the governments are not providing funding to Hamas. That there may be individuals who are providing funding. And we have stressed to them the importance of cutting off that flow of funding. I think that the trip is ...

LANTOS: Since neither government is democratic, it's a difference. It's a distinction without a difference. They have ways of imposing restrictions on the flow of funds, and they have failed to do so.

INDYK: We agree with that proposition, and that's why we are urging them to do so. Of course, we know, in our own cases as well, that it's not so easy to cut off funds. But your general proposition is correct.

GILMAN: The gentleman's time has expired. Mr. Salmon.

LANTOS: I have two more questions.

GILMAN: Well,...

LANTOS: Mr. Chairman.

GILMAN: Without (AUDIO-GAP) objection, the gentleman's time is granted an additional minute or two. We have several members who want to -- go ahead, Mr....

INDYK: I will be very quick. On the French-Egyptian proposal, we just don't see that as a relevant issue at the moment. We're trying to get an agreement, and we want the focus of the effort to be on the parties reaching agreement themselves. International conferences we don't see as being helpful, particularly helpful, to that process at the moment.

If we have a breakdown and nothing to fill the gap, I think it will be hard to resist that kind of conference, but we're not interested in it at the moment.

As far as Crown Prince Hassan, I agree entirely. Jordan is fortunate to have strong and wise leaders in King Hussein and Crown Prince Hassan, and we want to make it very clear that we strongly support them and stand by Jordan, and will be acting to do whatever we can to ensure that, in this time of uncertainty, that nobody has any illusions about steadfast support of the United States for King Hussein and Crown Prince Hassan.

GILMAN: Thank you very much, Mr. Ambassador. Mr. Salmon.

SALMON: Thank you, Mr. Chairman.

Ambassador Indyk, it's a pleasure to have you here today. (AUDIO-GAP) Over the past year, I've been alarmed at the Clinton administration's perceived willingness to appease countries and leaders that have sponsored terrorist attacks that have killed Americans.

In what only could be termed shocking, even frightening development, the administration recently appeared in court to block efforts of one victim's family, the Flatows -- who's daughter Alisa, was killed in a terrorist attack in Israel -- to enforce legal judgments obtained in an American court against Iran, which helped finance the attack.

The Anti-Terrorism and Death Penalty Act, which became law in 1996, included a provision authored by Representative Jim Saxton, that explicitly permitted such suits. The administration should be working on behalf of American citizens, not protecting the assets of Iran, the country our State Department has identified as the number one sponsor of terrorism.

SALMON: Protecting the assets of terrorists is absolutely the wrong message to send to killers of American citizens. And I think it's morally bankrupt, no matter how badly we'd like to develop better relationships with Iran.

I commend Representative Saxton for introducing legislation, the Justice for American Victims of Terrorism Act, which would permit victims of state-sponsored terrorism to execute judgments against property owned by terrorist sponsoring states.

I'm also troubled by the administration's consideration. I know you addressed it in your initial comments regarding the...

GILMAN: Mr. Salmon, could I interrupt for one moment, get a sense of the body here. Have you folks had, you haven't had a chance to ask your questions. Do you have a number of questions? Do you think you'll be taking your whole...

(UNKNOWN MEMBER): I have one.

GILMAN: One question, one question, and that's it. So, just, if we could proceed as fast as possible.

SALMON: I'll try to. GILMAN: Otherwise the ambassador...

SALMON: I just have some very important questions. The last gentleman ...

GILMAN: You've got (OFF-MIKE).

SALMON: Take what I've got. Anyway, I know that you spoke of the administration potentially softening its position on the venue for the bombing of the Pan Am flight that killed 270 people. I'd like to submit for the record an op ed piece submitted by Daniel and Susan Cohen.

I know that there may be some reports that are inaccurate of what the administration's position is. After all, where is the administration? I know a few years ago, when Qaddafi suggested the venue be at The Hague, it was laughed off and said it was preposterous, ridiculous. I hope that's still the administration's position. But, I'm curious after all, what is the position?

I'm concerned about reports that the State Department pressured the Israeli government to abandon its demand that the Palestinian Authority transfer to Israel the 36 terrorists that Israel has formally requested and in accordance with the Oslo Accords. Now, that may be a felicitous report. I hope it is. But, I'd like to know after all, what is the policy of the administration.

I expressed particular concern over the administration's position on this provision in Oslo, because some of the terrorists at Israel's request to be transferred to Israel have murdered American victims.

Earlier this month, I did travel to the Middle East and I met with Yasser Arafat to convey to him concern that the territory that he controls has become a safe haven for terrorists. I've been deeply troubled that the Palestinian justice system, as Secretary Albright said about a year ago in a speech, has become a revolving door of justice.

In my meeting with Chairman Arafat, he did agree to permit U.S. inspectors to visit the Palestinian prisons that house criminals implicated in terrorists attacks that have killed Americans, because their skepticism, whether or not they actually keep them in prison.

Now, that agreement from him is a movement, I think in the right direction. I think it's significant. It's still my preference that terrorists be transferred either to the United States or to Israel where the crimes occurred, to stand trial. It's also the position of the U.S. House which passed a measure, 406 to 0 regarding this issue.

Now, three questions, why has the State Department and the Department of Justice intervened in the Flatow case to prohibit these victims of terror to seize Iranian assets to help satisfy their judgments? I would like you to be as painfully clear as you can on what is the position of the administration in moving the venue to The Hague as proposed by Muammar Qaddafi. I know you spoke about it briefly.

And how's the administration, are the reports accurate that the administration has pressured Israel to release the PA from its obligation to transfer murderers to Israel?

And finally, has the administration taking Arafat up on his offer and inspected Palestinian prisons that hold killers of Americans? Thank you.

GILMAN: Just to let the members know and the ambassador know what we're going to be doing here, we'll give the ambassador time to answer your questions. Then we will break and then come back for you folks to have your time to ask whatever questions you'd like. And we will come back immediately after the vote is complete. It's going on the floor, we have 10 minutes left in the vote on the floor. Mr. Ambassador.

INDYK: Mr. Chairman, just clarification, how long do I have to answer Mr. Salmon's questions?

GILMAN: You have a couple of minutes

INDYK: Two minutes?

GILMAN: Five minutes if you'd like to take.

SALMON: If you can't answer them in the time constraints, you know, maybe you could submit some answers in writing. Thank you.

INDYK: Sure. First of all, the Flatow case. I have a personal stake in this, Mr. Salmon. Alisa Flatow was killed by a terrorist bombing on a bus in Gaza 10 days after I arrived in Israel to take up my post as ambassador. And that was followed unfortunately, by a number of American citizens being killed on my watch in Israel: Matthew Eisenfeld, Sarah Duker, David Boim amongst others. I went to more funerals than weddings in my time, in Israel. And therefore, I feel very strongly that the perpetrators of these heinous crimes should be brought to justice.

In the case of, the particular case of Alisa Flatow and the finding of the judge against the Iranian government and the attachment of the assets, the reason that the Department of Justice and the State Department lawyers intervened in that case was because of the legal obligations that we have under international covenants that we have signed up to. And it is for that reason that they entered the case. I will be glad to provide you with a detailed answer on that, because it involves these legal conventions. I give you the full count of that.

As far as the issue of the venue for Pan Am 103 trial, I'm not sure whether you were here at the beginning when I made very clear that what we are talking about is seeing whether it is possible to stand up a Scottish court with Scottish judges and Scottish procedure and Scottish prosecution in a different venue, that is in the Netherlands.

This is not a world court proceeding. We will not have anything to do with that. It's not an international panel of judges. It's a Scottish court. The UN Security Council resolutions provide for trials of the suspects in an American or Scottish court. So, that would be consistent with the UN Security Council resolutions as long as we are satisfied that the legal requirements can be met for that kind of process.

We are motivated by a desire to bring these suspects to trial. They are at the moment, as far as we can tell, sunning themselves on the beach in Tripoli. This is outrageous and unacceptable from our point of view. One hundred and eighty-nine Americans were killed. And justice delayed is justice denied.

We are responding to the concerns of many of the families involved. In fact, as you may know, a majority, almost two-thirds of the families have now come out publicly calling on us to do just what I have suggested. I'm very much aware that Daniel and Susan Cohen are not supportive of this approach. But, certainly others are because they want some sense of justice being done in this case. And that is what has been motivating us.

If Qaddafi does not...

GILMAN: Mr. Ambassador, we have six-and-a-half minutes left of this vote. And I think it would prudent for us to go and vote now, just in case.

SALMON: Mr. Chairman, could I just put a question on the table. I will not be able to come back regrettably. But, ask our distinguished ambassador...

GILMAN: Mr. Salmon, in fact, before you do, Mr. Salmon, why don't you take over the chair on the way back, and you will be able to have the ambassador finish answering your questions. When you come -- We're going to have to come back.

SALMON: Just to take 30 seconds. Mr. Ambassador, as you know, I and many members of Congress -- Senate, House, Democrat and Republican -- have been concerned about the lack of payments to Gibbs (ph) and Hill (ph) by the Saudi government. Perhaps, you could enlighten us. I've been pressing this for over two years. I've talked to Wyche Fowler a number of times in Saudi Arabia. I've talked to people from the Saudi embassy. And we still seem to get nowhere. Perhaps, you can enlighten the committee as to any progress that might be made on that?

GILMAN: OK, with that, this committee is in recess for 15 minutes.

(RECESS)

RECESS

SALMON: Okay, we reconvene now. Ambassador, right before we all took off for the vote, we were going to finish with my last question and then Congressman Rohrabacher had a question then we'll get to (OFF-MIKE). Oh, I'm sorry, Congressman Smith had a question, thank you.

INDYK: I believe you are -- the questions that I did not answer was on the issue of transfer of terrorists, the people involved in killing Israelis or Americans. Those reports, I'm not sure what you're referring to but they're certainly not accurate.

We have not pressured the Israeli government at all. In fact, half of the package of ideas that we have developed to try to deal with all of the obligations of both sides under the interim agreement. We deal specifically with this issue of the transfer of suspects. And I hope that if we get agreement that there will be satisfactory arrangements made for the fulfillment of the requirements under the interim agreement.

So on the contrary, we've been working to try to get satisfaction on this issue. I think you had a fourth question that I didn't ...

SALMON: Actually, the point was -- by the way, I had a very, very productive meeting with your people, both in Jerusalem and Tel Aviv as well as the Justice Department people that are on the ground now, the two FBI agents that have been sent there to try to wrap some of these cases.

In my meeting with Arafat he made the commitment to me because I expressed frustration that we weren't sure whether these people were actually finishing out their sentences.

He made the offer, well if your people want and come and investigate at any time, unannounced, then you're welcome to do that and my question was have we taken him up on that or do we intend to?

INDYK: We have from time to time done that, but it's not a very successful kind of operation. I mean, just because somebody's in jail one day doesn't mean they're in jail the next day.

SALMON: But if we show up unannounced, I know the problem that we've had in the past is that we have to let them know in advance, we're going to come visit the prison. That's completely counter- productive because they can grab the guy off the street, put him in prison and show him to you and then let him out, but if it's an unannounced visit and they're periodic, there's no, you know.

INDYK: Senator, we have done some of those things in the past. Again, under the agreement we have a system of monitoring that will be introduced by agreement by both sides that I think will take care of your concerns in that regard.

GILMAN: Congressman Smith had a question.

INDYK: Yes, Congressman Smith is asking about the case of Gibson Hill (ph). This is an unsettled business claim in Saudi Arabia. I have been working with Congressman Menendez and others to try to get some satisfaction in this case. I can not report that we've made any progress, but we will continue to pressure with the Saudi government and with Ambassador Prince Bandar when he returns to Washington.

SALMON: Thank you. Congressman Rothman is next.

ROTHMAN: Thank you, Mr. Chairman, Mr. Secretary. It's good to see you again. As you may know, Congresswoman Ros-Lehtinen and I are the authors and original co-sponsors of (AUDIO GAP) of an effort to get Israel into Western European and Others Group, the WEOG?

We met with the present, immediate past president and next leader of the European Union a couple of months ago. Maybe they've changed hands in their role and their positions since then, anyway, we wanted to tell them of our commitment to getting Israel into the -- eliminating Israel's second class status at the UN. And the bottom line is they said it's not the right time and we said it's 49 years, not the right time.

We left and especially during this the lack of movement in the peace process they said it would be absolutely the wrong thing to do. Low and behold, they acquiesced and encouraged the upgrading of Palestinian Authority's, status at the U.N. at the same time.

What is the administration doing to try to get Israel admitted into WEOG, temporary or permanent?

INDYK: We have raised this issue with the Europeans on many occasions and are continuing to do so because we support Israel's inclusion in the West European and Others Group. We agree with you that this kind of second class status is not acceptable or fair treatment for our friend and ally, Israel and that we should see and end to the way in which Israel is discriminated against in the international bodies.

You're right about there never being a good time, because we press the Europeans at a time when the peace process was moving forward and they didn't act on this at that time, so I don't think it's an adequate explanation to say that lack of movement is the reason -- lack of movement in the peace process is the reason.

On the other hand, the lack of movement in the peace process has created a very negative environment in the U.N. in general when it comes to Israel. Although recent years when things were moving in the peace process, we were able for the first time to introduce positive resolutions in the General Assembly in support of the peace process and that was positive towards Israel.

We saw a whole change in the atmosphere towards Israel. That, unfortunately, is receding just as the sour mood that Congressman Hamilton talked about his taking hold throughout the region and these kinds of initiatives are inevitably going to suffer.

ROTHMAN: Well you know, if I may Mr. Secretary, I think, I don't know how else to send the message. I mean we're -- everybody's patron, everybody's a strong ally and protector and I said to these folks a couple of months ago with Ms. Ros-Lehtinen and Israel is America's greatest best friend in a very important region of the world.

You are our friends. We expect friends to help us help other friends and you know when they said to me -- we were just at the verge when Rabin got killed and we were just about to do it -- I accepted that for what it was. And that's why it was so shocking when they participated in the upgrading of the Palestine status.

So we've got about 115 co-sponsors to our efforts here in the House and I told these folks last -- these folks a couple of months ago that the United States Congress would pay attention to what they did or didn't do, they have done the wrong thing by America, they've done the wrong thing by our greatest ally in the region and I think we have to send a message to them in any of the innumerable ways we can send messages, so I would encourage for you to use your good offices to accomplish that. INDYK: I will Congressman. Let me just for the record though, correct the impression you have in regard to the upgrading of Palestinian status.

On the one hand the Europeans were very helpful in the previous effort, previous successful effort to prevent this from happening which took place in I think it was December of last year.

In the General Assembly of course we have one vote and we cannot bock it on our own, but with the help of Micronesia and the Marshall Islands -- and the Europeans worked with us on that. In this case, they went along with the upgrading, but they then worked with us to ensure that it was a kind of minimalist approach so that the Palestinian -- the PLO did not get what it wanted in terms of voting rights and the right to introduce resolutions, the rights to be a candidate and so on.

ROTHMAN: Well, at the very least -- I appreciate that and that education; and I take it to heart. But you know, there were some small public relations victory, perhaps, for the Palestinian Authority. And there should be a commensurate, then, public relations victory for Israel assisted by the Europeans as well.

INDYK: That would ...

ROTHMAN: If they're talking about evenhandedness, then that's next. And I'm expecting that from them -- some public relations fig leaf to demonstrate that the Europeans recognize that the lack of movement has a responsibility in the two camps, not just the one.

But I do hear what you say about their cooperation. But it's not enough. And I hope you will convey that message.

INDYK: I would also point out that we should expect that there will be more efforts to upgrade the Palestinians' status. And I would imagine that if we do not succeed in getting an agreement before the U.N. General Assembly meets in September, we'll see a lot of other negative actions.

ROTHMAN: Again, though, I hope you will just send the message that if our friends, the Europeans, don't cooperate with us, then they're not our friends. If our friends won't help us when we need them, that violates the definition of friendship. And if they don't want to be regarded as our friends, then we will behave accordingly and regard them not as our friends. So please, send that message. We expect friends to act like friends. Otherwise, we will treat them as strangers.

UNKNOWN: (UNINTELLIGIBLE)

UNKNOWN: You know, Mr. Rothman, if we could get our friends to act like friends, we probably wouldn't be in arrears (ph) on the U.N. dues. Let... SALMON: The time of the gentleman has expired. I'd like to turn some time over to Mrs. Capps (ph) for questions.

CAPPS: Thank you. And I first ask unanimous consent to have my statement, which I didn't have a chance to give in the beginning, be submitted for the record. (AUDIO GAP) And it's my first pro-Israel position that leads me to be a strong advocate of the peace process.

You said the news isn't good. Everyone is saying that in the Middle East. And yet -- and I did come today concerned about press reports of recent date that the administration appears ready to throw up its friends and disengage from the active involvement in the peace process. And I would not be in favor of that.

We have -- even though the ultimate resolution of such a conflict, as you stated, must be negotiated directly between the parties, we've examples, such as recently in Northern Ireland, where our encouragement does and can make a tremendous difference.

You've dealt with this topic at length through this report -- your report and your engagement with us. And I appreciate very much your being here.

I want to ask a question which I broached with you during the break regarding the hardship being suffered by the Iraqi people. It's estimated that there are a million-and-a-half Iraqi people, including a half-a-million children who have died as a result of the U.N. sanctions since 1990.

Despite the fairly recent increase in the oil-for-food program, this is continuing. And I have reports from my constituents who tell me of firsthand knowledge of terrible sufferings that are going on there.

And I want to know if there's any way we can be doing more -- or we can be doing something to keep the Iraqi military contained, at the same time helping to alleviate the suffering of the Iraqi people. And if there' time, I have another short...

INDYK: ... Yes.

CAPPS: ... question about Jordan.

INDYK: First of all, I think it's important to note that there is no sanction on the importation of food and medicines to Iraq. And Saddam Hussein has always had the ability to spend money on meeting the basic needs of the Iraqi people. And he has chosen not to do so. He's chosen instead to build these unbelievable, uninhabited palaces as mosoleums (ph) to his ego -- and then play on the suffering of the Iraqi people for propaganda purposes -- out of recognition that he would not meet their basic needs because it served his purposes not to do so.

We introduced this concept under Resolution 986 of allowing Iraq to sell oil, putting the money from those sales of oil into a U.N. escrow account and making sure that, money was spent for humanitarian supplies, including medicines, for the Iraqi people.

The Secretary General recommended an expansion of that program and we supported that -- to the point where Iraq is now allowed to export $11.2 billion worth of oil annually to meet the needs of the Iraqi people. By U.N. estimates, that far exceeds the amount of money necessary to provide for food and medicine for the Iraqi people. And some of that money will be spent on upgrading hospitals and schools and the electricity infrastructure and so on.

So that the program as it kicks in is going to go beyond that basic humanitarian need to improving the conditions of the Iraqi people. And we're doing that under U.N. control -- control of the money, control of the contracts, monitoring of the distribution. We're doing it because Saddam Hussein himself will not do it. And one of the disturbing developments in this regard was a story in the "New York Times" yesterday -- I don't know whether you saw it -- in which they reported that because this program is now working and is alleving (ph) the plight of the Iraqi people -- alleviating the plight of the Iraqi people, Saddam Hussein is considering canceling it -- canceling cooperation with it. Because we are, in the process, denying him the propaganda benefit of, you know, babies in caskets on the tops of taxis, ...

CAPPS: ... Right.

INDYK: ... which he made great play of in the last crisis.

CAPPS: Right.

INDYK: I believe that within the next six months, if this program goes forward, as I hope it will, we will see a significant improvement in the conditions of the Iraqi people.

CAPPS: OK.

INDYK: And we are certainly -- are very concerned to meet that requirement.

CAPPS: Thank you. My other brief question, actually, was not on Jordan but on Lebanon. The elections that will be held in October are: what is the relationship, our relationship, to those?

INDYK: I'm sorry. Please repeat that -- (UNINTELLIGIBLE)?

CAPPS: Do we oppose -- do we support the elections in Lebanon?

INDYK: Oh, very much so. We were very glad to see that municipal elections were held in Lebanon for the first time in 30 years. Two months ago, they were successfully contested; good voter turnout, as far as well can tell -- a fair, free election.

And presidential elections when the occur is something we would also support. We don't intervene in Lebanese politics any more than we intervene in Israeli politics. So we don't have a candidate.

CAPPS: (LAUGH)

INDYK: But we definitely want to see that election go forward.

CAPPS: Thank you very much.

SALMON: Thank you. The time of the gentleman has expired. The chair will now recognize Mr. Faleomavaega.

FALEOMAVAEGA: Thank you, Mr. Chairman. And I certainly want to personally welcome our assistant secretary for East Asian affairs -- also our former ambassador to Israel that I've had the privilege of meeting personally when we visited with Chairman Gilman. And I certainly want to thank Chairman Gilman for calling this hearing and having you, Mr. Secretary, to testify before the committee.

(AUDIO GAP)

As you know, when we were there in Tel Aviv -- that was about a year-and-a-half ago -- we were briefed by officials of the Israeli government and the concern that they had that Iran was developing a missile that had the capability of eventually reaching Jerusalem and other key cities in Israel. Well, now, this has become a reality. It's somewhat very prophetic in that instance.

At the same time, interestingly enough too -- you know we've been playing ping pong with the Chinese, and now we're wrestling with the Iranians, as part of our Goodwill -- and hopefully in wanting to ask for your opinion, Mr. Secretary.

There's been a lot of media coverage about the -- what should be U.S. policy towards Iran. Should we have one of engagement similar to what we're doing with the People's Republic of China? Should we have Iran as a friend rather than as an adversary -- given the fact that there seems to be these motives -- or I mean basic gestures from the Iranian leaders to see that if we could normalize our relationship.

So given the concern that we've had from the military capability of Iran, do we see a -- what, exactly, is our position now in our relationship with Iran?

INDYK: Thank you, Congressman. It's nice to see you again.

FALEOMAVAEGA: (LAUGH)

INDYK: The test of the Shah-Hab (ph) was indeed a development that was not unexpected. It's a flight test -- the first. It was not entirely successful. We have some problems.

INDYK: But I think it indicates that they are far enough along in their development of this medium-range ballistic missile that we should assume, for planning purposes, that we will begin to see this missile deployed in year or so, which is a short window.

We have been concerned about this, as has the government of Israel, for some time. We have been vigorously involved in an effort to shut off the supply of technology to Iran -- not just for this missile, but also its long-range ballistic missile program.

We've had some successes in that regard. But what this I think does is to create an environment in which we need to redouble our efforts -- and not just with Russia, but also China and North Korea.

At the same time, as you point out, there's some changes going on in Iran, and that is something that we want to encourage and the Secretary of State has laid out a detailed approach in that regard, which makes it clear that, in a parallel process, if the Iranians are prepared to respond to our concerns -- which includes weapons of mass destruction and missile delivery systems -- that we are prepared to respond to their concerns. And we can develop a road map toward a more normal relationship.

But that depends on them and not just on us. So, as it were, the offer is out there when they're ready. But, in the meantime, we are not changing our policies. And our economic sanctions policies remain in tact as well until we see that we can develop this kind of approach.

We are responding to their rhetoric in kind with our rhetoric and making clear that we welcome a civilizational exchange as President Khatami has suggested. We welcome the interest of the people of Iran as manifested in his election in a return to the rule of law in greater freedoms, personal freedoms, press freedoms.

FALEOMAVAEGA: Are citizens now allowed to travel freely to Iran in these exchanges?

INDYK: Yes. We do have a travel warning on, but we have walked that back a bit from our previous concerns because of the change in climate.

FALEOMAVAEGA: Mr. Secretary, I'm sorry, but because my time is short, I've got to -- one other (CLEARS THROAT) -- There have been some real serious criticisms from some of our so-called European allies -- to suggest that the crisis with Israel and Palestine, with the Palestinians, for the Middle East, for that matter, has always been kind of like an American ocean of dominance. And especially France -- the Europeans just don't like the idea that the U.S. should continue calling the shots, so to speak.

And the criticism also seems to stem from the notion that we seem to lean towards Israel all the time -- always never seeming to give a fair consideration to the concerns of the Palestinians. And I don't know if that's accurate.

But what is the administration's position on this criticism? And are we really telling Europeans and other countries to stay away -- this is American turf; that you shouldn't participate? Or am I -- or is this media writings have been totally false as they are -- the administration is concerned?

INDYK: We don't tell them to stay away. The -- it's not our preserve; it's the preserve of the parties involved in the peace process themselves. And it's up to them to decide who they want to help them resolve these very difficult issues.

We have worked closely with France in Lebanon, for example, where we co-chaired the Israel-Lebanon monitoring group. It meets on a daily on -- I shouldn't say daily basis -- it meets whenever there's an incident -- there's complaints on either side.

It functions very well. Our cooperation is excellent. And we've demonstrated there that we can work together to promote stability. The -- so as far as we're concerned, there's no ban on European involvement. We would welcome it. But the reality is when it comes down to trying to negotiate the details of an agreement, having more than one mediator makes things very, very complicated.

FALEOMAVAEGA: One more quick question, Mr. Secretary: There's now pending before the administration a contract deal between Mobile Oil Corporation and a U.S. company with the -- Iran, where Iran will get oil coming out of the Caspian Sea; and then, in exchange, we will get the oil coming out of the Persian Gulf, which Iran has jurisdiction over.

Where are with that -- with that deal right now -- or pending contract?

INDYK: Yeah. It's -- it is something that is under consideration within the administration. We've made very clear that we are opposed to any kind of pipeline from the Caspian area through Iran. And we want to see pipelines flow east-to-west and not north- to-south in that regard.

The oil swaps is a proposal -- is not a pipeline, but it has many of the manifestations of a kind of functional equivalent of a pipeline, and that creates some problems for us. But it's under consideration.

FALEOMAVAEGA: A recent vote in the General Assembly of the United Nations -- I think with a total membership of about 186 nations -- 124 countries voted in favor of the idea that we should give more recognition to Palestine as a state. And I notice that the Marshall Islands and the federated states of Micronesia, along with Israel and the U.S. voted against this resolution.

What is the administration's position? Are we going to allow the United Nations to dictate something that is really -- should be on the premise of where the leaders of both factions are the ones really controlling the situation and not the -- you know, it's very easy for them to vote; but when the chips are down, who really is the one that picks up the mess, or tries to clear up the mess? It's our country.

INDYK: Yes

FALEOMAVAEGA: Well, I would like a response. What is our position on that?

INDYK: First of all, I'm sure you would agree with me, Congressman, that we should express appreciation to Micronesia and the Marshall Islands for voting with us in this.

FALEOMAVAEGA: And I personally conveyed the good wishes of Prime Minister Netanyahu on that basis. And they really appreciated that it is recognized by the highest level of the officials of Israel.

INDYK: Right. And the United States. You know, in the General Assembly we have one vote. And whenever this issue, the Palestinian issue or Israel, gets raised in the -- at the U.N. General Assembly, no real good comes of it. We've seen it in the most extreme case in the Zionism is Racism resolution that was passed there despite our opposition. In this case, it was elevating the status of the PLO, but it did not change it to the point where it had a kind of statehood status. It was more form than substance in that regard. So, in itself, it was not as bad as it might have been. Nevertheless, we made our opposition very clear to these kind of unilateral steps by either side, which tend to destroy trust and confidence and attempt to preempt the outcome of issues that need to be negotiated between the parties. And that's the answer.

The answer is: the negotiations is where these issues should be dealt with, not in the General Assembly and not in the Security Council.

FALEOMAVAEGA: Mr. Secretary, I want to commend you...

SALMON: ... Thank you. The gentleman's time has expired.

FALEOMAVAEGA: ... I want to commend you for the outstanding job you're doing for our country.

INDYK: Thank you.

SALMON: Thank you. We recognize Mr. Sherman.

SHERMAN: I'm going to pick up where Mr. Faleomavaega left off. In February of '94, then-Secretary of State Warren Christopher told a committee of this House:

"Certainly, the United States does not support a Palestinian state. Certainly, I think responsible official of Israels are the best judge as to whether and whether (AUDIO GAP) not the steps they've taken are the right ones for Israel. We are helping the Israeli leaders try to achieve the results that they want to achieve. I think that is the proper role for the United States in this situation."

And he ended by saying, "We do not certainly support a Palestinian state, as we never have."

Do these words still reflect American foreign policy vis-a-vis a Palestinian state?

INDYK: Congressman Sherman, the issue of Palestinian statehood is an issue which is -- needs to be dealt with in the context of the final status negotiations, which will deal with other issues as agreed upon between the parties -- Jerusalem, refugees, borders, and the issue of what the entity -- what form the entity will take and what powers it will have -- the Palestinian entity, that is.

INDYK: And we are strongly opposed to unilateral actions, as I mentioned in the previous answer, that would seek to preempt the outcome of those negotiations. And unilateral actions involving unilateral declaration of a Palestinian state are included in that concern that we have that neither side takes steps that would preempt the outcome of those negotiations.

SHERMAN: So if there was a unilateral declaration of a Palestinian state, how would the United States respond?

INDYK: Well, I think as I explained, that is an issue which should be dealt with in final status negotiations. And that is the position that we would take.

SHERMAN: But if there was such a declaration, how would we respond, assuming the declaration was unilateral and not part of a final status agreement?

INDYK: We would oppose a unilateral declaration, and make clear that this is an issue for final status negotiations.

SHERMAN: I do have some questions about Sudan and about what seems to be holes in our sanctions regime there. But we're having hearings this afternoon on Sudan, and I'm going to reserve those questions for one of your colleagues, and instead turn to the issue of Jerusalem.

You know, there's a popular fiction with the newspapers, et cetera, that is the executive branch of government which is the sole vicar of American foreign policy. And in fact, if you read any of these Supreme Court decisions on the subject, again and again they conclude that, in fact, foreign policy is supposed to be determined here in the Congress and administered by the administration.

And the Jerusalem Embassy Act states, in part, that Jerusalem should remain an undivided city. And it goes on to say Jerusalem should be recognized as the capital of the state of Israel. Is this act the policy of the United States government, or is Congress simply not allowed to legislate and to determine what American foreign policy is?

INDYK: Yes, obviously Congress has the power to legislate in these kinds of areas. But I believe it is the prerogative of the administration to decide on issues such as recognition. That is something that might, in the end, have to be resolved in the courts. But that is a prerogative that administrations, successive administrations has asserted.

SHERMAN: This is a statute ...

INDYK: But as far as the policy itself, just to finish, Jerusalem is an issue that the parties themselves agreed would be addressed in the final status negotiations. We are making a huge effort to try to get those final status negotiations started. We're doing so at the request of the Israeli government. Those final status negotiations are supposed to be concluded by May of next year. And if they are, then it will be possible to resolve this issue as well.

SHERMAN: I would point out that not only has this statute been passed by the Congress and signed into law by the president ...

INDYK: The president did not sign it, he ...

SHERMAN: Excuse me, allowed to become law by the president. And when a law is the law of this land, and I would hope that the officers of the U.S. government would follow it, and not simply declare that it is something to be decided by other foreign governments and not by the laws of our own country.

INDYK: If I could respond, Congressman.

SHERMAN: Yes.

INDYK: It is certainly the administration's duty to uphold the law, and my personal responsibility to do so. And we will do so. I think it's important to look at the wording of the particular legislation. And I believe that we are entirely correct in our position and not acting against the law.

SHERMAN: I look forward to examining that law with you paragraph by paragraph. But I don't think there's anything as simple in any of the statutes of this country as the words "Jerusalem should be recognized as the capital of the state of Israel."

INDYK: I think the world is "should" that becomes the issue here.

SHERMAN: "Should" is one of those simple words you learn in the first years of elementary school and seems relatively apparent to me. With the chair's permission, I have just one other question, and it concerns me, the whole issue of final status negotiations and land for peace, and that is even if one establishes that there are certain territorial concessions which Israel should make, the question is, in return for what?

In return for appropriate actions by the Palestinian authority, or in return for peace with the entire Arab world. Is it envisioned that Israel will make all of the territorial concessions that are reasonable solely in return for reasonable actions by the Palestinian authority, and therefore have nothing else to give in return for peace treaties with Iran, Iraq, Sudan, Algeria, and all the other states that are in a technical state of war with Israel. Is land for peace only peace with one entity, or is it peace with the entire array of hostile countries?

INDYK: It's an important question to ask. We seek a comprehensive peace, which means a lasting and secure peace with all of Israel's neighbors. Their neighbors are defined in that regard as the countries immediately surrounding Israel who are involved in conflict, one of the manifestations of which is territorial conflict, that plus Lebanon, Syria, the Palestinians. Of course, Jordan and Egypt are already at peace with Israel. SHERMAN: So if Israel was to make territorial concessions for peace, she's entitled only to get peace with her immediate neighbors? And the failure to deliver peace with other countries is not a failure of consideration?

INDYK: No. I did not finish my answer. But I don't think that one should expect that there will be contractual peace agreements with countries that are beyond Israel's borders. There are disputes between Iran and Iraq, and you can mention Libya as well, manifest their extreme hostility towards Israel.

And we would wish to see that changed. One of the ways to change that is to widen the circle of peace around Israel, to bring into contractual peace agreements with Israel those countries that surround it immediately. Once Egypt was at peace with Israel, that had a dramatic impact on the ability of other states to pursue their hostility.

One of the reasons that we think it is in our strategic interests to pursue to make peace agreements between Israel and Syria is because that, too, would have a dramatic impact on the ability of those that are still determined to seek Israel's destruction, would have an impact on their ability to do so.

And we think, particularly as this region along with the rest of the world enters the 21st century, that it is important to take advantage of a window that may in fact be closing to try to achieve that comprehensive peace so that Israel is in a much better position in the face of the proliferation of weapons of mass destruction and delivery systems, it's in a much better position to deal with those threats that come from countries on the periphery, such as Iran or Iraq or Libya. But in that process eventually, we hope that those countries will come to recognize that this is not the way to go and change their policies, too. Although, we don't hold much hope under the present leadership in Iraq or Libya in that regard. But I think that, that is the process of expanding the circle of peace that will eventually get to the point where Israel will have peace with all of its neighbors. But I fear that, that may be some time off.

SHERMAN: I would point out that I think it's a rather extreme position, but one that seems to be accepted, that in a land for peace deal, Israel's supposed to give up all the land, perhaps as early as May of next year. But all the peace Israel's entitled to is something to be deferred until such time as there is a change in the hearts of Teheran, Baghdad, Algiers and Tripoli.

INDYK: I don't think that Israel's expected to give up any land to Baghdad.

SHERMAN: Well, no. It's not a matter of whether Baghdad receives the land. The concept is land for peace. Israel's -- the sole recipient of that land would be the Palestinian Authority. But to say that Israel should make all of the concessions that it should make, and deliver those concessions in the next few years, and then Israel should get the peace it's entitled to only at such time as it is bestowed voluntarily and without further consideration by hostile regimes, in every real estate deal I was involved in the private sector, you would do something on the order of an escrow agreement. And if you're going to deliver land for money, you don't deliver the last acre of land until you're sure to getting the last dollar of money.

INDYK: Yes, well, but that, of course, would have the effect of allowing the last hold out, assuming Saddam Hussein's Iraq, to delay peace with Israel's neighbors.

SHERMAN: It shouldn't be a delay in peace, just a delay in turning over some of the land, but ...

INDYK: There's no land in dispute between Iraq and Israel.

SHERMAN: Well, the dispute, I think it's generally agreed that the recipient of the land will be the Palestinian Authority.

SHERMAN: But the peace has got to be conveyed, certainly as you point out, by Damascus and Beirut, and I would argue by those other states as well. And if we put Israel in a circumstance where we say you must make all the concessions, and receive only part of the consideration, that's not a deal I'd let any of my clients make in the private sector.

SALMON: The time of the gentleman has expired.

SHERMAN: Go ahead.

SALMON: Thank you. The chairman did have a few questions. I appreciate your patience in staying here so long. The chairman did have a few questions, if you wouldn't mind. What is the administration's assessment of the prospects of overthrowing Saddam Hussein?

INDYK: It's always difficult to make an accurate assessment when you're faced with a ruthless, authoritarian, totalitarian personality in control of an effective security apparatus who has succeeded in thwarting various efforts to overthrow him in the past. So I'm loathe to make a prediction about the certainty of his demise or the longevity of his horrendous rule.

I think that if and when he goes, it's likely to be sudden and unexpected. But beyond that, it is hard to say. He certainly is not a popular leader in Iraq. If the people of Iraq were able to have their say, then I think he would have been long gone. And the question is how can we work with those who oppose his regime to manifest an effective alternative to him that may help in the process of undermining his hold on power.

SALMON: What would be the prospects for a civil war in Iraq if the diverse exile opposition groups succeeded in ousting him?

YK: You know, there have been some very dire predictions about what would happen in those circumstances. I personally tend to be more sanguine. I think that there is a lot more cohesion to the Iraqi state and to the Iraqi people than is normally given them credit for. There was, after the Iran-Iraq, I'm sorry, after the Gulf war, there was great concern that the Shiite rebellion in the south would lead to the breakaway of the south under Iranian tutelage. I think that, that fear was much exaggerated, and unfortunately led to, or had an influence on the calculations of Iraq's southern neighbors and of Washington about whether to support that rebellion or not. So I don't think that we should be overly concerned about that. We obviously have long argued that it is important that the unity of Iraq is important, and we want to see the territorial integrity of Iraq. But I think that concerns about its disintegration are much exaggerated.

GILMAN?: The United States still maintains a ban on Lebanese airlines flying into U.S. airports, and continues to prohibit U.S. carriers from flying to Beirut. What are the administration's ongoing concerns?

INDYK: I think, first of all, in terms of the context here one needs to understand that we have made significant progress on the issue of travel to and from Lebanon. The secretary's decision to lift the travel ban was, I think, a breakthrough in that regard. And we're very pleased to see that, that has enabled American citizens to travel to Lebanon without incident. And it is very important that there not be incidents for that to continue.

Recently, the president took a decision to allow the ticketing, tickets to be issued here, which was the concern that the Department of Transportation had about particular security issues at the airport in Beirut. In terms of the passage of allowing the carriers to operate, we have continued security concerns, both about security in Beirut and the procedures of their carrier itself, Middle East Airlines. And those things would have to be addressed before we could look at that issue.

SALMON: In addition to attacking serious human rights record, the French press criticized Syria for allegedly shielding Nazi war criminal, Alois Brunner. The Syrians say Brunner is not in their country. What do we know about Brunner's whereabouts?

INDYK: That is an important question. And I'd like to take it if you would allow me, and let's try to get you an accurate answer on that in terms of what it is that we know about it.

SALMON: What significance do you attach to the recent visit of two British warships to Syria?

INDYK: Two British warships? I'm not aware of it, but I wouldn't attach great significance to it. I'm not aware of some new Pax Brittanica based on a relationship with Damascus.

GILMAN?: Yemen claims the disputed Red Sea island of Duwaima the site of recent clashes. Saudi Arabia says it's 75 percent Saudi, 25 percent Yemeni-owned. What information do we have about the status of the island?

INDYK: Yes, that is an island that has been recently in dispute, so much so it's been the subject of an armed clash between Saudi and Yemeni armed forces. Three Yemeni soldiers were killed. But the Saudi and Yemeni governments have, I think, resolved the immediate conflict which is related to the broader issue of defining the border between Saudi Arabia and Yemen. The island is strategically located. And it's in dispute because of the question of where that border extends to out into the sea from the coast between Saudi Arabia and Yemen. The Yemeni foreign minister, a few days ago, visited Saudi Arabia. And I believe there'll be some return visit from the Saudi foreign minister. And we hope that negotiations will resume over the border. They're close to settling this long-running dispute. And we have urged both sides to return to the table and to try to resolve their differences there. We think they can be resolved quite quickly. And then these kinds of incidents can be avoided in the future.

SALMON: Since fiscal year 1997, Yemen has received no U.S. assistance except for a small amount of IMET, $125,000. Does the administration intend to increase these aid levels to Yemen?

INDYK: We would like to see our aid to Yemen increase, and we're grateful for the support that we have received from members of Congress for that effort. We, you know, the Yemeni government faces some extraordinary difficulties in meeting the needs of its people, is engaged on a process of political and economic reform which we want to support.

There is a real humanitarian need there. And as oil prices have fallen, the ability of the Yemeni government to meet the needs of its people has also become more difficult. We are working to improve Yemen's ability to conduct free and fair elections, strengthen the legislative branch of government. We've allocated now $1.3 million for this purpose, and we'll be beginning those projects very soon.

In terms of supporting economic reform, we've used pipeline funds to extend our program of maternal and child health care and training programs. And that program will extend through the year 2000 now. And we have also supported and IMF-enhanced structural adjustment facility, and participated in a round of debt rescheduling according to Paris Club rules.

INDYK: From our point of view, a stable Yemen that is able to meet the needs of its people, and that is interested in building closer relations with the United States and the West, is very much in our interests and in the interests of regional stability. And so we will be coming to the Congress again in the context of the FY '99 assistance to seek a continuation of assistance to Yemen.

SALMON: Have we seen any tangible benefits that have resulted from the IMET program?

INDYK: In terms of the IMET program itself, I think that we are now beginning to see the development of closer military ties with Yemen. I wouldn't want to exaggerate this. This is just fledgling steps. We've -- General Zinni has also visited there recently -- and Admiral Fargo (ph), the outgoing head of fleet operations. The Yemeni government is keen to build a relationship with us. And I think, again, the broader context needs to be borne in mind. Yemen was a country which came down in support of Iraq during the Gulf War. I think that President Saleh and his government have come to understand the lack of wisdom in that approach. And, as they have distanced themselves from Iraq, we have been interested in building our relationship with them. And that is a work in progress. We want to see them to continue to distance themselves from Iraq. And we want to be responsive to them. And we're prepared to also see the building of a limited military relationship that would benefit us as well. I think we also need to bear in mind that Saudi Arabia is a critical ally of the United States in the region. And, therefore, we are always sensitive to Saudi Arabia's concerns. And it's one of the reasons why we think it's very important that Saudi Arabia and Yemen resolve their border dispute.

And we want to see Yemen continue on the course that it has been embarked on for some years now -- of settling its disputes with its neighbors, and becoming a constructive participant in an effort to promote regional stability in an area of vital concern to us.

SALMON: One final question: Many of the Gulf states are wrestling with the effects of falling oil prices. If price does not recover quickly, to what extent will political stability in the Gulf states be affected?

INDYK: Look, this is an important question and one that maybe we should pursue when we have a chance to meet with the committee again. The fall in oil prices is having a deleterious economic impact on -- not only on the oil rich or oil producing countries in the Gulf, but also on other Arab countries who are dependent upon markets in the Gulf or export of their labor to the Gulf to work there.

And that's going to impact on Jordan, who's already -- which is already having economic difficulties. It's going to impact on Egypt. It impacts on Syria. So overall, the expected prolonged low oil prices is going to impact on the region's economic prospects.

It also, I would point out, is a serious problem for Iran, which is one of the biggest oil exporters and is facing now over a four- billion deficit in its budget -- which is going to crimp its spending. To try to answer your question shortly in terms of the impact on political stability, we don't see a short-term impact. These governments are going to have to tighten their belts. They're going to have to adjust in ways that will lead them, I think, to cut their support and subsidies that they've been able to finance in the past because of oil revenues. And that could have an effect over time. And it's something we'll need to watch closely.

SALMON: I -- before we adjourn this hearing, I do have a copy of the Reuters report regarding the two British warships visiting this area. I'll give you that.

INDYK: Thank you.

SALMON: And with that, this hearing is now concluded. Thank you.

INDYK: Thank you very much, Mr. (UNINTELLIGIBLE).

END.

07-29-1998.

©Copyright 1998, US HOUSE OF REPRESENTATIVES