Israeli Prime Minister Menachem Begin yesterday flatly rejected a tough new statement by President Carter criticizing the establishment of Jewish settlements in occupied Arab territories.
"I do not accept the American view that Israeli settlements are illegal and constitute an obstacle to peace," Begin said through his press spokesman.
The controversy over the Jewish settlements - and particularly those located in the Rafiah salient area of the Sinai which presumably would be returned to Egypt as part of a Middle East peace pact - has become a major obstacle to reconvening Egyptian-Israeli negotiations.
The White House added fuel to the controversy Wednesday by issuing a statement at the conclusion of Egyptian President Answer Sadat's visit stating that President Carter had stressed "his conviction that Israeli settlements on occupied territory were contrary to international law and an obstacle to peace.
"Further settlement activity would be inconsistent with the effort to reach a peace settlement," the White House statement said. The pronouncement represented the firmest criticism by Carter to date of the Israeli settlement policy.
"This position is negative and my government continues to maintain that the settlements are legitimate and legal," Begin said.
"The Carter administration has been kept informed about the Israeli point of view since the very beginning," he added.
The question of the settlements was bypassed yesterday when Israeli Foreign Minister Moshe Dayan held talks in New York with Assistant Secretary of State Alfred Atherton.
Dayan, who is making a series of fund-raising appearances in the United States and at the same time trying to counter the favorable publicity Sadat received during his visit, said he and Atherton discussed the U.S. official's impending return to the Middle East to resume his efforts at mediation.
Atherton plans to fly back to the region late next week to try anew to get Israel and Egypt to agree on a "declaration of principles" that can serve as the basis for Arab-Israeli peace negotiations.
"We are very happy to welcome his return to Israel so we can go on with what we started - the Egyptian mediation," Dayan said.
Begin's statement criticizing Carter's stand on the settlements question was issued in Geneva where the Israeli leader addressed 450 Western European Jewish leaders.
In his speech, Begin said Israel will "never submit, surrender or succumb" to Arab ultimatums in Middle East peace negotiations.
At a new conference Wednesday, the Israeli leader had likened the possible sale of U.S. warplanes to Egypt to "an ultimatum" to the Jewish state.
In Jerusalem, Deputy Defense Minister Mordechai Zippori told the parliament yesterday that Israel planned to "mobilize all our friends" in American to block the sale of jet fighters and other weapons requested by Sadat during his U.S. visit.
Sadat asked Carter for 120 F-5Es, a short-range jet fighter, and expressed interest in more advanced F-15s and F-16s.
U.S. officials said it would take Carter about two weeks do decide what to do about Sadat's request for weapons.