The Israeli Cabinet announced yesterday that it has found no reason to change existing policy on the question of Jewish settlements in the occupied territories.
With the Arab world insisting that settlements already in existence must be removed, recent calls to augment them have contributed to the impasse in the Middle East peace efforts initiated by Egyptian President Anwar Sadat.
While the Cabinet statement could indicate continuation of past Israeli moves into the Sinai and the West Bank of the Jordan River, it is thought more likely to mean reinforcement of the more recent efforts to keep a low profile on the issue --avoiding new initiatives.
A communique, worded by Prime Minister Menachem Begin, declared: "At its weekly session, the Cabinet held a discussion on political issues and on the settlement question, and resolved that it had no need to resort to new resolutions on these matters."
Another topic taken up by the Cabinet was a report by Foreign Minister Moshe Dayan on his meeting Saturday night with U.S. Assistant Secretary of State Alfred Atherton, whose efforts to establish a set of principles for the Egyptian-Israeli peace effort have also been complicated by Israel's stand on the settlements issue.
Following announcement that the Cabinet decided to go along with the present policy on the settlement, it was noted that. With crucial talks between Begin and President Carter only two weeks away, the government does not want to tie its hands publicly on the settlements question.
"Begin sees the settlement freeze as a possible concession he may have to make to Carter and therefore does not wish to give away this advantage pre-maturely," said an Israeli political observer.
A spokesman for the Cabinet did say that two less controversial settlements, to be established within the framework of army camps on the West Bank, will still be set up as previously announced.
But an indication that the hardliners on settlement policy lost the Cabinet debate came shortly after release of the communique.
Member of Parliament Geula Cohen, who speaks for the ultra-extremists in Begin's Herut faction of the ruling Likud Party, expressed her disappointment at the government's decision and said she hoped that new settlements will be undertaken in the near future.
Atherton, who returned here from Cairo on Friday, brought with him a detailed Egyptian reply to the Israeli ideas on a declaration of principles, as well as a written text of the Egyptian proposals for such a declaration.
According to unofficial reports, the Egyptian suggestions are harsh in their wording on the issues of the rights of the Palestinians and the demand for Israeli territorial with-drawal. While there were few changes in the latest Egyptian text; most of them are said to reflect a hardening of the Egyptian position.
No Cabinet response was announced but even before the meeting it was reported that the Israeli government probably would reject the Egyptian counter-proposal. Atherton is to meet with Begin and Dayan today.
Diplomatic activity was augmented here yesterday by the visit of British Foreign Secretary David Owen, who arrived from Amman with "new ideas" on how Jordan could be drawn into the peace efforts.
Owen, who later met with Dayan, told reporters he is convinced that Jordan will join the talks between Egypt and Israel as their momentum accelerates. He also said that, in his opinion, the Israeli settlements in the occupied territories are illegal and interfere with peace efforts.
In Amman, Owen told the Jordan News Agency that the Palestinians must be involved in the determination of their future and hence in the peace talks. Asked if Israel might meet Egyptian demands for Palestinian self-determination, he replied: "I rather doubt it. This very serious issue is whether or not there should be a separate Palestinian state. I think this is bound to be something that has to be negotiated."
[In an interview published in Kuwait. Reuter reported, Jordanian Premier Modar Badran said his country might join the peace talks if Israel publicly pledges to recognize the national rights of the Palestinians and to withdraw from occupied lands.]
Begin and other Cabinet members have held extended talks on the settlements question recently with Jewish leaders from the United States and other countries attending the 29th Zionist Congress here.
Most of the leaders reportedly were critical of Israel's settlements policy and argued that it creates difficulties for them in explaining Israeli's position in the negotiations with Egypt.
Similar complaints have been received by Israeli leaders from other supporters of Israel abroad.
Former foreign minister Abba Eban, whose Labor Party is among the critics of the current settlements policy, said yesterday of Agriculture Minister Ariel Sharon's efforts to expand the settlements in northern Sinai:
"When you negotiate the sale of a used car it is unwise to change the tires and mount inferior tires in the midst of your salesmanship efforts."