Israel's decision to establish new settlements in the West Bank and Gaza Strip is "most unwelcome" and will erode the possibilities for negotiated peace in the Middle East, the Reagan administration said yesterday.
"We cannot understand why at a time when broader participation in the peace process is most critical and possible, Israel has elected to extend a pattern of activity which erodes the confidence of all and most particularly the inhabitants of the West Bank and Gaza . . . ," the administration said in a strongly worded statement released by the White House and the State Department.
The administration's reaction to the new settlements was signaled earlier yesterday by Secretary of State George P. Shultz, who in a televised interview said Israel's action was "not consistent with the objective of peace." But he said the United States will not seek to pressure Israel over the settlements issue through cutbacks in military aid.
In a nationally televised address last Wednesday, President Reagan called for Israel to halt further Jewish settlements in the occupied territories and suggested that the West Bank and Gaza eventually be granted self-rule "in association with Jordan." The president also said the United States would oppose moves to absorb these territories into Israel or to turn them into an independent Palestinian state.
Both Shultz, in an interview on "Face the Nation" (CBS, WDVM), and the administration in its later statement made it clear that Reagan would not withdraw that proposal. "The U.S. position set forth by President Reagan . . . remains and shall remain unchanged," the statement said.
Although the plan has met with curt and angry rejection from the government of Menachem Begin, Shultz reiterated the U.S. view that its potential for bringing peace to the Middle East will act as a "tremendous pressure" on Israel and the Arab world and ultimately make the president's initiative the basis for new negotiations on resolving their enmity.
He also became the top-ranking administration official to state publicly that the United States will not use its sizable military aid to Israel as a lever to force Begin to be more cooperative. That point was made privately by a senior administration official at a background briefing before Reagan's speech last Wednesday, and Shultz yesterday said that the senior official had "hit it on the head" in describing the administration's views on the aid question.
"Our emphasis will be on the importance of peace," Shultz said. "It's a tremendous objective. We don't have any plans to try to maneuver people in a peace negotiation by talking about withholding aid."
He also waved aside reports that Israel is threatening to withhold from the United States military intelligence obtained in the Lebanon war if Reagan continues to hold up congressional action on the promised sale of 75 F16 jet fighter-bombers to the Jewish state.
"The president will decide that the F16 question in his own good time," Shultz said. He added that intelligence sharing is not "the sort of thing you set up in terms of a trade," that discussions are under way about giving the United States information on the Soviet equipment captured in Lebanon and that Washington expects to learn a lot about the materiel now in Israeli hands.
He was asked whether the United States hopes to topple the Begin government in favor of the opposition Labor Party, which has welcomed the Reagan plan as close to its own views. Shultz replied:
"No, absolutely not! Who is the government of Israel is the business of the people of Israel. That's their business. We don't have any views on that."
Referring to the situation in Beirut, the secretary said that the evacuation of Palestine Liberation Organization guerrillas has "by and large gone well" and that he expects the U.S. Marines assisting in the operation to be withdrawn from Lebanon, probably by this Friday.
Questioned about the strains in U.S. relations with its West European allies over Reagan's sanctions against European companies supplying equipment for the Siberian natural gas pipeline, Shultz replied, "I'm sure the president will hold firmly to the strategy implied by the sanctions."
Late Saturday night, the administration suspended exports to an Italian firm that defied Reagan's ban on the use of American technology for the pipeline. But the penalties applied to the Italian firm of Nuovo Pignone and its Italian subsidiary, INSO, were softer than ones applied earlier against two French firms, Dresser France and Carusoe Loire.
Commerce Secretary Malcolm Baldrige said Saturday night that the sanctions against the French firms would be readjusted to bring them in line with those imposed on the Italians.
Shultz said yesterday the aim of the sanctions is to pressure the Soviet Union to ease the repression in Poland, and he added: "If we can work out things that are more effective and that have the support of all our allies, we're certainly willing to look at them."
He also dismissed a charge by Wayne S. Smith, the former chief U.S. representative in Havana, that the United States has passed up opportunities to reduce tensions with Cuba and has exaggerated the extent of Cuban arms aid to leftist rebels in Central America.