The 21-member Arab bloc agreed today to abandon its drive to oust the Israeli delegation from the General Assembly in the face of a U.S. threat to retaliate by boycotting the session and cutting off U.N. funds.
Despite the formal decision taken by the Arab League members this morning at a closed meeting, however, there was no certainty that the issue was resolved.
Both Arab and Western diplomats conceded that Iran -- which is not bound by the Arab decision -- might still make an anti-Israel motion when the assembly meets Monday to consider members' credentials.
Such a move could force the Arabs and other Third World delegations to vote against Israeli representation -- despite their intense desire to duck the issue -- because they have publicly committed themselves to do so in past communiques of the Arab, Islamic, African and nonaligned groups.
"Anything can happen on Monday, and our all-out lobbying effort continues," said U.S. Mission spokesman Joel Blocker. "I still hear stories that Iran may do it."
A ranking Soviet diplomat suggested that the end of the crisis "is 90 percent sure, but there are still certain uncontrollable elements in the picture."
Iran's ambassador, Said Rajaie-Khorassani, asked whether he would act on his previous threats to force a vote now that the Arabs have decided not to, replied: "I don't know."
Even if Iran acts, both moderate Arab and Western diplomats expressed confidence that it would fail to win a majority because of the U.S. lobbying and the absence of official Arab support.
The drive against Israeli U.N. representation stemmed from a decision of Arab foreign ministers in Tunis on Sept. 22 in the wake of the Beirut massacre.
Two days later, Israeli credentials were rejected by a 41-39 vote on the last day of a meeting of the International Atomic Energy Agency, a U.N. affiliate.
Then Algeria moved to expel Israel from another U.N. agency, the International Telecommunications Union, at a meeting in Nairobi.
The Arab effort was defeated early Friday morning when the ITU delegates accepted a resolution that condemned Israel for the invasion of Lebanon but did not expel the Jewish state, special correspondent Mary Anne Fitgerald reported from Nairobi. The United States voted against the condemnation resolution, which passed on a 85-31 vote.
The compromise language was substituted Thursday night by 61-57 vote of the 157 ITU members.
At a meeting here of Arab diplomats two weeks ago, a proposal by Libya and Iraq to challenge Israeli representation in the assembly was approved conditionally, even though it had little support within the bloc.
Most Arabs--including Syria and the Palestine Liberation Organization -- feared such a confrontation would hurt their interests because it would spotlight Israel as a victim rather than as an aggressor, force Western nations to embrace Israel publicly at the moment they were moving toward Arab policies and torpedo the proposals put forward last month by the Arab League summit in Fez, Morocco.
Arab diplomats said that instead of forcing a vote on Monday, they will submit a letter expressing their reservations on Israel's representation, citing its defiance of U.N. resolutions on the Middle East.
The letter--a face-saving device used against Israel in the past -- will be open for other delegations to sign as well, but will have no practical impact on Israel's privileges as a U.N. member.
Two other factors played a role in the Arab decision, diplomats said. One was the intense lobbying campaign by Washington, which pointed out the potential damage to the Fez plan and to President Reagan's proposal for an Arab-Israeli settlement.
The Arabs became convinced that they would lose a showdown vote when they felt the impact of last Saturday's public threat by Secretary of State George P. Shultz to pull the U.S. delegation out of the assembly if Israel were excluded and to cut off the American contribution (25 percent) to the $750 million annual U.N. budget.
The second factor was the private lobbying by Secretary General Javier Perez de Cuellar, who warned Third World diplomats that the exclusion of Israel could "destroy the U.N."