Secretary of State George P. Shultz, ending months of opposition, indicated yesterday that the administration is ready to support a two-year, $1.5 billion emergency program to aid Israel's troubled economy.
"I hope we'll be able to feel very soon that a positive response is called for," Shultz said in an interview with The Washington Post. "There hasn't been any conclusion yet within the administration circles, but I think it's getting close."
Diplomatic and congressional sources said the decision to provide the special aid has in effect already been made but a bureaucratic hitch has held up a formal announcement.
These sources said Shultz also decided to ask for $500 million over two years in special aid to Egypt and $8 million to improve the "quality of life" for Palestinian residents of the Israeli-occupied West Bank and Gaza Strip.
The sources said Shultz, facing mounting congressional pressure, decided Monday to withdraw his plea for Congress to postpone voting the emergency aid until Israel produced a sweeping program to restructure its economy and arrest its runaway inflation. But, the sources added, a public announcement that the administration will support the aid package has been held up by objections from Office of Management and Budget Director David A. Stockman.
According to the sources, Stockman, while agreeing in principle to the Israeli aid, feels that announcing support for such a large package at this time would hurt the administration's drive for big Senate cuts in other parts of the federal budget. In addition, the sources said, Stockman has raised questions about the wisdom and necessity of the proposed aid for Egypt.
In the interview, Shultz refused to talk about "the internal administration discussions" on when to release the aid. "I hope it will have a positive outcome," he said.
Shultz, who had argued as recently as April 21 that aid would not be effective "unless Israel makes hard and far-reaching decisions for structural adjustment," reportedly changed his position after receiving a letter April 22 from Israeli Prime Minister Shimon Peres.
In the letter, Peres described a nine-point economic program that he said his government is pursuing in line with recommendations from a team of private U.S. economists headed by Herbert Stein, former chairman of the Council of Economic Advisers.
Shultz also said that hopes of bringing about direct Mideast peace talks between Israel and a Jordanian delegation including Palestinians "didn't quite come off" despite the recent exploratory mission to the region by Assistant Secretary of State Richard W. Murphy.
"But it's still very much of a live question, and since basically we're talking about a process that looks toward direct negotiations with Israel, that's one of the pieces of the puzzle that has to be found," Shultz added.
He said that when he visits Jordan on a Middle East swing May 10 to 14, he will discuss "the possibility and the prospect of a visit here by King Hussein," who is expected in the United States to attend his son's graduation from Brown University later this month.
"If he does come on that occasion, I'm sure the president will look forward to a chance to visit with him," Shultz said.
A House Appropriations subcommittee headed by Rep. David R. Obey (D-Wis.) has scheduled a markup meeting today on a supplemental appropriation for Mideast countries in the current fiscal year. Obey said he notified Shultz last Friday that his subcommittee would act on the Israeli aid this week.
Obey said he was notified Monday of the State Department's decision about the aid.
Obey also said he will seek to make today's subcommittee vote conditional on receipt of a formal aid request from the administration. It was not immediately clear whether this plan would be affected by the apparent delay resulting from Stockman's objections.
In addition to the emergency package, the United States already plans to provide Israel with $1.8 billion in military assistance and $1.2 billion in economic aid in the 1986 fiscal year.