The wealthy Swiss businessman who hired E. Bob Wallach, a close associate of Attorney General Edwin Meese III, to help promote a proposed Iraqi oil pipeline said yesterday that a memorandum Wallach sent to Meese describes proposed payments to the government of Israel and the Israeli Labor Party.

In a televised interview with ABC News, Bruce Rappaport said he had seen the document and that it states "that there will be some money that will have to be paid to the government of Israel and . . . either also a certain portion to the Labor Party, and I think he even referred to some amounts annually."

ABC said Rappaport said he did not intend to pay bribes and that the payments would be standard business procedure and would come from profits from the pipeline or discounts on the oil.

Rappaport's statement represents the first direct confirmation from any of those involved in the pipeline project about the contents of the memo.

The 1977 Foreign Corrupt Practices Act prohibits U.S. citizens or residents, or companies based in the United States, from making payments to foreign officials, governments or political parties for help in obtaining business. The law does not apply to payments by foreign citizens.

Sources familiar with the memo have said that the contemplated payments were to come from the pipeline profits but that the memo does not make clear who would make the payments.

Meese's attorney, James Rocap, when asked about Rappaport's remarks, said, "The question is, what is the money Rappaport is talking about for? Is he saying that Bruce Rappaport, a supporter of the Labor Party for many years, intends to continue to support the party? The critical issue is what does the memo say or suggest? Once you make a decision about that, you come up with the question, is there any violation of law?

"The final question is, if there was any violation of the law suggested, what was Mr. Meese's understanding at the time? As he said at his news conference, he had no understanding, belief or knowledge of any kind that there was any illegal activity in connection with the pipeline, from that memo or otherwise."

Rocap said he could not discuss the memo itself because "it's still classified."

Yossi Gal, a spokesman for the Israeli Embassy here, said yesterday, "I didn't see the memo. I can only say that whoever played with the idea that money can be paid to the government of Israel or to anybody, it's an insult to the intelligence . . . . Nobody is suggesting that any of this actually did take place."

The pipeline was to be built by the Bechtel Group Inc. and was virtually dead in late 1984 before Rappaport became involved on the recommendation of a Japanese trading company that had done business with both him and Bechtel.

Rappaport subsequently hired Wallach and entered into a formal joint-venture agreement with Bechtel in mid-July 1985. Under the terms of that one-year agreement, Rappaport was to arrange for the security of the pipeline, which was to run near Israeli territory, and in turn was to profit by handling sales of the oil.

Meanwhile, official disclosure of the soon-to-be declassified memorandum to Meese is likely to be up to Meese, sources familiar with the matter said.

White House spokesman Marlin Fitzwater, on Air Force One en route to Los Angeles, said an interagency panel reviewing whether to declassify the 1985 memorandum from Wallach and other documents involving the pipeline "has been meeting all week long and should complete their review soon."

Justice Department spokesman Patrick S. Korten said he understands that "the panel has concluded that there's no need to retain the classification" on the Wallach memo. However, he said, "The decision on declassification is not up to them. It's up to {independent counsel James C.} McKay, and I have no idea whether he's made the decision on declassification."

McKay, probing Meese's role in the pipeline project, reluctantly classified the document on the recommendation of the State Department. But he is said to want it declassified because classification could restrict McKay's ability to use it in his investigation.

When that happens, Fitzwater said, the decision about whether to release the document publicly will be up to Meese and McKay.

McKay's office declined comment. Sources familiar with the investigation said McKay is unlikely to make public documents that are the subject of his grand jury inquiries until the investigation is complete. The sources suggested, however, that McKay might indicate that he has no objection to Meese's disclosing the key portion of the document.

In a news conference last week, Meese said he was prevented from describing the document in detail "because of current security classifications." He said the "10 words" in Wallach's memorandum that had sparked the news reports do not fairly imply "that a violation of law was committed or contemplated in connection with the pipeline. It contains no reference to bribes or payoffs."

Meese's lawyer, Nathan Lewin, said later that he thinks the document should be declassified and that he has no objection to having it made public.

Rocap said Thursday night that Meese would consult with McKay before taking any steps. Meese returned from a trip to Europe last night and is to fly to Mexico today. Nothing in the rules governing grand jury secrecy would prevent Meese from releasing the memorandum.

Wallach is believed to have written the memo in September 1985 when he was working as a lawyer for Rappaport.

Rappaport, a friend of then-Israeli Prime Minister Shimon Peres, had been enlisted by Bechtel early in 1985 because of his close ties to Israeli political figures. Wallach, in turn, was hired by Rappaport because of his ties to Meese.

A member of the National Security Council, Meese paved the way for a meeting in the summer of 1985 between Wallach, Rappaport and then-White House national security adviser Robert C. McFarlane. McFarlane pronounced the project important to U.S. national security interests. Wallach and Rappaport, sources say, reportedly stated that they would "take it from there."

Sources say Peres conveyed his support for the project on a visit to the United States in October 1985, but it collapsed after it became clear that the Iraqis still had reservations.Staff writer Lou Cannon contributed from California to this report.