PRIME MINISTER NETANYAHU: Ladies and gentlemen, it is a great pleasure and honor to welcome Secretary Albright on her first visit to Israel as a Secretary of State. Secretary Albright is a distinguished world leader, and she represents the abiding kinship between our two peoples and our two countries. It is a bond of deeply shared values of freedom, of democracy and of friendship. This is also the first visit of Madeleine Albright as Secretary of State here and there are so many issues that we need to talk about, but we devoted our time to the most pressing discussion vis-a-vis the Palestinian-Israeli talks. I think that our meeting was truly most cordial and most productive, and Madeleine, we were deeply moved today by your words this morning. I'm sure they touched the hearts of all Israelis -- they certainly touched mine -- and they showed real empathy with our history, and, I think, a real understanding of our concerns and our desire and our hopes.

I want to emphasize again that we want the peace process to succeed. In fact, I'm convinced that my government is the only government which can bring this process to a successful conclusion. This government is determined to achieve peace -- real peace, peace with security. A peace that will last. A peace that will benefit all the peoples of our region. But obviously, no agreement can work unless both sides live up to their obligations.

The central, and I say the essential, premise of this agreement that was signed by Israel and the Palestinians exactly four years ago was based on a Palestinian commitment to wage an unrelenting war against terrorism. Unfortunately, in the four years that have passed, the Palestinian Authority has done virtually nothing to keep up this central commitment and as a result terrorism grew. It grew by leaps and bounds in the first three years under my predecessors, the late Yitzhak Rabin and Shimon Peres. It continues to grow in the absence of firm Palestinian Authority action against terrorism. We must make it clear to everyone who wants to see peace prevail that terrorism must not be used as an instrument of negotiations and violence is not an option in such negotiations. This is unacceptable. I know it is unacceptable to us and to the United States and it should be unacceptable to every peace-loving government in the world. The only sane way to fight terrorism is to do what was explicitly undertaken by the Palestinian Authority, and was articulated so well by Secretary Albright, that is fighting the terrorists and dismantling their infrastructure. These are the critical components of security in waging war on terrorism. All this is not an item for bargaining. It is not an option. It is as Secretary Albright has put it, "a sine qua non of the Oslo agreements."

We believe the Palestinian Authority must keep its part. It must fight terrorism with no "ifs" and "buts" and it must do so soon if this process is to survive. It must, in short, decide if it wants peace with Hamas or peace with Israel, but it cannot have both.

I want to assure you, Madame Secretary, that we will do everything to make your visit successful because your success is the success of the entire peace process, which we so fervently desire. If you are able to persuade the Palestinian Authority to wage war against the terrorists, I believe the road will be open to the continuation of the peace process to bring it to a successful conclusion. And I am convinced we can achieve peace. I hope the Palestinian Authority, our Palestinian partners, also desire this peace with the same fervor. And I hope they will prove it soon by fighting terrorism. We can achieve a good life for both our peoples in this small land. And if peace is to win, both sides would want it to win. We certainly do.

SECRETARY ALBRIGHT: Thank you very much. Mr. Prime Minister, it is a great pleasure to be here with you, and I very much appreciate your characterization of our discussions. I do believe that we had very good discussions and reviewed a variety of issues relating to the pursuit of Israeli-Arab peace. Israel and the United States have long been partners in that historic endeavor and it is important that the partnership continue. Clearly, we are at a very difficult moment with negotiations stalled, and Israel and the Palestinians are locked in a crisis of confidence which has threatened the historic gains achieved in recent years. If we are to move forward, Israelis and Palestinians need to restore the partnership and the reciprocity that

produced those achievements. The terrorist war being waged against Israel and peace itself has created a severe challenge.

This security is at the center of my agenda. Let me be clear. The enemies of peace are purposely and relentlessly attacking Israelis, so the war against terror being waged by those who support the path of peace must also be purposeful and relentless. There is no way to completely protect any society from the threat of terror, but partners in pursuit of peace have a right to expect a total, sustained and comprehensive effort to preempt terror, to combat it, and to delegitimize those in their midsts who associate themselves with it. There can be no room in this process for those groups who would tolerate or advocate terror and violence. I will be seeing Chairman Arafat tomorrow and my message will be clear: it is essential that Israeli- Palestinian security cooperation be serious, sustained and effective. At the same time, the Palestinian Authority must take unilateral steps and actions to root out the terrorist infrastructure. If we are to create and sustain an invigorated and accelerated negotiating process, there is simply no other way.

The Prime Minister has talked of the importance of reciprocity and he is right. Both Israelis and Palestinians must shoulder their responsibilities if we are to emerge from the current crisis. This process cannot succeed without reciprocity. But let me be clear. There is no moral equivalence between killing people and building houses. It is simply not possible to address political issues seriously in a climate of intimidation and terror. At the same time, real security depends ultimately on real peace. Achieving this peace turns fundamentally on a political process which meets, through a genuine process of give and take, the needs of both sides. Clearly, Israel also has a responsibility to shape an environment which will give that process a chance to succeed. This means that Israel should be taking steps that build confidence and should refrain from actions that undermine confidence and trust. As I said in my speech last month, it is very difficult to create a serious environment for negotiations when unilateral actions are taken that pre-judge or pre-empt issues reserved for permanent status negotiations. Restoring a sense of partnership will not be accomplished quickly or easily, certainly not on a single visit. At the same time, I firmly believe that there's no alternative to the political pathway Israelis and Palestinians have chosen. The people of this region have seen too much violence. There have been too many victims. They do not deserve and will not accept a future that promises only more of the same. The United States will do all it can to help the parties rediscover the path for a brighter future with real security and real peace. The President of the United States and I are committed to that. And in that effort, as in our deep and abiding friendship with the people of Israel, the United States may be counted upon to persevere.

Thank you very much.

QUESTION: Madame Secretary, did you bring with you any concrete plans for renewing the negotiations and the peace process between Israelis and the Palestinians, and does this plan, if it exists, include freezing or halting of the building of the settlements, especially Har Homa?

SECRETARY ALBRIGHT: I came here, on this, my first visit, with the hope that I will be able to do what I can to restore confidence. As I have said many times, we see a crisis of confidence here and the bonds need to be rebuilt before the process can go forward. I have also said that while it is very evident that the United States is a key player within the Middle East peace process, and our bonds and our interests here are very strong, it is the leaders of this country, and of the Palestinians, that have to make the hard decisions and to live up to the expectations of the people of this region who want peace.

QUESTION: Mr. Prime Minister, on the reciprocity, or maybe it should be called even- handedness, are you being asked now to implement a further withdrawal and do you think it is safe for Israel, experiencing all this terrorism, to keep pulling back on the West Bank, like now?

PRIME MINISTER NETANYAHU: Well, I think that the Secretary had it right, and indeed President Clinton as well, when he and she put the primacy of security, indispensability and security, in order to move the process forward. I think that we are interested in moving that process forward, but we also understand the crucial importance of stopping the bombs from exploding. We can talk, and you can ask me more questions of this nature, and they'll be largely irrelevant if we don't stop terrorism. So we concentrated much of our discussion on this issue and I think that it's best to focus on this at this time. I think that the Secretary's statement,

that it is up to myself and to Mr. Arafat and our colleagues to make those kinds of decisions, is exactly right.

QUESTION: Mrs. Albright, James Rubin, the spokesman of the State Department said today that the nice words that you said this morning at the President's house were the first words, and then you are going to be tough on Netanyahu. Does that mean pressure of the Government of the United States on Israel?

And if you permit a question in Hebrew for the Prime Minister of Israel: (in Hebrew*) Mr. Prime Minister, the President of Israel says that Israel does not need to exert economic pressure on the Palestinians. It's dangerous when you have hungry neighbors. Unfortunately, he said this morning, as James Rubin, State Department spokesman, relayed to American journalists, unfortunately, Netanyahu is patronizing Arafat, peers at him from above, and he should not be treated like that.

SECRETARY ALBRIGHT: I'm not sure it's always fair to put words in the mouth of the spokesman, but I think that what I would like to say is that I have come here because of the great priority that the President and I put on the Middle East peace process and on the ever strong relationship that the United States has with the people of Israel and Israel itself, and I have come as a realist. I have made quite clear before I got here that my value in this process is to be realistic and to do what I can, on behalf of the United States, to help rebuild the confidence and to try to clarify some of the issues. It is not an issue of putting pressure on anybody. It is a matter of being realistic about what we would like to see, getting back on track the Middle East peace process, which is not only crucial to all of you who live here, but to us in the United States also.

INTEREPRETER: To the Prime Minister the following: the Israeli President said this morning that it would be wrong on the part of Israel to exert pressure on the Palestinians, that it would be particularly risky to hungry citizens in the Palestinian Authority. James Rubin, the American spokesman of the White House (sic), said that Netanyahu is patronizing Arafat, not relating to him as his equal, quoting actually the President of the States actually saying these words (sic).

PRIME MINISTER NETANYAHU: Well, I'm not going to comment on the remarks attributed to the President. He has not given me a response, or rather a full detailed account of his conversations with the Secretary, so I'm not going to comment on it. I will say -- I'm supposed to say this in Hebrew. Yes, of course, I just translated (laughter), now the reverse translation.

(in Hebrew*) I'm not going to comment on things attributed to the President because the President has not yet been able to report to me completely and wholly on his conversations. In general, I can say that our approach is surely to avoid starving anyone. We take the opposite way. Our concern is not only that there be no hungry Palestinians but also that there be no dead Israelis.

QUESTION: Madame Secretary, in your call for mutual responsibility and reciprocity, you are being very specific in what you're asking Yasser Arafat to do. You're asking him to crack down on terrorism. You're not being nearly as specific in your words as to what you would like the Israelis to do. If and when Chairman Arafat cracks down on terrorism the way you and Prime Minister Netanyahu would like him to do, are you then calling on the Netanyahu government to impose any sort of settlement freeze to carry through with the withdrawals, as stipulated in Oslo, to do these things as part of getting the accelerated final status talks going which you and Prime Minister Netanyahu both support?

SECRETARY ALBRIGHT: Let me say and just repeat that obviously dealing with the problem of terrorism is the sine qua non of moving forward. But what I have said both here and in my previous speeches and remarks is that we believe it is very important to live up to the various aspects of the Oslo process, and we believe that there are mutual responsibilities within that process. We would hope that they would be carried out not only according to the letter but also to the spirit of the Oslo process, and we believe that it is important, because, I think, if I might take a minute longer on this, is because the interim agreements themselves, which were supposed to help create bonds of confidence, have not had that effect. We have suggested having an accelerated final status discussion so that the people who live here could actually see something coming from the peace process. But we also believe that it's important not to abandon the interim agreements in the Oslo process, and therefore the suggestion that I have made is that the interim agreement carried out in mutually responsible ways be married to an accelerated final status process.

QUESTION: You said what you're going to say tomorrow to Mr. Arafat. Can you please

reveal some of what you said to Prime Minister Netanyahu? This is the first question. Second question: do you accept Arafat's claims that those terrorists, who made both terrorist attacks in Jerusalem, came from abroad and that actually Israel is responsible for what happened because Israel is responsible for the borders of Israel, and this is why it's her fault?

SECRETARY ALBRIGHT: First of all, let me say that the Prime Minister and I have already in my statement explained what it is that we talked about and the importance of dealing with the terror and our understanding of Israel's need to deal with the issue of terrorism. But at the same time, we did speak about the importance of the Oslo process and generally moving the process forward. I believe that it is very important for Chairman Arafat to be realistic about dealing with the infrastructure of the terrorist organizations and not to try to deal in ways that obfuscate rather than deal specifically with what is the problem here -- which is the infrastructure that exists of the terrorist organizations -- and that he has to deal with that very clearly.

QUESTION: Prime Minister, and also the Secretary, last evening, and overnight, the Palestinian Authority arrested about 200 people in the Gaza Strip and apparently interrogated them, and are still holding between 50 and 100 people. Do you consider this as serious effort, or part of a serious effort, to do what you're asking them to do? Or do you see it cynically as some sort of strange gift for Mrs. Albright's visit?

PRIME MINISTER NETANYAHU: Well, I've commented on this before as this process was taking place. Unfortunately, much of this is intended for show. It is not a substantive and sweeping effort against Palestinian -- Hamas terrorism and Islamic Jihad terrorism -- that is required. As you know, we have on-going alerts for terrorism, additional attacks. And unless such concerted effort is taken to catch not the sardines, but the sharks, the sharks who organize, who direct, who dispatch the terrorists we will have more terrorist attacks. That has not happened by any stretch of the imagination. I would also say that in the absence of this happening, you cannot really fight terrorism. To give you an illustration: after the first bombing we had in Jerusalem, the Mahane Yehuda bombing a few weeks ago, we did our effort in the areas controlled by us and as a result we discovered additional terrorist cells and additional plans of terrorists directed from Palestinian controlled areas to launch more attacks. Those attacks we neutralized, largely neutralized because we put people in jail. One interrogation led to another. The fact that we were in control in these areas, we were able to stop terrorism that was planned in the Palestinian controlled areas. But that effort is not in the Palestinian territory which has now become a collection of bases and safe heavens for the Hamas and Islamic Jihad terrorist organizations. Before we are asked to give additional territory, we have a right to demand the implementation of that commitment in the existing areas controlled by the Palestinian Authority. And as long as the Palestinian Authority doesn't undertake this vigorous effort to fight terrorism and dismantle their infrastructure, we are not going to go very far. It's going to be impossible to continue the process. I hope they have a change of heart. I hope they have a real policy decision to fight terrorism. I can tell you that so far, as we speak, that has not happened. We want to see a real change, demonstrated over time, because I think it's in our interest, and frankly, I think it's in the Palestinians' interest as well. Terrorism is destructive for both of us, and for peace.

SECRETARY ALBRIGHT: I believe that it is very important for us to see concrete and sustained action, not a revolving door in terms of people who are arrested and then released. And, as I said previously, for Chairman Arafat to go after the infrastructure of the terrorist organizations. And the only gifts I want are concrete actions.

QUESTION: Madame Secretary of State, do you agree with the Israeli Cabinet decision to freeze any further pull-back from the West Bank until the Palestinians will fulfill all their obligations? And may I add, could you promise us that very soon, maybe within two years, the American Embassy will be removed from Tel Aviv to Jerusalem as Congress decided?

SECRETARY ALBRIGHT: Let me say that I think, again, I'm supportive of the Israeli Government's and Prime Minister Netanyahu's specifically calling for firm action against the terrorists, as I have now repeated many times, and will continue to do so. It is essential that terrorist activities be dealt with at their base. At the same time, I do believe it is very important to follow through on the obligations of Oslo, and to make sure that we do everything the Israeli

Government also along with us, and with the Palestinians to re-build a web of confidence. I think that is essential. The question on Jerusalem is a final status issue, and that is why we believe it is important to begin to move in that direction.

QUESTION: Based on what we've heard today, there hasn't been any new agreements, or new movement in the peace process other than both of you have talked about the need to fight terror. Are there any possibilities, Mr. Prime Minister, that you might release some of the money withheld from Palestinian Authority tax revenue? Is there any possibility of the resumption of the security talks? Is there any possibility that you might resume negotiations on opening Palestinian air and sea ports in line with what Secretary Albright is saying that you have to have peace in order to have security?

PRIME MINISTER NETANYAHU: I have to say that we enforce closure policy only to prevent the terrorists from reaching our cities, reaching our market places, reaching our schools. In the absence of security cooperation, we have less intelligence, and because we have less intelligence, you have to somehow, create a protective wall to prevent the terrorists from coming in. And that is the purpose of the closure which we relax periodically as the security situation improves. As far as the money, we have no intention to starve anyone, on the contrary, we released those monies that we could. We didn't really see the kind of activity that we wanted, but I wanted to communicate good faith, so I released a third of the funds that we withheld because the other side of the agreements weren't being kept as well. Unfortunately, about a week or so later, the response I got was an embrace, a kiss that Arafat gave to the leaders of Hamas. You know, you say, "one good deed deserves another," we deserve something else. And I think we all do. And we want to see a change of policy vis-a-vis terrorism, I can assure you, that that will prompt an immediate change from our point of view, as to the measures that we apply. And it would also be possible to relax many of the security measures that we apply.

Well, I want to say Madeleine, that this can be an ongoing event into the night, they are insatiable in their demands of questions they want to ask. But I also want to say that I think that the most difficult part of your visit has been achieved successfully. You have withstood the Israeli press with flying colors, so this augurs well for the continuation of your mission. And we wish you, we wish all of us much success. Thank you very much.