Military

DATE=12/31/02

TYPE=CORRESPONDENT REPORT

TITLE=ARAFAT / MIDEAST (L-O)

NUMBER=2-297943

BYLINE=SONJA PACE

DATELINE=JERUSALEM

CONTENT=

VOICED AT:

INTRO: Palestinian leader Yasser Arafat says the only way to end the conflict with Israel is through direct negotiations. Sonja Pace reports from Jerusalem Mr. Arafat says he welcomes calls for a cease-fire, but fears violence will increase, especially if war breaks out with Iraq.

TEXT: Yasser Arafat spoke of the shadow of war hanging over the Middle East as he addressed supporters at his battered and sandbagged compound in Ramallah.

/// ARAFAT ACT IN ARABIC FADE UNDER ///

Mr. Arafat said that if the United States takes military action against Iraq, the world's attention would focus almost exclusively on that conflict. The Palestinian leader said he fears it would provide Israel with, what he called, a "golden opportunity" to exploit that situation and crack down even harder on the Palestinians.

/// 2ND ARAFAT ACT IN ARABIC FADE UNDER ///

Mr. Arafat said the only way to resolve the Iraq crisis, as well as the Israeli-Palestinian conflict, is through direct negotiations.

The Palestinian leader's speech to cheering and flag-waving supporters marked the anniversary of the founding of his Fatah faction in 1965. Tens-of-thousands of Palestinians also gathered in Gaza City's main square to listen to Mr. Arafat's words broadcast over loudspeakers.

Since the current Palestinian uprising began 27-months ago, nearly 18-hundred Palestinians and 700 Israelis have been killed in almost daily clashes, suicide bombings, and targeted killings.

Israeli troops have re-occupied most of the West Bank and have kept Mr. Arafat holed up in his Ramallah compound for the past year. During that time hatred and distrust have grown on both sides, and neither side has shown a willingness to take the first step to de-escalate the crisis.

During his speech, Mr. Arafat welcomed recent calls for a cease-fire made by international mediators. He also repeated his opposition to attacks on Israeli as well as Palestinian civilians and said the Palestinians are "extending a hand of peace" to Israel.

/// 3RD ARAFAT ACT IN ARABIC WITH CHANTING ///

But he also said the Palestinians are not about to go away.

His supporters were clearly buoyed by those words.

Israel has refused to deal with Mr. Arafat, blaming him for not doing enough to curb attacks against Israel. President Bush has also called for Mr. Arafat to be replaced by leaders "not compromised by terror."

Mr. Arafat has come under pressure from his own people to reform his corrupt administration, but to most Palestinians he remains the symbol of their fight for an independent state. (SIGNED)

NEB/SP/KL/RAE