Hundreds of Palestinians demanded the

settlers leave the Arab neighborhood.

JERUSALEM, 17-SEP-97(AP). Volleys of Palestinian stones and Israeli tear gas

cannisters flew outside a Jewish settler compound Wednesday as Israeli

police pushed back hundreds of Palestinians who demanded the settlers

leave the Arab neighborhood.

Defying the Israeli government and ignoring the threat of increased

violence, the Florida multimillionaire who owns the compound said he would

not shut the new settlement down.

Prime Minister Benjamin Netanyahu was awaiting a Supreme Court ruling

Thursday before deciding whether to evict the Jewish settlers by force, a

senior aide said. Israel television said Netanyahu was determined to get

the settlers out.

The government's top legal adviser has told Netanyahu he could remove the

settlers if he felt their presence in the Mount of Olives neighborhood of

11,000 Palestinians endangered national security.

Israeli security officials have predicted widespread Palestinian riots if

the settlers don't leave the compound, located in an area of east

Jerusalem the Palestinians want as the capital of a future state.

On Wednesday, hundreds of Palestinians chanting "God is great!" marched

toward the compound, but were pushed back by Israeli riot police, who

clubbed and beat them.

Several Palestinians threw stones and were chased into alleys by Israeli

troops, who fired back tear gas. Four Palestinians and two settler

supporters were arrested, and five Palestinians were injured.

Hundreds of Israeli peace activists joined the Palestinian protesters, but

were not forced out by police.

Irving Moskowitz, the Florida millionaire who owns 3.5 acres in the Arab

neighborhood and has rented two buildings to the settlers, met Wednesday

with Public Security Minister Avigdor Kahalani, who tried to persuade him

that the settlers should leave voluntarily.

"We didn't come to a solution," Moskowitz said after two hours of talks.

Moskowitz, who lives in Miami Beach, bristled when asked how he could

justify sending a whole region into turmoil when he doesn't even live

there. "I don't see it like that," he told reporters.

Rather, he insisted, he was trying to defend the Jews' right to live

anywhere in Jerusalem and would welcome the Palestinians as neighbors. "We

will have good relationships with them, just as in any democratic country

people of different races and religions and nationalities live together,"

Moskowitz said.

Despite the conciliatory talk, Jewish settlers who have bought homes in

the city's Arab neighborhoods acknowledge their real purpose is to thwart

the establishment of a Palestinian capital.

Palestinian leader Yasser Arafat said Wednesday that allowing the settlers

to remain violates the peace agreements. "We hope it will be solved very

quickly. Otherwise there will be a negative reaction," Arafat told

reporters in Gaza City.

The Palestinian Authority has so far reacted with restraint, apparently

hoping Netanyahu will resolve the matter.

Wednesday's protest was a first sign the Palestinians were getting

impatient. Some protesters said if the settlers weren't out within 24

hours, there would be widespread riots after noon prayers on Friday, the

Muslim sabbath.

Netanyahu's adviser, David Bar-Illan, said the government would make a

decision after Thursday's Supreme Court hearing on an appeal by Moskowitz

that police be barred from evicting the settlers.

Bar-Illan said the government has offered a compromise, whereby the

settlers would leave voluntarily in exchange for recognition they have the

right to settle in the neighborhood.

Should Netanyahu try to evict the settlers, he risks endangering the

stability of his right-wing coalition. Hard-line legislators have already

threatened to topple the government over the issue.

But if he lets them stay, Netanyahu also risks alienating the United

States and wiping out any prospects for a resumption of peace talks with

the Palestinians.

At the compound Wednesday, settlers prepared for a long stay, trucking in

cupboards, other furniture and boxes filled with their belongings. The

settlers have already secured the building with surveillance cameras and

floodlights to spot any intruders, and three burly private security guards

are posted outside.

"Jerusalem is ours," read stickers covering the iron gates.