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Israel failed on Friday to reach an agreement with the Bush administration for help in absorbing tens of thousands of refugees, and a key member of Congress warned that the $14 billion worldwide foreign aid bill could be sidetracked by the smoldering dispute.

"We really have reached the moment of truth," said Sen. Patrick Leahy, D-Vt., whose subcommittee controls spending on foreign aid. Leahy has taken the lead in Congress in trying to stop Israel from expanding the Jewish population on the West Bank and in Gaza."It is my judgment that if this matter does not come before my committee and get voted on in the next few days then my committee will not act on the foreign aid bill this year," Leahy told reporters after a meeting with Secretary of State James A. Baker III.

Israel is asking the administration to guarantee $10 billion in commercial bank loans over the next five years to help absorb tens of thousands of refugees from the Soviet Union and Ethiopia. Washington has linked the guarantees to cessation of Israeli settlements in the West Bank and Gaza, which the United States opposes as an obstacle to Mideast peace.

Leahy was followed into Baker's State Department office by Israeli Ambassador Zalman Shoval, who resumed negotiations they held two weeks ago.

Forty minutes later, Shoval emerged with the terse statement: "We've had another talk, mostly about the loan guarantees, but not exclusively. There is no agreement yet and we'll have another talk."

Shoval did not say when they would meet again. Nor did he explain what problems remain over Israel's request.

Sources familiar with the meeting said Baker and Shoval discussed "principles" and did not exchange any new proposals.

Shoval reaffirmed that Israel would not spend any of the loan money on settlements but could not accept a freeze, said the sources, insisting on anonymity.

They did not set a time for their next session.

Baker told the ambassador two weeks ago that Israel could complete housing units already started - an estimated 5,700 to 6,000 by U.S. count - but break no new ground.

The ambassador accepted in principle that settlements on the West Bank and Gaza would be slowed down, but they did not agree then - or apparently Friday - on how the curbs would be imposed.

Leahy's threat to hold up the foreign aid bill does not mean U.S. assistance to dozens of countries would be terminated.