Israeli air attacks in Lebanon and disagreements between the PLO and Israel about East Jerusalem shook the peace process in early June.

No further progress was reported in Israel-Syria talks. However, observers said negotiations in Washington between Israel and Jordan on 6-7 June suggested that there was still life in Arab-Israel negotiations.

Israeli jets and helicopters mounted a series of attacks on Hezbollah bases in south and east Lebanon beginning on 2 June. The first bombardment, on a training camp in the Beqaa valley, killed 45 people, Lebanon's Foreign Affairs Ministry said.

Hezbollah forces reacted by firing Katyusha rockets into north Israel. This was the first rocket attack into Israel by Hezbollah since the invasion of the area by Israeli forces in July 1993. There were no Israeli casualties. Israel mobilised extra forces in the border area in expectation of further Hezbollah action.

Israel's attack followed weeks of stalemate in the negotiations with Syria. They have failed to make any progress since the shuttle tour of the region by US Secretary of State Warren Christopher in early May. Christopher is unlikely to visit the region again until the two sides give a clear indication that they are ready to begin direct talks.

Disagreements about East Jerusalem have continued to stall progress in talks between the PLO and Israel. The issue took a new twist in early June when Israeli Foreign Affairs Minister Shimon Peres was criticised by the Israeli press about a letter sent to the PLO during the negotiations in Oslo in October 1993.

The letter said: 'All the Palestinian institutions of East Jerusalem, including the economic, social, educational and cultural, and the holy Christian and Muslim places are performing an essential task for the Palestinian population...Needless to say, we will not hamper their activity.' Critics say this implied that he was encouraging the development of Palestinian institutions in the city.

Peres said in a radio interview on 7 June that the letter did not change the status quo. He denied claims by PLO Chairman Yasser Arafat that the letter was addressed to him. Peres said the letter does not give any commitment about the future of Orient House, the unofficial headquarters of the PLO.

The Israeli opposition says Orient House is one of the many facts on the ground being created by the Palestinians to predetermine the outcome of discussions about the future status of Jerusalem. The PLO-Israel declaration of principle says the status of the city should be addressed in final status talks to begin before the third year of Palestinian self rule.

Israeli officials want to make East Jerusalem an area with an overwhelming Jewish majority through continued intensive settlement by the time the city's status is formally placed on the agenda of peace talks, analysts say.

In talks in Washington, Israeli, Jordanian and US negotiators agreed areas for co-operation once a final peace agreement is reached. These talks encompassed water and boundaries between Israel and Jordan. Amman had been pressing for these issues to be addressed before the signing of a bilateral peace deal with Israel.

A joint statement issued on 7 June said a commission to examine these and other issues will be established. However, all Israeli-Jordanian co- operation is subject to the signing of a peace deal, which Jordan has said cannot be reached without Syria.