The Soviet Union appears to have softened its demand that Israel accept an international peace conference with the Arabs.

But the Kremlin is still balking at resuming full diplomatic relations with the Jewish state, which it severed 23 years ago in a show of solidarity with Israel's Arab neighbors.Soviet Foreign Minister Eduard A. Shevardnadze and Israeli Prime Minister Yitzhak Shamir discussed their relationship at a previously unscheduled meeting Wednesday. Most of the session was devoted to discussion of the Persian Gulf crisis and the settlement of the Arab-Israeli dispute, Shevardnadze said.

Shamir met Secretary of State James Baker on Thursday and described Israel's assessment of the Iraqi threat to Israel and to the region. He urged that the United States keep in mind these concerns when making decisions about resolving the gulf crisis.

"Baker told him the administration understands well our concerns and has them clearly in mind," said an Israeli diplomat.

The Soviets, who asked for the meeting with Shamir, have been eager to carve a bigger role in Mideast diplomacy, which has traditionally been conducted under U.S. auspices. "I think it was a very necessary and useful talk," Shevardnadze told reporters at a brief news conference with Shamir at his side.

Shamir said he told Shevardnadze of Israel's desire for resumption of diplomatic ties "as soon as possible."

Shevardnadze indicated that he was no longer insisting Israel must agree to participate in a Mideast peace conference before diplomatic ties could be renewed.

"No, we're not setting any preconditions," he said in response to a question at a brief news conference with Shamir at his side.

"We are moving toward" full ties, Shevardnadze said. "The process is developing in normal fashion" with the renewal of consular ties recently and the flourishing of economic and cultural programs.

Shamir and Shevardnadze appeared to agree that priority must now be given to removing Iraq from Kuwait - the same approach the Israeli leader agreed on with President Bush at their meeting Tuesday. Bush and Shamir said stalled Arab-Israeli peace talks would have to wait until the gulf crisis was resolved.