WASHINGTON - Israel has gone a long way to satisfy the Vatican's demands and has found solutions to almost all the obstacles that stand in the way of finalizing an agreement, according to Nimrod Barkan, director of the World Jewish and Interreligious Affairs Bureau at the Foreign Ministry. Barkan, who has been in the center of the negotiations with the Vatican, was here Wednesday, presenting Israel's views on the issue to US officials and to activists in Jewish organizations. The negotiations have been dragging on for almost 12 years, but it is only in the last year that they reached the core issues, following direct orders from the Prime Minister Ariel Sharon and Foreign Minister Silvan Shalom to speed them up. Israel has accepted the Vatican's views on several points: It has exempted Catholic monasteries from paying property taxes, arranged for proper legal procedures that will give the Catholic Church access to Israeli courts and made sure Catholic education, health and social service institutions will receive the funding they deserve on the national and local level. Another issue in dispute was the matter of land confiscation. Israel has promised the Vatican that confiscations will only be done according to Israeli law and with appropriate compensation. The only issue remaining in dispute is the Vatican's demand that Catholic institutions will not come under Israeli tax laws. According to Israeli officials, the Vatican is not asking to avoid paying taxes, but insists on determining the tax rate in a bilateral agreement and not as part of the general tax code. In previous negotiations, Vatican representatives have claimed that since the Catholic Church was present in the Holy Land long before the establishment of the State of Israel, it is entitled to special tax status. This issue was expected to be in the center of the meeting between President Moshe Katsav and Pope Benedict XVI Thursday. Israel has refused to grant the Catholic Church an extraterritorial tax status, claiming that such an agreement would open the door to similar demands from other religious groups, as well as from Jewish institutions. Barkan said that the tax dispute does not have any effect on the good relations between the Vatican and Israel, though he could not predict when and how this issue would be resolved. "The pope is a great friend of the Jewish people and of Israel," he said, noting the shift the pope has led in the Vatican's Middle East policy and his explicit denunciation of terrorism aimed at Israelis. The Catholic Church has complaints regarding the separation barrier being built around Jerusalem, as do all other Christian denominations operating in the city. They claim the route of the barriers obstructs their ability to perform religious rituals and prevents their followers from receiving the religious and social services they provide.