Hopes Dim for Breakthrough In Middle East Peace Process

IMMEDIATELY after the June election of the new Israeli prime minister, Yitzhak Rabin, Israelis and Arabs were euphoric about the prospects for an almost-immediate accord on limited self-government for the 1.7 million Palestinians in the occupied West Bank and Gaza Strip.

But as the delegates prepare to open a month- long set of talks in Washington on Monday, Arabs, Israelis, and Americans are less hopeful about any quick, substantial progress in the year-old Middle East peace talks.

"Our goal has always been to encourage all the parties to come to the rounds with ideas and we're doing it this time, too," says a Bush administration official. "But progress in these negotiations is never easy."

This week, as the countdown to the talks began, Arab foreign ministers and a Palestinian delegation met in Damascus, where the Palestinians pushed for a postponement in the peace talks to protest Washington's approval of $10 billion in loan guarantees for Israel without a concomitant pledge from Jerusalem to halt all settlement activity in the West Bank and the Gaza Strip.

Although the Arab parties agreed to attend the talks, the agreement on loan guarantees reached Aug. 10 between Mr. Rabin and President Bush has undermined Arab confidence in the United States as an honest broker.

"We suspect that close to 10,000 units will be allowed to be built in the occupied territories and that's not exactly a freeze on settlements," says Marwan Mu'asher, spokesman for the Jordanian delegation to the peace talks.

"There is suspicion about the continuing even-handed policy of the US," says an Arab diplomat in Washington. "This round will not be easy for the Arabs."

New obstacles blocking the way to an early breakthrough in the 10-month-old peace negotiations include:

* An uneasy feeling among Arabs that, in the wake of Rabin's election, they have lost the high ground and Washington's favor. Arab diplomats also are concerned by the departure of James Baker III from the State Department.

"The Arabs trusted Baker and they will not find him at this round," says the Arab diplomat.

* Instead, the Arabs will find a new Israeli government, buoyed by renewed American support, with a new proposal for limited Palestinian self-rule that still falls short of their demands.

According to informed sources, Israel's new autonomy proposal will stipulate elections by early spring for a 13-member "administrative council" that will administer the territories. Israel, however, will maintain control over foreign affairs and defense. Palestinians call for elections to a 180-member legislature with broad lawmaking powers. "Rabin is refusing to change this to a legislative body," says a well-informed Israeli source.

* Finally, the election of Rabin - who has always espoused a step-by-step approach to peace - raises prospects of a renewed Israeli attempt at a separate peace with the Palestinians while ignoring other Arab claims. Such a move would likely prompt Syria - which wants to reclaim the Israeli-occupied Golan Heights - to oppose an interim agreement for the Palestinians.

"Rabin wants to move faster on the Palestinian track," says a well-informed Israeli source. "But it's not clear that this will work and that's what Rabin heard from Bush and from [Egyptian president] Hosni Mubarak."

In the opening talks in Madrid last October, the mood was ebullient as, for the first time ever, Israel sat across from Arab countries that for decades had refused to acknowledge its existence. However, as the plenum broke into bilateral talks, the process became mired in procedural problems.

When the bilateral talks moved to Washington, the Israelis showed up late, and the Palestinians copied them. Two rounds of bilateral talks were spent in the State Department's corridors as Palestianians, Jordanians, and Israelis worked on a compromise formula for Palestinian representation. Five Washington rounds achieved nothing. Finally, following Prime Minister Yitzhak Shamir's defeat at the polls, Mr. Shamir told a radio interviewer that his goal had been to stall the talks for 10 years while he cont inued to build settlements in the occupied territories, something the Arab parties had suspected all along.

Despite new suspicions among the Arabs, the Rabin government is serious about reaching some kind of agreement. Bickering over a venue, with the Israelis constantly opposing Washington, is gone. And Jerusalem appears to have a plan it truly hopes to implement.

According to the Israeli source, Israel will propose one negotiation with the Palestinians on modalities for elections in the occupied territories. A second negotiation would deal with the powers the administrative council will wield. Presumably, the transitional government would rule for five years; in its second year, negotiations would open on the final status of the West Bank and Gaza Strip.

In addition, Rabin seems to have accepted that Syria needs to be considered. "After Rabin's talks with Baker in Kennebunkport," says Mr. Mu'asher, "there's a new tone. The Americans told him you have to engage all the parties."

According to some sources, Rabin is waiting for Syria to respond to a US proposal to station American troops on the Golan Heights as a first step in a Syrian-Israeli settlement. According to one source, if Syria responds positively, Rabin will outline how far Israel is prepared to come down from the Heights.