Israelis See Basic Miscalculation by U.S. : Mideast: Shamir aides say he is not looking for a face-saving way to include the PLO in peace talks.

Officials of Israeli Prime Minister Yitzhak Shamir’s government are searching doggedly for a way to avoid a confrontation with the Bush Administration over approaches to peace in the Middle East.

But top aides to Shamir say that the effort is hampered by what they view as a basic miscalculation by American officials, and notably by Secretary of State James A. Baker III, about Shamir’s willingness to change his mind on issues regarding talks with Palestinians.

The issue at stake, as it has been for the past year, is whether Israel will sit down with the Palestine Liberation Organization and negotiate a settlement to the Israeli-Palestinian conflict.

Last week, Foreign Minister Moshe Arens sent a list of proposed modifications to a plan advanced by Baker to get talks leading to a Palestinian-Israeli dialogue under way. The Israeli government hopes that the changes will be accepted and that a showdown between Shamir and the U.S. Administration will be avoided as a mid-November date for a Shamir-Bush meeting approaches.

Senior aides to the combative prime minister assert that the Bush Administration is assuming that Shamir is looking for a face-saving formula to open talks with the PLO. Washington supposes that Shamir remains opposed to talks with the PLO because of domestic political pressures reflected in a need to keep his own Likud Party in line behind his leadership.

That is not the case, Shamir’s advisers insist. Shamir firmly opposes such talks, not for reasons of convenience but from conviction. Thus, the U.S. effort to obscure PLO involvement in talks is bound to fail, the advisers add.

“The impression we get is that the United States believes that the prime minister is looking for a cover to make talks with the PLO possible,” said Yosef Ben Aharon, one of Shamir’s closest political associates. “It is not so.”

Shamir’s objection is based primarily on the PLO’s demand for setting up an independent state in the occupied West Bank and Gaza Strip. Israel argues such a state would threaten Israel’s security.

Baker has presented Israel with a five-point proposal to be discussed at a meeting attended by Israel, Egypt and the United States. The meeting of the three would be aimed at working out the formation of a Palestinian peace delegation. The latter panel would discuss with Israel details for putting into effect Israel’s plan for West Bank and Gaza elections.

According to Baker’s plan, a copy of which was obtained by The Times, Israel would meet with Palestinians in Cairo. Egypt would not sit in for the Palestinians; rather, Israel would meet a selected panel “after a satisfactory list of Palestinians has been worked out.” The Palestinians “would be free to raise issues that relate to their opinions on how to make elections and negotiations succeed.”

Advisers to Shamir say that the plan undermines Israel’s election proposal because it leaves loopholes that guarantee participation by the PLO--this even though the name of the organization is not mentioned. Once the PLO is seated at talks, the advisers contend, follow-up elections would only serve to ratify the organization’s de facto leadership.

“We have to draw the line,” said Ben Aharon. “We have to ensure that no legitimacy is given to the PLO.”

To close the loopholes, Israel has suggested three changes:

In Point 1, which calls for the eventual formation of a “Palestinian delegation,” Israel wants the wording altered to read a delegation from “Judea, Samaria and Gaza, hereafter referred to as Palestinians.” Judea and Samaria are biblical names for the region covered by the West Bank.

The change has at least two important meanings. First, it would limit the Palestinian panel to residents of the occupied land, in keeping with Israel’s desire to talk only with local Arabs. And two, in Israeli political language, the terms Judea and Samaria indicate a historic claim to the occupied land.

In Point 3, Shamir is asking for Israel to be given an explicit veto over selection of the Palestinian panel to ensure no PLO involvement. Under Baker’s formula, the Palestinian delegation would be formed in consultation with Israel. Israel wants wording that says Israeli agreement must be sought.

Finally, Point 4 of Baker’s plan says, twice, that Palestinians would be able to discuss “elections and negotiations.” In the Israeli government’s opinion, the word negotiations opens the way for Palestinians to raise demands for statehood, an issue Israel is unwilling to discuss. Shamir wants the reference to talks eliminated.

There is no indication yet that Baker is willing to accede to the Israeli demands. On Saturday, Israel Radio reported that the United States had agreed to an Israeli veto over the makeup of the Palestinian delegation, but officials here and in Washington denied that any such accord had been reached.

Confirming that Israel had asked for “a number of changes,” a senior State Department official in Washington said, “This is not nailed down, and it remains to be seen if it can be nailed down.”

In the meantime, officials close to Shamir are chafing under what they call Washington’s “therapy diplomacy,” aimed at persuading Shamir that, in his heart of hearts, he really wants to talk to the PLO.

“The Bush Administration thinks it is helping Shamir overcome psychological barriers, letting him see the light present in his own soul. Well, we don’t need a psychiatrist, thank you,” the aide said.

They point out that neither Baker nor his spokesmen ever says just who are the Palestinians with whom Israel is supposed to meet. Israel suspects it’s the PLO.

On Oct. 15, Shamir sent a letter to Baker in which he insisted that Palestinian participation be limited to residents of the West Bank and Gaza. During the summer, the United States suggested that Palestinians living abroad be let in on the talks, a move that Shamir believes is a cover for PLO entry.

“We are determined to prevent such a development at all costs,” he wrote.

In preparation for the Shamir-Bush meeting, the Israeli government has launched the latest in a series of public relations campaigns aimed at persuading Washington to break off its own dialogue with the PLO. Israel has compiled a report listing alleged instances of terror in Israel and the occupied lands ordered by the PLO.

Israeli officials are suspicious that the Americans are carrying out their own campaign to put pressure on Israel by leaking embarrassing news to the U.S. media. A report on NBC that Israel had helped South Africa build a ballistic missile is seen as one example.

FIVE POINTS FOR PEACE Secretary of State James A. Baker III has presented Israel with a five-point proposal to be discussed at a meeting attended by Israel, Egypt and the United States. These are the five points: The United States understands that because Egypt and Israel have been working hard in the peace process, there is agreement that an Israeli delegation should conduct a dialogue with a Palestinian delegation in Cairo.

The United States understands that Egypt cannot substitute itself for the Palestinians, and Egypt will consult with Palestinians on all aspects of that dialogue. Egypt will also consult with Israel and the United States.

The United States understands that Israel will attend the dialogue only after a satisfactory list of Palestinians has been worked out. Israel will also consult with Egypt and the United States.

The United States understands that the government of Israel will come to the dialogue on the basis of the government of Israel’s May 14 initiative. The United States further understands that Palestinians will come to the dialogue prepared to discuss elections and negotiations in accordance with Israel’s initiative. The United States understands, therefore, that Palestinians would be free to raise issues that relate to their opinions on how to make elections and negotiations succeed.

In order to facilitate this process, the United States proposes that the foreign ministers of Israel, Egypt and the United States meet in Washington within two weeks.