Shamir Leaves Door Open for Compromise on Talks : Israel: A plan is under study to allow Palestinians-in-exile to return for peace negotiations.

Hidden within the theatrics of party wrangling, Prime Minister Yitzhak Shamir has made a clear effort to leave the door open for key compromises to get Israeli-Palestinian peace talks off the ground, senior officials here said Tuesday.

In a speech he gave Monday just before a meeting of his Likud Party dissolved in chaos, Shamir carefully avoided ruling out delicate formulas that might let Palestinians-in-exile and residents of Arab-populated East Jerusalem participate in arranging elections in the occupied West Bank and Gaza Strip.

“He did not want to close off any arrangement that might be acceptable,” said one of his top aides, Yosef Ben-Aharon.

Specifically, officials close to the prime minister said, formulas are under study that might permit expelled Palestinians to return and thus be counted as residents of the disputed land and not outsiders. In addition, someone who lives in East Jerusalem but officially holds residency in the West Bank or Gaza might be permitted to take part in negotiations.

Shamir was careful not to break new ground in Monday’s speech. He reiterated pledges not to make concessions that would jeopardize the status of Jerusalem as Israel’s undivided capital or to let members of the Palestine Liberation Organization enter into negotiations.

“He said only what he had said before,” Ben-Aharon pointed out.

Israel’s Foreign Ministry has been working toward a step-by-step compromise that might lead to a meeting of Secretary of State James A. Baker III and the foreign ministers of Israel and Egypt to name a Palestinian peace panel. The Palestinians would work out details for an Israeli-proposed election in the West Bank and Gaza.

Sources in Israel’s Foreign Ministry who are in touch with Washington and Cairo maintain that the issue of which Palestinians will be allowed to enter the talks is still unresolved.

However, the officials report creeping agreement over some aspects of how the panel will be chosen. It would not be composed of “proclaimed” members of the PLO. None of the panel members can have ever been involved in any terrorist act. Egypt would announce the delegation, not the PLO, even if the organization has agreed to the list.

Egypt has been pressuring the PLO to accept a veiled, offstage role by letting surrogates not intimately tied to the organization take part in talks.

It is just this kind of diplomatic fig leaf that Ariel Sharon, the hawkish trade and industry minister, tried to rip off during Monday’s party meeting when he tussled verbally with Shamir and dramatically announced his resignation from the Cabinet.

Shamir was quoted in the Israeli press as saying he considers the resignation final, and Sharon said he is not going to take it back.

As defense minister under the Likud government of Menachem Begin, Sharon designed Israel’s 1982 invasion of Lebanon. He has differed with Shamir on means of quelling the long-running Arab uprising in the territories, maintaining that with enough force it could be ended in a matter of weeks.

On Monday, Binyamin Begin, Menachem Begin’s son and a supporter of Shamir, said that Sharon once proposed the arming of Palestinians sympathetic to Israeli rule to fight nationalist Palestinians.

“This Arab revolt won’t end until thousands of Arabs are killed by Arabs,” Begin quoted Sharon as saying.

Sharon confirmed that he wanted to arm Arabs opposed to the PLO. “We have to give people a chance to protect themselves, and in this case we are talking about Arabs who are prepared to defend themselves against PLO murderers,” he said on the radio.

Of the more than 700 Palestinians killed during the two-year-old uprising, well over 100 were accused as collaborators with Israel and were killed by other Arabs. Israel supplies light weapons to many Palestinian collaborators in the occupied lands but does not go so far as to turn them loose on Palestinian nationalists.