PERSPECTIVE ON ISRAEL : Real Terror Is a PLO-Run State : If the Palestinian’s minimal demand is unacceptable, American policy has been conjuring up an illusion.

Terrorism is not the issue.

President Bush has said that it is, and that he suspended talks between the United States and the Palestine Liberation Organization because PLO leader Yasser Arafat refused to denounce the foiled gunboat attacks against Israeli civilian targets in Tel Aviv. Prime Minister Yitzhak Shamir of Israel also gives terrorism as his reason for not participating in any peace process involving the PLO. But concern with terrorism can mask reluctance to grapple with the real issues of the Arab-Israeli conflict.

Assume for the moment that the PLO were to honor its commitment to renounce terrorism. Would its minimal demand, an independent Palestinian PLO-run state on the Israeli-occupied West Bank and Gaza Strip, then be acceptable to the Bush Administration? If not, then what is the “dialogue” all about?

Some might say that it is to gain the blessing of the PLO for local elections on the West Bank and Gaza Strip. But the PLO has already said that it would never support elections involving the inhabitants of these areas without open PLO participation. And Israel has adamantly refused this condition. Is the “dialogue” then nothing more than the creation of an illusion of progress--perhaps a necessary illusion to make life more palatable for Egypt, which has put itself out on a limb in the Arab world in making peace with Israel? And is espousal of anti-terrorism Bush’s cover for lack of a Middle East policy?

Similarly, Shamir’s condemnation of PLO terrorism diverts attention from the fact that whether the PLO remains dedicated to terrorism or not has little to do with his real motivations. The PLO represents the Palestinian diaspora outside of the West Bank, Gaza and Israel proper, and the last thing in the world Israel wants to do is negotiate the return of thousands of Palestinian refugees to the region. That is why the Shamir peace plan focuses on the development of local leadership in the territories as a counterweight to PLO power. Such a plan is endorsed by all major parties in the Israeli political spectrum. No Israeli government will support negotiations aimed at the creation of an independent PLO-run state.

It is convenient for both the Bush Administration and Shamir that the attempted beach landing and shooting spree, said to have been organized by Abul Abbas, a member of the PLO executive council, with the cooperation of Libya, occurred when it did. The peace process wasn’t going anywhere and the attack enabled Washington to break off talks with the PLO without either party having to face the harder questions.

These questions include:

--Is the United States still committed to the Camp David accords, which envision the development of autonomous leadership in the West Bank and Gaza without involvement of the PLO?

--Would the Bush Administration repeat the Reagan Administration’s veto of moves by the U.N. Security Council urging Israel-PLO talks aimed at creating an independent PLO-run state?

--Does President Bush stand behind the declaration of Vice President Dan Quayle at the recent American-Israel Public Affairs Committee convention, that the United States is opposed to an independent Palestinian state?

There was a time when U.S. involvement was based on the assumption that the Soviet Union was all too willing to fish in these troubled waters for Arab client states and would support their most radical demands. Now that threat seems to be dissipating. What we are left to ponder is whether an active U.S. role in a largely illusory peace process carries any payoff. Frustration and aggravation of tensions are the price of illusion. Today, no Arab state is prepared to meet directly with Israel to discuss recognition and peace unless Israel negotiates with the PLO. Israel will not negotiate with the PLO, insisting that the waging of peace is the responsibility of the states that waged war. The PLO dialogue creates the impression that it can be a full partner for peace, but it is hard to see how that squares with the reality of both sides’ bottom-line positions.

Perhaps the suspension of U.S.-PLO talks will give Administration policy planners time to ponder what U.S. objectives in the region are, and what is and is not realizable. The parties at this point seem incapable of working out anything on their own--though perhaps if the United States bows out they will be spurred to change their strategies.

If the United States is to become involved again in the peace process, and if U.S.-PLO talks are to be resumed on a meaningful basis, then it will take more than a debate about terrorism to get them moving. It will take a clearer vision of what it takes to make peace between Arabs and Israelis, and the determination to move with it.