NEWS ANALYSIS : Shamir’s Balancing Act Faces Test : Politics: The likelihood of elections may force Israel’s leader to define his stand on key peace issues.

Israeli elections in the midst of Middle East peace talks, a prospect made likely by this week’s apparent collapse of the government, will put to a test one of the longest running acts in Israeli public life: Prime Minister Yitzhak Shamir’s politics of ambiguity, a balancing act in which he has tried to work for peace talks and oppose concessions that might lead to compromise in the talks.

It is an act that has been aimed mostly at Washington, with which Shamir wants to maintain a traditionally close alliance, and more recently, from which he would like to win concessions that would make it cheaper for Israel to borrow badly needed funds abroad.

The high-wire performance has been shaken by withdrawal from his coalition of two far-right parties; and with the apparent advance of elections comes the possibility that Shamir’s true attitudes might yet be smoked out.

After more than seven years in power, he might be forced to declare where he stands on the key sacrifices of peace--giving up authority and territory to the Palestinians and perhaps land to Syria.

“Shamir is caught in his own web. Everyone--the right and left--is saying that autonomy leads to something more. Only Shamir is hiding from the facts,” asserted Arye Naor, a political columnist and official in the former rightist government of Menachem Begin.

For the moment, Shamir is clinging to his formula that says Israel can have everything, peace talks and all the territory west of the Jordan River. “We are committed to the peace talks and all of the Land of Israel,” said spokesman Yossi Ahimeir, using terminology that covers the West Bank and Gaza Strip. The talks will go on, Ahimeir insisted, even with a weakened Israeli government.

The far right in Israeli politics--and that includes a chunk of Shamir’s own Likud Party--no longer buys the have-it-all formula, and that is why the government is falling. Two rightist parties in Shamir’s coalition withdrew their support for the prime minister because, in their view, talks were leading to autonomous rule for Palestinians that would strip Israel of part--if not all--of the land.

The Moledet Party, holding two seats, not only wants to annex the occupied territories but also to remove all the Arabs from them. Moledet sealed the government’s collapse Thursday by voting to pull out of the coalition. The withdrawal would leave Shamir with a minority 59 seats in the 120-member Knesset, or Parliament.

But a formal collapse could take time. Long goodbys are a fixture in Israeli politics, and government officials say it could take weeks to set a date for new elections, which had been scheduled for November. Until elections are held, Shamir will remain in power as caretaker--unless the dovish Labor Party can somehow pull together a ruling majority, a feat almost everyone thinks is impossible.

It wasn’t clear whether Shamir would resign or be brought down by a vote in Parliament. The next no-confidence vote is scheduled for next week.

Israel’s political hubbub is expected to further slow the already paralyzed pace of the Mideast peace talks. “Every early election delays outstanding issues,” spokesman Ahimeir remarked.

That may not be much of a bother to Shamir. He himself was having second thoughts about the course of peace negotiations, observers say. His offer of self-rule to the Palestinians was based on the Camp David agreements with Egypt, an accord that prescribed withdrawal of Israeli troops to strategic outposts.

Shamir also wanted to restrict self-rule, which was to develop over an interim period of five years, to limited areas of education and public welfare. No control over terrain or security even within Palestinian communities was foreseen, and, after five years, in Shamir’s view, only minor adjustments would take place.

So timid was Shamir about making any offers that he handed the Palestinians only an agenda this week during their talks in Washington.

“A deterioration has taken place in the Israeli proposal for an interim arrangement,” said Avinoam Bar-Yosef in the Maariv newspaper. Commented Shlomo Avineri, a former Labor government official and now a Hebrew University political scientist: “The government is committed to the peace talks but not to peace.”

With Shamir teetering, the potential role of the United States in either pushing him over the brink or helping him stay in power popped into the minds of observers here. The tools would be guarantees for $2-billion worth of loans that Israel wants to fund jobs for new immigrants from the old Soviet Union. Almost any decision made by the Bush Administration would affect Shamir’s election campaign.

If the loan guarantees are granted, even for less than $2 billion, they will help Shamir sustain the notion that relations with Washington are sound. If they are withheld, liberal opponents of Shamir would charge him with offending Israel’s most generous ally.

Several commentators bet that, given the uncertainty of the outcome, the loan guarantees could be withheld until elections take place. “The U.S. wouldn’t want to give them during an election campaign so as not to be seen as intervening on the side of Likud,” wrote columnist Akiva Eldar in the liberal Haaretz daily newspaper.

Because obtaining the guarantees could ease the unemployment problem, the loan issue also plays into the riddle of which way tens of thousands of immigrants from the former Soviet Union will vote. Their numbers could conceivably account for six or seven seats in the new Parliament, a bonanza for any party that wins them.

Will they be swayed by Shamir’s Land of Israel arguments, even after experiencing Likud’s mostly inept handling of their needs? Or will they swing to Labor on the promise of competence and forget that party’s socialist past and dovish image, which have dulled Labor’s chances to win power in recent years?

“This will be the wild card in the elections,” analyst Avineri said. “No one knows how they will vote.”