Could the Chronic Logjam of Israeli Politics Finally Be Breaking? : Elections: With Washington demanding real concessions at the peace conference, the need for loans might bring the Labor Party back into power.

Israel’s next general elections, scheduled for June 23, are likely to be as affected by the cold wind blowing from New Hampshire as the steam produced by its own primaries held last week. Today’s Israeli public shows as much interest in how Patrick J. Buchanan is doing as in the victories of Premier Yitzhak Shamir and opposition leader Yitzhak Rabin. Buchanan’s pledge to cut off foreign aid and disqualify Israel from receiving U.S. loan guarantees and the way this might set the agenda for President George Bush were providing the background to the tense primaries of Israel’s leading political parties.

Shamir’s reelection as the leader of the ruling Likud bloc was expected. The decision of Labor members to elect Rabin as their new leader, however, is less obvious and more significant. Receiving 40.5% of the 100,000 Labor votes, he defeated his arch-rival Shimon Peres by 6%. Rabin’s election has injected new hope into the Labor Party’s prospects. Recent public opinion polls show Rabin is more popular than Shamir among the 3.5 million Israelis eligible to vote in the general elections. Rabin radiates a more energetic and pragmatic approach to Israel’s problems.

Shamir, on the other hand, appears rigid and uncompromising. “Shamir,” wrote a leading Israeli columnist, “is the status quo.” He easily won the party elections last week, with 46% of the vote. But his apathetic style does not generate enthusiasm among party activists.

After 15 years in power, Likud is losing its appeal among its traditional strongholds. Unemployment, at 12%, is most felt in development towns and poor neighborhoods--the driving force behind Likud’s rise to power. Inflation is down to 10% annually, but the first signs of recession can be seen all over the country. Industrial output is in decline and so are exports. But the most serious troubles facing the Likud government originate in Washington. The only way for Shamir to regenerate the staggering economy, to create jobs and, above all, to absorb more Russian immigrants, is to obtain the $10 billion in U.S. loan guarantees.

To get the money, Shamir was ready to dissociate himself from his constituency, Israel’s extreme right-wing. Abandoned by his coalition partners, and left with a minority government, Shamir led Israel to the Middle East peace conference.

But the Bush Administration did not reciprocate as expected. The loan guarantees were not forthcoming, and Washington is now pressing him even harder to make substantial concessions in this week’s peace talks with the Palestinians. So far, the Israeli delegation made no concessions in the first three rounds of talks, making only insignificant gestures. Shamir’s peace tactics seemed intended to gain time until the general elections.

Calling his bluff, U.S. Secretary of State James A. Baker III, presented Shamir with a dilemma. Earlier this month, Baker bluntly told the Israeli ambassador that Israel could get the guarantees only if it stopped building new Jewish settlements in the occupied West Bank and Gaza strip. Washington holds the view, along with the Arab world, that the settlements are an obstacle to peace.

If Shamir bows to U.S. pressure he will betray his own ideology of a “Greater Israel,” further weakening his position in right-wing circles. If he doesn’t accept the U.S. formula, Israel may never see the money. This will have unprecedented repercussions on Israel’s foreign and domestic fronts. In the last two years, more than 400,000 immigrants from the former Soviet Union arrived in Israel. Recently, the influx has dwindled. Only U.S. financial support can renew the massive immigration, which has been perceived as the country’s insurance policy for continued existence in a hostile Arab environment.

The deterioration in U.S.-Israeli relations is Rabin’s best card. He is already trying to exploit the fears of Israeli voters that, if the loan guarantees are not provided, the Likud government will have to raise taxes and make further cuts in health, education and housing.

Does Labor really have a chance to topple Likud? The close race between Labor and Likud in the last three elections was a genuine reflection of the people’s mood. Since 1967, Israeli society has been divided. One position, sponsored by Labor and left-wing parties, calls for territorial compromise over the occupied land and expresses its readiness to reach agreements with Syria, Jordan and the Palestinians. The other view, supported by Likud and its right-wing satellites, advocates continued Israeli control of “our ancient Biblical land” and refuses concessions to the Palestinians.

Leading pollsters are cautious to predict whether the Israeli electorate will change its established voting patterns of splitting almost equally between Labor and Likud. Some political observers, however, point out four major changes which could effect the results:

--The tendency for amalgamation will probably produce less chaotic campaigns. Four major political blocs will emerge: Labor, Likud, an alliance of three left-of-center parties and the religious bloc.

--Right-wing parties that share similar political programs are divided along personal lines and will run independently.

--In previous elections Israeli Arabs split their vote. If the 500,000 Israeli Arabs heal their old divisions, they might tip the scales in favor of Labor.

--Likud is afraid the new immigrants, now 8% of the electorate, will punish them for poor management of their absorption.

But none of the political commentators rules out the possibility that the June elections might once again result in the traditional political deadlock. This development will mean that Israel, once again--as in 1984-1990--will have a National Unity government: A Cabinet, headed by Rabin’s Labor and Shamir’s Likud, which will be ideologically divided, politically paralyzed and, worst of all, incapable of reaching the desperately needed decisions.