U.S. Officials Cautious About Mideast Plan : Diplomacy: President is ‘very encouraged.’ But others warn that tough bargaining may lie ahead.

With Israelis and Palestinians on the verge of what could be the most significant Middle East peace agreement since the 1978 Camp David accords, the Clinton Administration sought Monday to lower expectations, warning that months of tough bargaining may be required to complete the plan.

“I’m very encouraged . . . and very hopeful,” President Clinton said of the agreement, worked out in secret talks between Israeli Foreign Minister Shimon Peres and a top official of the Palestine Liberation Organization.

But Administration officials, saying that nothing comes easily in Arab-Israeli talks, warned that the formal negotiations scheduled to reopen today in Washington may be extremely difficult.

The agreement, calling for Palestinian self-rule in the Gaza Strip and the West Bank town of Jericho, appears to have been reached with a minimum of U.S. help. But Middle East experts predicted that active American mediation will be required to fill in the details.

The so-called “Gaza first” formula has been kicking around for more than a decade without attracting much support on either side of the conflict. The plan appears to have been revived at this time to provide a tangible outcome for the Israeli-PLO talks.

Perhaps the most important aspect of the negotiations is that they broke the Israeli taboo against direct talks with the PLO, which previous Israeli governments dismissed as a terrorist organization.

“The moment has finally come for the Israelis and the PLO to deal with each other,” said William B. Quandt, a former National Security Council consultant on the Middle East. “I thought it would happen someday, but I didn’t think it would come so quickly.”

Quandt said that Israel apparently decided to deal with the PLO because Chairman Yasser Arafat’s organization is in disarray and seems to be in danger of losing the allegiance of West Bank and Gaza Palestinians to the radical Islamic fundamentalist group Hamas.

“It looks like a conscious effort to throw a lifeline to an old enemy,” Quandt said.

But the Israeli-PLO contacts clearly took U.S. officials by surprise. State Department spokesman Mike McCurry said there has been no change in Washington’s refusal to deal with the PLO.

Although the Israeli-PLO dialogue would have been extremely unlikely without 22 months of U.S.-mediated Middle East peace negotiations, Washington was little more than an interested observer. McCurry bristled at the suggestion that the Administration was only a “bystander” at the talks, but he conceded, “I think, frankly, modesty would suggest that the United States shouldn’t try to take too much credit for this.”