NEWS ANALYSIS : Support Ebbing as Peace Talks Drag On : Mideast: Surge in terrorism raises pressure on Rabin and Arafat. But impasse on troop withdrawal doesn’t mean process has broken down.

Where have all the hopes for peace in the Middle East gone?

Disillusionment had set in even before Israel and the Palestine Liberation Organization failed Sunday to agree on basic conditions for Palestinian self-government in the Gaza Strip and the West Bank district of Jericho, thus delaying Israel’s withdrawal from the regions.

Israelis and Palestinians are still burying their dead from a conflict that is supposed to be over. The West Bank and Gaza Strip appear to be slipping into an accelerating cycle of political violence where murders and revenge, ambushes and counterattacks daily destroy prospects for peace.

Palestinians, moreover, believe that little has changed in their daily lives. There are still army roadblocks and checkpoints, humiliating searches and long delays in getting endless permits for the most mundane things. Several hundred political prisoners returned home, but thousands more remain in Israeli detention centers.

And impatience has mounted over the drawn-out negotiations between Israel and the PLO. Israelis fear that too much is being given away, Palestinians complain that they are getting too little, and both believe that the process has become as bogged down in minutiae as past Arab-Israeli negotiations.

All these elements, particularly the surge in terrorism, had emerged strongly in recent weeks to shift public opinion away from the peace accord.

The failure of Prime Minister Yitzhak Rabin and PLO Chairman Yasser Arafat to resolve their differences at their meeting Sunday in Cairo thus seemed to confirm the fears of many that the accord on Palestinian autonomy is unraveling.

The Palestinian-Israeli dynamic, in reality, is far more complex. The political forces that brought the accord on Palestinian autonomy and an Israeli withdrawal remain strong, the ultimate foundation for solving not only the Palestinian question but the Arab-Israeli conflict.

Rabin and Arafat, moreover, both need, and rather badly so, to make a success of their pact.

“The Israeli-Palestinian conflict is not a love story to be resolved by a kiss or a handshake,” Israeli Police Minister Moshe Shahal had said in a weekend interview, “but agreement is a necessity that can be met by true realism. . . . There is really no alternative for either side.”

Both sides had foreseen the need for further negotiations--the few months allocated had plainly not been enough--and the delay announced Sunday consequently signaled an impasse, admittedly on the most sensitive issues but not a breakdown of the whole process.

The surge in terrorism in recent weeks hardened Israeli demands for security guarantees, both in real terms to protect the Jewish settlers who will continue to live in Gaza and the West Bank, but also politically to demonstrate the Rabin government’s concern for the 125,000 settlers.

But the PLO needed, even more than before, to show its own toughness by getting tangible concessions from Israel--enlargement of the autonomous Jericho district, control of the international border crossings into Gaza from Egypt and to Jericho from Jordan, and many symbols of an independent state.

Both Rabin and Arafat meanwhile are facing increasing opposition to the accord, Rabin from Israel’s security-conscious public as well as from the vocal West Bank settlers, Arafat from Islamic fundamentalists, Marxist radicals and even reformers within his own ranks.

The pressure has been unremitting on both men to take a harder line and retreat from compromises reached in secret negotiations last summer for the Declaration of Principles that laid the foundation for Palestinian self-government, the Israeli withdrawal and future relations.

The delay in implementing the accord, however, increases their vulnerability to extremists, Palestinian and Israeli alike, who have found in provocative terrorism a strategy that undermines the whole process.

“It is easy to get into a cycle of violence, and very hard to get out of it,” Shahal said. “Israelis can never overlook the death of one of our people, and the murder of innocent Palestinians, such as we had last week, justifies the call for more violence.”

For this reason, Ran Cohen, a liberal member of the Israeli Parliament, criticized the delay as “allowing the hideous murderers to continue their actions against innocent victims and to try to torpedo the peace process.”

But there is no way back, either for Rabin or for Arafat; politically, they are yoked together so tightly that a gain for one benefits the other and a defeat for one harms the other.

Rabin, painfully aware of his diminished support among centrist Israelis, cannot say that the deal with the PLO was all a blunder and survive politically. He remains convinced, in fact, that he was correct and that only he can lead Israel through perhaps the most fundamental of the many strategic shifts it has made in its 45 years.

Arafat similarly cannot retreat, for that would mean turning over the Palestinian leadership to the radicals, now an unholy alliance of Islamic fundamentalists and the far left, admitting that they are correct in continuing to call for an armed struggle to bring about the destruction of Israel.

Compromises thus must be found in the next 10 days on the outstanding issues, and Rabin, while negotiating from a position of strength, must satisfy Arafat’s political needs to serve his own.

“It is an impressive show of coolness on the part of both leaders, saying let’s not run ahead and just do something under pressure,” said Dedi Zucker, an Israeli member of Parliament from the left-wing Meretz Party, a member of the governing coalition. “But they must use the time well--they have paid a high political price for it.”

The principal danger now appears to be that the stall in the drive toward peace becomes permanent, that the momentum lost in recent weeks is not recovered and that the cycle of violence comes to govern the speed of the negotiations.

“Time is of the essence,” the leftist newspaper Al Hamishmar observed Sunday. “Every delay in carrying out (the interim arrangement) is liable to create unforeseen problems and a loss of control.”

Elias Freij, the mayor of Bethlehem in the West Bank, warned that the 10-day delay in implementing the original agreement “will create among Palestinians many more doubts about the true intentions of Israel.”

Much will depend, Freij said, on whether Israel follows up immediately with moves, such as the release of Palestinian prisoners, to rebuild confidence in the accord. “People want to see and feel and taste the change, and they don’t so far,” he said.

Yet senior Israeli analysts believe that the momentum can be regained quickly, and with it popular confidence in the peace process among Israelis and Palestinians.

“The real deadline is April 13, when our withdrawal from Gaza and Jericho must be complete,” a Rabin adviser said. “Palestinians will see the changes gathering speed as army outposts are closed, checkpoints are removed, roads are reopened, prisoners come home, our troops pull out and the PLO comes in. That will all happen in the first phase. We are just negotiating how it will happen.

“The trick will be to persuade our own people that they are just as safe, even safer, with the rapidity of these changes. We do need some assurances that the process will not spin out of control--that’s why we want to control border crossings, for example--but a speedy implementation is as much in our interest as in the PLO’s.”