World Perspective : PEACE PRIZE : On Nobel Day, Reality Falls Short of Noble Hopes : Arafat, Shamir and Peres are honored for their efforts toward Mideast peace even as analysts say a miracle would be needed to push the process forward.

The hopes for a Middle East peace, ignited when Israel and the Palestine Liberation Organization reached their historic agreement on Palestinian self-government last year, seem to be fading even as the men who fashioned the Declaration of Principles receive the Nobel Peace Prize here today.

Israeli Prime Minister Yitzhak Rabin and PLO Chairman Yasser Arafat, who forged what they proudly called the “peace of the brave,” complain that the other is not honoring the accord.

Their supporters are bitter about the failures, asking daily about the promised peace and the “new Middle East.” Their opponents scream “betrayal” ever more loudly.

Even Israeli Foreign Minister Shimon Peres, a visionary statesman with almost boundless optimism, has grown tired. Frustrated by the lack of progress, he acknowledges that the agreement he fashioned in months of secret negotiations here last year may have to be amended.

Shlomo Gazit, a retired Israeli general and one of the region’s foremost strategic analysts, calls the Nobel awards ceremony at which Rabin, Peres and Arafat will be honored today “the last chord of a dying process.”

Only a “miracle”--tough decisions taken unflinchingly on hard issues by the now-wavering leaders--will restore lost momentum to Arab-Israeli peacemaking, Gazit said. Few in the Middle East would disagree that this would be a political miracle.

That reality fell short of both Israeli and Palestinian hopes is clear.

Israelis, for whom security is paramount, count more than 70 dead in the last year, most civilians and half of them killed in suicide bombings carried out in Israeli cities by Islamic radicals opposed to the peace accord.

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Palestinians in the Gaza Strip have seen a sharp decline in their already miserable living standards since Arafat’s Palestinian Authority took charge of the territory in May. Only a third of the $700 million promised by the West in immediate economic assistance has materialized as the PLO and the World Bank have argued about accounting practices.

In the West Bank, the Palestinian Authority now operates the education, health, welfare and tourism departments. It is starting to collect taxes to finance these services. But Israeli troops remain heavily deployed in the region, and deadly clashes with residents continue.

The Palestinians’ first national elections, originally scheduled for last July and intended to establish a democratically chosen government for the West Bank and Gaza Strip, have been postponed once and twice again while Israel and the PLO negotiated the size and powers of the planned council. If agreement is reached soon on the council, elections might be held in spring.

Arafat’s political leadership and his day-to-day administration are widely criticized by Palestinians as ranging from inept to chaotic, from corrupt to despotic. After Palestinian police fought bloody battles with the Islamic Resistance Movement, a radical fundamentalist group known as Hamas, there were fears of a Palestinian civil war.

“The gap between ceremony and reality is stretching the peace process to its limits, not just between the two opposing sides (Arabs and Israelis) but also between the social classes here,” commentator Doron Rosenblum wrote last month in the influential Israeli newspaper Haaretz in terms that also echoed Palestinian complaints.

“For the patrician caste in power, which travels by Volvo or Mercedes, there is no end to festivities, to trips abroad, to toasts drunk in fine company,” he noted. “Meanwhile, those who travel by bus and shop in the markets continue to be targets of terrorism, to pay ever-higher prices and taxes and to lose their savings in a crumbling stock market. It is no wonder that not just Palestinians but also more and more Israelis are asking what exactly they have gained from the peace.”

Rabin, who with Peres was jeered by right-wing Israelis and American Jews as they left synagogue services here Friday night, acknowledged the opposition he faces at home but reminded critics: “We came (to power) after democratic elections to bring about a change in the Middle East, to give peace a chance. . . . Of course, there are risks, but the opportunities are much greater.”

People should “not expect immediate results--not everything in life is instantaneous,” he said.

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Still, Israelis see the “peace process” as an experiment they evaluate at each stage before deciding whether to go on. Right now, there is much hesitation; even Rabin’s Cabinet needed three days’ debate this week on how, even whether, to proceed.

Among Palestinians, the question is no less profound. “It is hard to see how all this is leading to an independent Palestine,” said Dr. Haidar Abdel-Shafi, the respected Gaza physician who led the Palestinian delegation to the 1991 Middle East peace conference in Madrid. “What I think we are beginning to understand is the illusory nature of the Oslo agreement. . . . But how do we get out of it? We may have gone much too far to turn back, but may have also made it impossible for ourselves to go forward.”

For all this, however, there are achievements that were difficult for most Israelis and Palestinians to imagine before the Declaration of Principles was signed.

Apart from troops guarding Jewish settlements, Israel has withdrawn its forces from the Gaza Strip, ending 27 years of military occupation and permitting establishment of the first-ever Palestinian administration there. This was no less a gain for Israelis than it was for the 850,000 Gazans.

As they begin take over government functions in the West Bank, Palestinians are laying a firmer foundation than in Gaza for the independent state they hope to establish at the end of the five-year period of autonomy.

Palestinian political violence--factional clashes, assassinations, widespread security arrests--has been far less than many top Israeli officials predicted; Arafat’s efforts have been aimed largely at bringing his opponents into the embryonic political system.

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And, as even critics of Israel’s accord with the PLO acknowledge, without that agreement addressing the core issue of the Arab-Israeli conflict there would not have been the Israeli peace treaty with Jordan, the Middle East economic summit in Casablanca, Morocco, and prospects of a treaty with Syria next year.

“We carry a very heavy burden for our own people, for the Palestinian nation, but we also have a burden for the other Arabs,” said Nabil Shaath, the Palestinian planning minister and a top negotiator with Israel, “for resolution of the Palestinian problem is the precondition for resolution of the whole Arab-Israeli conflict and thus for peace in the Middle East.”

The agreement worked out in the months of secret talks in and around Oslo by Israel and the PLO with Norwegian mediation, in fact, set Arafat a task verging on the impossible: The PLO was to take the Gaza Strip--one of the most impoverished, pestilential and violent places in the Middle East--and within months turn it into a showcase of democracy, prosperity and tranquillity.

The PLO’s success would depend on Israel’s pullback in the West Bank, further negotiations on the status of Jerusalem, the future of Jewish settlements in the Palestinian territories and, above all, a Palestinian state, perhaps independent but probably linked to Jordan in a confederation.

All this might bring only a “small peace”--the absence of war--but it is a peace that Rabin and some Arab leaders see as an effective alliance between the Jewish state and its moderate Arab neighbors against the spread of Islamic radicalism.

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The Peace Process

Key peace process dates for Israel and the Palestinians:

Oct. 30, 1991: Middle East peace conference opens in Madrid with Israel and the Palestinians participating.

Sept. 13, 1993: Israel and the Palestine Liberation Organization sign Declaration of Principles in Washington after 10 months of secret talks.

Feb. 25, 1994: Jewish settler kills about 30 Palestinians at West Bank mosque. Violence surges throughout occupied territories and into Israel.

May 4: After more than six months of difficult negotiations, Israel and the PLO sign agreement implementing autonomy plan.

May 13: Palestinian police begin arriving in Gaza Strip and Jericho on the West Bank; Israeli forces lower flag after 27 years of occupation.

July 25: Israel and Jordan sign agreement at White House ending state of war between them.

Oct. 14: Israeli Prime Minister Yitzhak Rabin, Foreign Minister Shimon Peres and PLO Chairman Yasser Arafat are awarded Nobel Peace Prize.

PLO Aid

The aid flow to the Palestinian Authority:

PLO sought in ‘94: $700 million

PLO received in ‘94: $120 million

PLO promised in ‘94: $125 million