NEWS ANALYSIS : Israel, PLO Approach Decisive Step : Mideast: The belated accord they plan to sign would cut to essence by ending occupation of major West Bank towns.

The autonomy agreement that Israeli and Palestinian leaders say they will sign in Washington on July 25 may be late in coming and still incomplete, but it appears to cut to the meat of the Middle East peace process--ending Israel’s nearly 30-year occupation of the West Bank and control over Palestinians.

Israel has agreed to withdraw from major towns in the West Bank territory that it won in the 1967 Middle East War, allowing Palestinians to hold their own elections before the end of the year.

The historical road to peace and an eventual Palestinian homeland is marked by caution signs. Foreign Ministry legal counsel Joel Singer warned on Israeli television Wednesday that “there remains a great deal of work to be done . . . and it must be made clear there is still no agreement.”

But there is also a sense here that Israeli Foreign Minister Shimon Peres and Palestine Liberation Organization Chairman Yasser Arafat made real progress toward implementing the second phase of their 1993 peace accord on Tuesday when they drew up a broad outline for Israeli redeployment, Palestinian elections and transfer of civil authority.

Details are to be worked out by a committee before July 25.

“The process is irreversible,” columnist Shimon Shiffer wrote in the Israeli daily newspaper Yediot Aharonot on Wednesday. “The elections which will take place in the territories toward the end of the year are aimed at consolidating the rule of Arafat.”

Arafat’s Palestinian Authority will expand beyond the grim Gaza Strip that Israel was only too happy to be rid of and the isolated town of Jericho--both of which he has ruled since May, 1994--into the West Bank land that religious Jews call Judea and Samaria and consider theirs by virtue of the Bible.

There, Jews and Arabs will live almost side by side under separate rule. The 140,000 or so Jewish settlers in the West Bank are in enclaves that will remain under Israeli army control, but only minutes from the communities where the PLO will plant its flag and patrol its own streets.

This is a nightmare to Israelis who believe that Islamic fundamentalists opposed to the peace accords will use areas under Palestinian control to launch terrorist attacks against Jews.

“When Shimon Peres and Yasser Arafat are discussing the future of [the West Bank town of] Qalqiliya, the significance of [the peace accord] takes on a concrete and threatening nature,” the Maariv newspaper said in an editorial. “This is no longer a problem of the settlers, but of whoever is going to visit his aunt in [the nearby Israeli town of] Kfar Sava.”

Israeli leaders say almost daily that the army’s redeployment would be halted if Jews were attacked from West Bank towns or villages, while the opposition Likud Party insists that Arafat has shown he cannot control terrorism.

According to Peres, the plan calls for a phased Israeli withdrawal over two years, starting with the northern towns of Janin, Nablus, Qalqiliya and Tulkarm before Palestinian elections this fall. Special arrangements would be made in three other major West Bank cities--Ramallah, Bethlehem and Hebron--during the elections so Palestinians would not go to the polls in the presence of Israeli soldiers.

The pullout would begin four weeks after the agreement is signed and end 22 to 25 days before the voting, Palestinian officials say.

In the second stage of the pullout, Israel would leave other towns and villages in 1996, and Israelis and Palestinians would patrol rural areas jointly. The third troop pullback, from rural areas, would take place in mid-1997.

Negotiators still must resolve the exact boundaries of the autonomous regions; the transfer of civilian authority, particularly over land and water, and the participation of Jerusalem residents in the Palestinian elections.

They also are still discussing Israeli “hot pursuit” of suspects in Palestinian areas and the release of about 5,500 Palestinian prisoners.

The West Bank provides a greatly enlarged social and economic base for Palestinian self-rule, but some Arab leaders have criticized the agreement-in-progress because of the separation between Palestinian communities.

“The most dangerous aspect of the agreement announced yesterday is that it will divide the West Bank into areas of Israeli jurisdiction, areas of Palestinian jurisdiction and areas of joint jurisdiction,” said Ghassan Khatib, a Bir Zeit University economist and former member of the Palestinian negotiating team. Division of the West Bank into such islands “cripples the drive to build a Palestinian state in the 1967 borders,” he said.

That may be precisely what the Israelis want to do with their patchwork redeployment. But whether it is called a state or an entity--as Israeli Prime Minister Yitzhak Rabin refers to areas under Palestinian control--and whether its constituent parts are connected or separate, the fact is that Arafat’s Palestinian Authority this week is that much closer to taking charge of the West Bank, the backbone of its homeland.