Israel, Palestinians Face ‘Hard Choices’ in Pivotal Meetings This Month : Negotiations: Two sides reportedly talking about allowing elections to go ahead before Israeli army leaves West Bank, contrary to original pact.

JERUSALEM — In some of their toughest negotiations yet, Israel is telling the Palestine Liberation Organization to choose between national elections that would install the first democratically chosen Palestinian government and the early withdrawal of Israeli troops from West Bank towns and villages.

“We need the elections for our political credibility, but how much credibility will we have if Israeli soldiers are still present and continuing their occupation--but by our agreement?” a senior Palestinian negotiator asked Friday after three days of talks in Cairo. “But this is the choice.”

PLO Chairman Yasser Arafat is nonetheless moving toward accepting the continued deployment of Israeli forces on the West Bank, including some major towns such as Hebron, in order to get the election this spring of a legislative council, Palestinian sources said.

Arafat’s decision will probably come in key meetings over the next 10 days with Israeli Prime Minister Yitzhak Rabin and Foreign Minister Shimon Peres.

According to Israeli and Palestinian officials, the leaders will attempt to agree on goals and timetables for their negotiating teams in Cairo.

Uri Savir, Israel’s chief delegate to the Cairo talks, said “some decisions now have to be taken at the highest levels,” and Palestinian Planning Minister Nabil Shaath said he expected the leaders to “give the necessary instructions to move ahead on the various issues.”

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Although there would be further negotiations, beginning in 1996, on final resolution of the Palestinian problem, the Cairo talks would effectively launch the effort to separate Israel from the Palestinian territories, laying the basis--and perhaps the borders--for what would likely become a Palestinian state.

“Hard choices lie ahead,” an Arafat adviser commented Friday. “They are difficult in themselves, of course, but their importance will reach far beyond the immediate objective--elections, troop redeployment, transfer of authority--because they shape the future.”

Rabin told Arafat last week in Oslo, where he, Shamir and Peres received the Nobel Peace Prize, that Israel wants the 5-month-old Palestinian Authority to hold elections as quickly as possible, gaining greater standing for the authority among Palestinians in the West Bank and Gaza Strip and taking the 1993 accord on self-government a major step toward full implementation.

But Rabin, according to Israeli sources, fears that the pullout of Israeli troops from West Bank villages and towns, as required by the accord, would expose both the 120,000 Jewish settlers in the region and Israel itself to further terrorist attacks by Islamic radicals opposed to the peace agreement.

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A year would probably be needed, Rabin said, for Israel and the PLO to work out satisfactory security arrangements if Israeli forces were to be withdrawn from all Palestinian areas before the election as the accord requires.

“From our side,” Rabin reportedly told Arafat, “it is unthinkable that we hold the elections with an early redeployment by the Israel Defense Forces outside of the populated areas on the West Bank before we know or agree to the picture of the entire interim arrangement.

“I am not willing to withdraw forces from all of the populated areas before knowing what the answer will be to security problems.”

For Israelis, that point was dramatized twice this week when Palestinians attacked Israeli military reservists on the West Bank.

On Wednesday, a soldier who had lost his way and blundered into central Ramallah was beaten by youths; on Friday, an officer was shot in the shoulder while driving through neighboring Al Bireh.

“Look what has happened in Ramallah and Al Bireh while the army is still there,” said Aharon Domb, a spokesman for the Council of Jewish Settlements in Judea, Samaria and Gaza. “Imagine what would (happen) if the army pulls out.”

Rabin, speaking in a radio interview from South Korea, where he is visiting, replied: “We will move toward separation. The right final settlement is a redivision of the (biblical) Land of Israel.”

What Rabin proposed to Arafat, according to Israeli sources, was a staged troop withdrawal that would begin with a pullout of soldiers from such towns as Bethlehem and Jenin where there are no settlers nearby and that are not bases for Islamic militants.

There would also be thinning of forces in other areas and perhaps what was termed as “symbolic withdrawal” from some towns where the administration would be turned over to Palestinians while Israeli forces remained to protect Jewish settlers and Israeli frontiers.

Through this process Israel would begin to define the areas, both the settlements and border regions, that it hopes to retain as part of the final agreement. The Israeli military reportedly has already drawn up a budget of more than $1 billion for new bypass roads, border fences, checkpoints and encampments.

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What Rabin offered Arafat in return for the phased withdrawal, according to Israeli sources, was elections for a large council with broad legislative powers as the Palestinians have sought, the separate election of its chairman, the participation of Islamic opposition groups in the election and the accelerated transfer of governmental powers to the Palestinian Authority.

“There are differences between us and Israel on the council, but they are not so large,” a Palestinian minister said Friday. “Israeli military withdrawal is the real problem.”

Arafat said this week, after meeting with Peres in Stockholm, that elections cannot be held under military occupation, but Palestinian sources said that he might agree to a phased Israeli pullback if it were deeper than proposed and the timetable for the subsequent withdrawals clearer.

Arafat’s advisers are divided, however. Some argue that he should seize the opportunity to hold elections as soon as possible and expand the Palestinian Authority, thus strengthening his administration and stabilizing the political situation in the Gaza Strip and West Bank. Others believe none of this is worthwhile without ending the Israeli occupation.

Israeli officials said the next move is up to Arafat.