Jerusalem — Weapons slung over their shoulders, eight Israeli soldiers calmly pick their way through a Sunday crowd in the Old City's bustling Muslim quarter. From this point within the walls of old Jerusalem eastward across the pines and ridges of the Judean desert, out of the Rift Valley in which the Jordan River meanders, one stands in occupied territory.
Most of the time the occupation is peaceful. Soldiers chat with Palestinian youngsters. Hebrew shoppers bargain at Arab stalls. But the authority of the green Israeli uniform reminds one of the unresolved problem: Israeli control over 1 million non-Israelis.
In parts of the occupied West Bank during the past two weeks, Palestinian students have taken to the streets to protest Israeli authority. Some have hurled rocks, Israeli soldiers have opened fire, 12 students have fallen.
Most observers of Israeli-Palestinian relations believe the soldiers have acted under duress, without orders from above. One hard-line Israeli, however, states that "Force is something they [the Palestinians] understand." He points out that no one was killed and that repression is much worse in Arab countries.
But at least one non-Israeli analyst criticizes military authorities for not going through the graduated phases of riot control before opening fire.
A long list of factors contribute to peace and violence in this area. The Israeli government has control over only a few of them. But the government, some observers say, may at least contribute to a climate in which either coolness or reaction prevail.
The "iron fist" policy -- flattening Palestinian activism with military muscle -- is a hallmark of Prime Minister Menachem Begin's government. But his coalition regime is now in trouble, mainly on economic grounds, and it could collapse.
Thus the crucial question is, how might a successor to Mr. Begin approach the Palestinian question?
The "iron fist" concept grew out of the murder in Hebron April 2 of six Israelis. In this sense, it was a product of the times. But the unflinching firmness with which the policy has been carried out characterize the Begin government's approach.On Dec. 1, for instance, Israeli authorities took the drastic step of arresting Bir Zeit University Vice-President Gabi Baramki. A government spokesman said Mr. Baramki was arrested for disobeying orders not to allow the university to celebrate "Palestine Week" Nov. 13. Mr. Baramki was released on bail.
The opposition Labor Party, under either Shimon Peres or Yitzhak Rabin, could not be expected to go soft on terrorism against Israelis, but a leading spokesman maintains that Labor would try to create an atmosphere in which tension would ease.
"The current government raised expectations [through the Camp David accords], " says the Labor Party's Simcha Dinitz. "Frustration then brought on violence and deterioration, which only played into the hands of extremists. A Labor government would be less generous about declarations, but would work to meet its goals quietly over the long run."
Labor's "territorial compromise" approach to the West Bank dilemma differs from the inflexibility of the Begin government approach. Hope is placed in King Hussein of Jordan, patron of the West Bank, and in the provisions of UN Resolution 242, which was signed by Israel and its Arab neighbors after the 1967 war. Among other things it calls for "withdrawal of Israel from territories occupied" in exchange for recognition of Israel by Arab countries.
Jordan accepts Resolution 242 only if it means all, not part, of the territories are returned. The Palestine Liberation Organization (PLO) has renounced the resolution.
Labor's "Jordanian option" would give the moderate Hashemite kingdom control over most of the territory and Palestinian over most of the territory and Plaestinian population centers of the West Bank. But Jerusalem, the Jordan Valley, Israeli settlements, and key military outposts probably would be retained, Mr. Dinitz says.
"Ideally we would like to see Jordan in the peace process under Camp David," says Mr. Dinitz. "But it is imperative that Jordan become a partner in some manner." Dinitz believes Ronald Reagan supports a territorial approach with emphasis on Jordan.
Still, though there are signs King Hussein is gaining strength among Arabs, it will take delicate maneuvering on his part to enter into negotiations with Israel. Running counter to Labor's strategy, the King last week joined Arab states in rejecting UN Resolution 242. But Mr. Dinitz says he believes King Hussein did this as "lip service" to Arab militants.
A Western diplomatic source, meanwhile, sees too many negatives at present for Labor to expect King Hussein to come forward and negotiate with Israel.
"With the split of the PLO away from Jordan and the end of the rapprochement, the Jordanian option -- which really would be a PLO option under Jordanian sponsorship -- is gone," this source says. "The Persion Gulf war prevents the King from achieving unanimous Arab backing. The Lebanese situation, the Golan Heights annexation bill [in the Israeli parliament] -- these all weigh against the Jordanian option."
But Mr. Dinitz stresses that Labor sees the Middle East as the scene of "great opportunities" in the year ahead.
"Two of the most important factors," he says, "will be Jordan's ability to take independent action and moderate Palestinians in the West Bank not using terror as a weapon."