Nicosia, Cyprus — As Palestinian autonomy talks resume this week in Cairo, Israel is standing firm on the property it has occupied since 1967. Despite American urging to do so, Israel officials are not prepared to make major concessions that would alter the view of Prime Minister Menachem Begin's government -- that the territory ultimately will be annexed.
This makes it difficult to find Arab or Western political leaders, analysts, or diplomats -- outside a small circle in Israel and Egypt's President Anwar Sadat -- who place much hope in the reconvening today of the Camp David negotiations. Cynicism seems to be the prevailing attitude in the Middle East.
Officials with the Palestine Liberation Organization (PLO) refuse to pay attention to the talks: the PLO, recognized by all Arab and most third-world governments as the "sole legitimate representative of the Palestinian people," is excluded.
A Western diplomat privately calls the autonomy talks "a charade," pointing out that they are being substantially overshadowed by the US-Saudi AWACS issue and the onset of cold-war polarization in the Middle East.
Israeli chief negotiator Yosef Burg set the tone for his side in the discussions several days ago when he said Israel will present no new proposals, since "if our previous proposals were good ones, there is no need to come with new ones." Egyptian officials say their side will have no new positions either.
The Israeli and Egyptian views when the talks were broken off 16 months ago were diametrically opposed.
Egypt sees autonomy as entailing a speedy handover of Israeli-occupied territories to the 1.2 million Palestinian inhabitants.
Israel defines autonomy more narrowly as regional self-government for Palestinians under continuing Israeli military, political, and economic control.
Last month, Mr. Sadat and Mr. Begin agreed to reopen the discussions anyway and promised that by the end of the year an agreement could be reached. The US State Department, which has urged both parties to begin talking again, is shooting for an April 1982 deadline for an agreement.
Messrs. Sadat and Begin will be in substantially different positions from what they were only one month ago when the two leaders held a summit in Alexandria, Egypt. Two important changes have given Israel a clear upper hand:
* Egypt has undergone a major political shakeup, signaling to Washington the precariousness of Mr. Sadat's government and compounding the isolation of Egypt in the Arab world.
* Israel has come up with a new "strategic cooperation" agreement with the United States that underscores its most-favored position in the Middle East -- an occurrence the disheartened Western diplomat believes is "all carrot and no stick" as far as US-Israel relations are concerned.
These two developments seem to have acted as disincentives to Israeli flexibility. Moreover, observers note that the Reagan administration is sending only modest US representation to the autonomy talks instead of the kind of special Mideast negotiator that the Carter administration employed. Several Western observers say this shows the Reagan Mideast policy still not formulated.