Is Camp David the end of the line for Egypt, Israel?

By , Staff correspondent of The Christian Science Monitor

Seen from the cool heights of Jerusalem and the dusty Nile Valley, Camp David seems to be shimmering slightly over the Sinai, ready to fade out.

''Peace? Yes it is very good,'' grins a shopkeeper in a Cairo bazaar. ''We make good business with Israeli tourists. These are some now.'' He calls ''shalom'' across the store, and a ''shalom'' is returned. The shopkeeper drops his voice. ''But we do not like what they did with the Golan Heights.''

Broadened somewhat, the shopkeeper's feelings are echoed by Egyptian leaders. Camp David is fine, they say, but beyond the basic transaction - peace with Israel for the Sinai Peninsula - there is little over which minds can meet, especially on the subject of Palestinian autonomy. The Camp David accords call for talks between Egypt and Israel on autonomy for 1.2 million Palestinians living under Israeli occupation in the West Bank of the Jordan River and the Gaza.

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In Israel, one constantly hears evidence of distrust of Egypt. An Israeli whose house soon will become Egyptian territory frets that ''Egypt will go back to the Arab brotherhood after April.'' And a government official in Jerusalem says, ''I support Camp David, but I am under no illusions about Egypt.''

Because it will take more good will and compromise than now exists to come to an agreement on Palestinian autonomy for inhabitants of east Jerusalem, the West Bank, and Gaza, diplomats in both Israel and Egypt are pessimistic about a continuation of Camp David as a ''peace process.''

The Israeli withdrawal from Sinai, however, appears to be proceeding smoothly. In Cairo Jan. 19, Egyptian Foreign Minister Kamel Hassan Ali and Israeli Defense Minister Ariel Sharon were preparing to sign an agreement that resolves the major border-delineation and property-transfer matters involved in the territorial exchange April 25. This includes a provision for an Egyptian police force on the islands of Tiran and Sanafir at the mouth of the Gulf of Aqaba.

But on the subject of Palestinian autonomy - which US Secretary of State Alexander M. Haig Jr. is attempting to coax along through his personal diplomacy - analysts see little room for compromise. These are the major points in dispute:

* East Jerusalem. Egypt wants the 100,000 Palestinians of east Jerusalem to participate in the autonomous body that would govern the occupied territories. Israel says there is no east Jerusalem, that the entire city is Israeli territory.

* Self-governing power. Egypt favors a large autonomous council that, at least for the five-year transition period provided under Camp David, would function much as an American state legislature. Israel wants a small Palestinian body with power akin to that of an American city council.

* Settlements. Israel says all of the 88 Jewish settlements established on the West Bank since 1967 are to remain, and eventually be annexed, as Israeli territory. Egypt holds that all are illegal and must be taken out.

Mr. Haig says there is no deadline for resolving these issues, but Western diplomats admit that after April 26, Egypt will have little incentive to negotiate. Having given away Sinai, Israel also will be reluctant to exchange more territory.

Mr. Haig's short-term approach, say diplomats, is to return to the Mideast at month's end with a draft of a ''declaration of principles'' of which Israel, Egypt, and the US agree. Reactions and amendments will be solicited, a new draft written, and more shuttling conducted. If all can agree, a tripartite meeting of foreign ministers is likely.

Beyond such a declaration, lack of common ground is causing many Western diplomats to wonder where Egypt-Israel relations can go after April.

''It is an appalling thought to let the status quo prevail in the Middle East ,'' says a diplomat in Cairo. ''A stallout could pave the way for a chill in relations between Cairo and Tel Aviv.

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