Jerusalem — Last summer - at the height of Israel's invasion of Lebanon - Prime Minister Menachem Begin told cheering supporters that Israel would have a peace treaty with its northern neighbor within the year.
As the new year approaches, however, hopes for a treaty and for early Israeli troop withdrawal from Lebanon have faded. They have given way to the prospect of continued Israeli military involvement there and the beginnings of domestic debate over its likely duration and its price.
Israel is at odds with the Lebanese government over the venue and the nature of direct Israeli-Lebanese negotiations on Israeli troop withdrawal from Lebanon. The aim of the talks would be a pullback of all foreign forces - including the Syrians and Palestine Liberation Organization fighters - which is being pursued by special United States envoy Philip Habib.
On the surface the debate is procedural. The Israeli Cabinet has demanded that the talks be held in Beirut and Jerusalem and that they deal with political as well as security questions. Israel dropped its demand that ministers head the negotiating teams.
Lebanon has insisted on military rather than political talks (with underlying hints of flexibility). It has also rejected Jerusalem in favor of suburban locales because the choice of the disputed Israeli capital would alienate them from the Arab community.
But the debate is more than procedural. Israel's insistence on Jerusalem reflects still flourishing hopes for winning political gains from the Lebanon war. For Prime Minister Begin, acceptance of the Jerusalem venue, in the words of the independent daily Haaretz, represents ''a sort of signal that the Lebanese government is ready for a peace treaty.''
Israeli Chief of Staff Rafael Eitan, speaking at a Cabinet meeting, maintained that all of Israel's previous wars ended with military victories and not political gains. The Lebanon episode, he went on, must not be ended without political gains.
For the moment, Israel appears willing to hold firm on its demands even if it means a long stay in Lebanon. The Israeli Army has completed winterization programs for its troops in Lebanon (though informed sources say there is some worry that cold winter conditions may affect morale).
Sources here don't rule out the possibility that progress on starting Lebanese-Israeli negotiations will be made before Prime Minister Begin visits Washington in January.
But the prospect of a prolonged Israeli stay in Lebanon has begun to fuel political debate here over Israeli aims, a debate that could intensify the longer its troops remain. While the conservative newspaper Yedioth Aharanoth cautioned against overdoing ''flexibility'' toward Lebanon, the left-wing Mapam Party paper Al Hamishmar warned, ''Past experience has shown that it is impossible to force any Arab state to make peace with us as long as it is unwilling to do so.''
''Lebanon makes its living from banking and commerical services to the Arab world,'' wrote Amos Alon in Haaretz. ''She is not Egypt who can ignore the Arab world,'' he added, noting that these were arguments that compelled former Defense Minister Ezer Weizman and the late Foreign Minister Moshe Dayan to oppose Israeli Army intervention in the Lebanese civil war.
Former Labor Prime Minister Yitzhak Rabin, respected as a military analyst across the political spectrum, has warned against using the continued presence of the Israeli Army in Lebanon as a way to achieve political gains. He advocates a push for separation of Israeli and Syrian forces and adequate security arrangements in south Lebanon to protect Israel's northern settlements.
The Israeli public still appears willing to give the government more time to achieve security arrangements. A Jerusalem Post poll in early November showed nearly 79 percent of Israelis in favor of an Israeli military withdrawal from Lebanon, but with security arrangements. No question on political gains was asked. Thirteen percent favored an unconditional withdrawal.
But the poll was taken before a gas leak in the south Lebanon city of Tyre caused 75 Israeli fatalities. Although the military ruled out sabotage as the cause, security throughout south Lebanon has been tightened.
Since early October about two dozen incidents of attacks on Israeli troops by Lebanese or Palestinians have been reported, several in or near urban areas where Israeli soldiers moved freely during the summer. Foreign journalists, who once could visit south Lebanon from Israel with only one Israeli military reservist as an escort, are now required to travel in armed convoys.