Israel questions how it will live with 1.3 million Arabs

The group of young dovish Israeli academics were discussing the future of the Israeli-occupied West Bank and Gaza Strip at an evening gathering. As usually happens in Israel, the talk quickly turned to politics.

But the tone took on a special note of urgency. ''We have to change our strategy now,'' urged a political scientist, an activist in the Peace Now movement. ''It's no use fighting anymore to get rid of occupied territory. The West Bank is already annexed to Israel. That means we could wind up permanently ruling a million Palestinians deprived of civil rights. We have to start fighting for Arab civil rights.''

''Be careful of self-fulfilling prophecies,'' warned another guest sharply. ''If we say the West Bank is annexed, we could be helping to make it come true.''

His voice rose in a note of desperation. ''We can't accept annexation as permanent. If we start fighting for citizenship for 1 million Arabs, soon we no longer will have a Jewish state.''

Discussions like this take place with increasing frequency in Israel. The nature of the internal debate over the fate of the occupied territories, home to 1.3 million Palestinians, is changing.

''We entered a new era,'' notes the Jerusalem Post's West Bank correspondent, David Richardson, ''where teen-agers of 16 on both sides have known nothing but the occupation.''

Until recently hawks and doves argued over whether, in return for peace, some , all, or none of the land occupied during the 1967 Arab-Israeli war should be returned to Arab rule.

Today, as the government of Prime Minister Menachem Begin continues its policy of large-scale building of Jewish settlements in the occupied lands, with no effective challenge at home or abroad, the debate focuses on whether de facto Israeli annexation is still reversible.

This provokes other thorny questions:

If Israel expands to encompass 1.3 million Palestinians, will the Palestinian population with its higher birthrate ultimately outstrip the Jewish population, now at 3.3 million?

Can the program to settle Jews in the West Bank - now at 30,000 settlers - live up to government expectations that it will pass 1 million and equal the Palestinians?

Is Arab-Jewish coexistence possible under such circumstances, or will there emerge two separate and unequal systems of justice and government administration?

What are the consequences for Israeli democracy of permanent rule over a hostile 30 to 40 percent of its population?

There is general agreement here that an array of factors favor long-term Israeli occupation of the territories:

* Israeli government policy. The platform of the ruling Likud coalition bars return of occupied lands, and advocates a narrow version of administrative autonomy as the permanent status for Palestinians there.

Government settlement policy - while far from reaching its broadest aims - has linked the territories to Israel by roads, infrastructure, and political lobbying. An increasing number of Israeli citizens have ideological commitments or vested economic interests in keeping them.

* Israeli politics. The Labor Party opposition, which still advocates Israel's splitting the West Bank with Jordan, trails at the polls and is rent by internal leadership battles. Its best hope is the possibility that Mr. Begin's coalition might crumble if he stepped down for personal reasons.

* Arab disarray. ''The Arab world is at its lowest ebb in 30 years,'' says Meron Benvenisti, an Israeli expert on the West Bank, referring to inter-Arab conflicts, such as the Iran-Iraq war and the economic fallout from lower oil prices.

The infighting within the moderate wing of the Palestine Liberation Organization, following the PLO's forced departure from Beirut by Israel last year, has undermined hopes in some small dovish circles here that PLO Chairman Yasser Arafat might ultimately endorse Arab-Israeli peace talks. And the decision of Jordan's King Hussein not to join negotiations, within the framework of President Reagan's peace proposal, has left no prospect for an Arab initiative which might challenge Israeli policy.

* United States policy. Both Israeli doves and hawks believe the US administration, entering an election year and struggling to solve the crisis in Lebanon, has downgraded and overshadowed the West Bank problem and is no longer actively seeking its solution.

For the doves, this is the harshest blow. ''The Americans have a new attitude toward the West Bank,'' says Mr. Benvenisti. ''The Palestinian problem is no longer seen as the main destabilizing factor in the Mideast, and Israel is viewed as an important strategic asset.''

For the first time in nearly a decade, there is no US-backed Mideast negotiating proposal hanging fire. The Sept. 1, 1982 Reagan plan, which called for Palestinian self-rule in association with Jordan, became moribund when Jordan opted out of talks in April. Though technically not dead, the talks on autonomy for the West Bank and Gaza, authorized by the 1979 Camp David accords, are effectively scrapped.

Moreover, US policy on Jewish settlements has become increasingly blurred. While continuing to call for a ''settlement freeze,'' State Department spokesman John Hughes on Aug. 3 referred to the possible dismantling of existing settlements as ''an impractical'' demand. One Peace Now activist complained, ''The Americans have totally undermined us.''

But Israeli Foreign Minister Yitzhak Shamir commented with satisfaction that the US had recognized ''the reality'' of Jewish settlement in what many Israelis now call Judea and Samaria, the biblical names for the West Bank.

Within opposition circles, however, the debate is still heated over whether to accept the government portrayal of the occupation as irreversible.

Labor Party leaders also challenge the theory of ''irreversibility.'' Says former Labor Party Foreign Minister Abba Eban, ''I don't accept it. The Jewish people don't have the demographic resources to swamp everybody.

''If I heard that the American government intended to incorporate forcibly into the US some 80 million Russians who have not the slightest twinge of loyalty . . . I would conclude that America had decided on a policy of suicide.''

Yet, says Mr. Eban, the governing Likud Party is proposing that Israel establish permanent coercive jurisdiction over a foreign people forming 35 percent of its own population. He is hopeful that a majority coalition favoring ''partition'' of the West Bank with Jordan can still be achieved during the next election.

However, some doves disagree. ''Annexation is beyond the point of no return, '' says Mr. Benvenisti, a former deputy mayor of Jerusalem who now heads the West Bank Data Research Project, a private think tank that examines the economic and administrative structure of the West Bank.

''If you measure the forces against annexation and those for it,'' he says forcefully, ''you can say inevitably that the forces for it are greater.''

Mr. Benvenisti is challenged by other Israeli doves like lawyer Tsaly Reshef, a leader of Peace Now, which supports a return of occupied Arab territory in exchange for peace. ''In world history, processes which looked much more irreversible were changed. Even if we had 100,000 to 200,000 Jews living on the West Bank - and we only have 20,000 to 30,000 - it still would be reversible. It depends on whether the great powers decide they want a different solution. They can change the process.''

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