A HEAD-ON collision between the United States and Israel is inevitable unless the two governments take a hard look at the source of the problem and adopt the necessary measures to restore the cooperative and trusting relationship vital to their national interests.The core issue that has soured US-Israel relations may be attributed to the Bush and Shamir governments' diametrically opposite views on what might provide the basis for peace in the Middle East. The US considers the surrender of territories taken during the 1967 conflict and the freeze on all Israeli settlement activity there prerequisites to peace. Israel insists that peace with Arab states requires more than surrendering land. Israelis do not subscribe to the notion that Palestinian and Syrian recognition of Israel's existence is an irrevocable fact. Syria's Hafez al-Assad, having lost his Soviet benefactor, is happy to dance to the American tune as long as he succeeds in exchanging the tangible - land - with the revocable - a promise of nonbelligerency. Syria does not want to take part in the phase of negotiations dealing with regional issues, when such an exchange wouldn't be possible. What underlies the tension is Israel's perception that George Bush is unsympathetic to its unique regional problems and that he is less committed to Israel ideologically and morally than were his predecessors. The lack of a personal relationship between President Bush and Prime Minister Yitzhak Shamir adds subtly to the strain between the countries. Contrary to the belief held by some administration officials, the end of the cold war and the disintegration of the Soviet Union have not diminished Israel's strategic importance but only changed its strategic role as the only democracy in an inherently unstable region. Arab politics are not just unstable but unpredictable. Iraq's invasion of Kuwait and its continuing aggressive policies and defiance of international agreements are not aberrations in a part of the world where the political process is cloaked in obscurity. Israel's growing economic dependence on the US in a time when the US's own economic problems are mounting further strains the relationship. Israel's growing economic and military needs inherently contradict its desire to exercise total freedom of action in areas that affect US interests in the region. The presumption that the US, as Israel's main benefactor, could subordinate that country's will on issues critical to its security evokes widespread resentment among Israelis. Regardless of the extent of US financial aid to Israel, there is a limit to how far any Israeli government would go in accommodating Washington. Linking Israel's request for loan guarantees to a freeze in settlement activity further hardens the Israeli position. Israelis do not respond well to pressure regardless of its source, but losing confidence in the only ally they have would only evoke more fanaticism, making it hard for any government to yield an inch. Shamir's hands are tied not only because his government will collapse at the first sign of flexibility on territorial concessions, but also because of growing skepticism in Israel regarding the Bush administration's ultimate commitment. The future success or failure of this week's peace conference depends less on Israeli concessions than on the quality of the new US-Israel relationship and how that relationship is understood in the Arab world. The pattern of US criticism of Israel could give rise to Arab expectations that the US will eventually abandon its close ties with Israel. Neither the Bush administration nor the Shamir government should take the other for granted. For Israel to exercise greater political freedom it must become considerably less dependent on US financial aid. Perhaps Israel should start by withdrawing its request for the $10 billion in loan guarantees and look to Jews, especially in the US, to provide for Soviet immigrants to Israel. By scaling down its economic dependence, Israel will also restore the sense of partnership between the two countries, which has been recently lacking. More important, it will inhibit the spread of antisemitism fed by the notion that Israel is a constant drain on the US treasury. US-Israel friendship was built over the years on the basis of moral principle, shared democratic values, and strategic interests. Considering the geo-political dynamic of the Middle East, US strategic and economic interests can still be best served by working closely with Israel, an ally with whom the US can maintain close relations, based on the same principles that have sustained the friendship for more than four decades.