The Israeli Cabinet's categorical rejection of President Reagan's new position on Middle East peace negotiations may mark the beginning of a period of open conflict with the United States over the means of bringing peace and stability to the Middle East.
Prime Minister Menachem Begin told US Ambassador Samuel Lewis that the day he received the American proposal was ''his saddest as prime minister.'' He told the Israeli Cabinet that anyone who accepted the Reagan plan would be ''a traitor.''
The official Cabinet communique, issued after the unanimous rejection of the US proposal, said that Reagan's proposals ''seriously deviate from the Camp David agreement . . . and could create a serious danger to Israel.'' It pledged that ''on the basis of these positions (the government of Israel) will not enter into any negotiations with any parties.''
The ''bitterness and astonishment'' aroused among Cabinet ministers by the Reagan proposals stem from several basic sources, all of which reflect the growing legacy of mistrust and suspicion that has been building between Israel and the US for over a year.
Israeli officials are angry at the way in which the US presented its plan. While Israel was aware that the Americans were considering new ideas that apparently were discussed in general terms during Defense Minister Ariel Sharon's recent visit to Washington, the timing and specifics of the proposals came as a surprise. Israeli officials are complaining that no prior consultations were held with them while the US had already revealed the details of the plan to Saudi Arabia, Egypt, and Jordan. Mr. Begin was also enraged that the plan was announced as Israel was savoring its triumph over the PLO.
But Israel's worst fear is that the US is finally challenging the basic assumption of the Begin government that the return of the Sinai to Egypt was a trade-off for the ultimate retention by Israel of the occupied West Bank and Gaza Strip, home to 1.3 million Palestinians. Prime Minister Begin had made clear Israel's intent to demand sovereignty over these areas after a five-year transition period of Palestinian self-rule. He had also stressed that this land would never return to Arab control - whether under Jordan, which had ruled it before 1967, or the PLO. Both Defense Minister Sharon and Foreign Minister Yitzhak Shamir have repeatedly insisted in recent weeks that the remainder of the Jordanian kingdom east of the Jordan River, with a population majority of Palestinian ethnic origin, is already the Palestinian state.
Until recently the US had not publicly confronted these positions. But with the PLO decimated, the Americans are playing a more active role in the peace process knowing they must attract previously absent Jordanian and Palestinian interest for the negotiations to succeed.
The American emphasis on future linkage between the Palestinians of the West Bank and Gaza and the state of Jordan, and Mr. Reagan's finely worded paragraph on ultimate Israeli relinquishment of occupied territory provide both an incentive to the Arabs and a basic threat to the Begin government's conception of the future of the occupied areas. Prime Minister Begin said the Reagan plan was worse than the 1970 ''Rogers plan,'' named for Secretary of State William Rogers, which called for a return to Israel's 1967 borders.
Mr. Reagan's assurances that the US will not support the establishment of an independent Palestinian state in the West Bank and Gaza, and his stress on adequate security arrangements for Isreal, have not soothed the Begin government. Housing Minister David Levy, echoing the communique, insisted the proposals would lead to a Palestinian state even if one was not intended.
The American call for a freeze on Jewish settlements in the West Bank and Gaza touches the same raw nerve. Mr. Reagan's speech said this act, more than any other, could create Arab confidence in the Camp David framework. But to the Begin government - which built 79 out of 103 Jewish settlements on the West Bank during his five years in office and just inaugurated a major new Jewish town there this week - settlement represents the integration of pre-1967 Israel with the West Bank, which it considers Israel's land by bent of history, religion, and security.
''Such settlement is a Jewish inalienable right and an integral part of our national security,'' the communique said. ''Therefore there shall be no settlements freeze.''
Whether the Isreali reaction will be stronger than words is not yet clear. Prime Minister Begin will answer President Regan's two letters today and has also conveyed his feelings to visiting Secretary of Defense Caspar Weinberger.
The Prime Minister will be under pressure from his newest coalition partner, the right-wing Tehiya Party, as well as from other hawkish ministers who would like to force the confrontation with the US. They will demand establishment of new settlements or even extension of Israeli law to the occupied territory. On the other hand, some Cabinet ministers are likely to advise a more wait-and-see response to the Americans, especially since some government officials still doubt that President Reagan will follow up his tough talk with action.
Some members of the opposition Labor Party have already pointed out that the Reagan plan resembles ''the Jordanian option'' of territorial compromise with their eastern neighbor, which they have long advocated. But the internally divided Labor Party and its Chairman Shimon Peres did not immediately put forward a unified response to the American plan.