BY turning over responsibility for the West Bank to the Palestine Liberation Organization (PLO), King Hussein has given US Secretary of State George Shultz's Middle East peace initiative its latest and toughest challenge. But this shouldn't cause him to quit. The King's announcement could have an important positive effect to the extent that it generates greater realism in pursuit of peace, including by the United States. The Shultz initiative, launched in February in response to the Palestinian uprising, has not been accepted by any of the parties. Yet Israeli and Arab leaders alike have encouraged Mr. Shultz to keep on trying, reflecting their shared awareness of the dangers if there is no progress toward negotiated peace.
There are two major sticking points: the issue of Palestinian participation in negotiating a settlement, and disagreement over an international peace conference.
Shultz could take steps in the next few months which would help break the stalemate over these issues. Even if there is little hope that negotiations would get started this year, additional steps would keep the US initiative alive and provide a basis on which the next US president could build. There are signs that Shultz will pursue his initiative and that his evolving view of the conflict may make a breakthrough possible.
In Cairo on June 3 Shultz said the fundamental issue is ``the competition between two national movements for sovereignty on one land.'' Then, using words that might have been spoken by the most ardent Israeli or Arab advocate of peace, he declared that ``the fate of Zionism and Palestinian nationalism is interdependent.''
The moral logic of the secretary's statements implies what many prominent Israeli and American Jews have been saying: Peace requires mutual recognition of the rights of self-determination and security between Israelis and Palestinians, and agreement by these two peoples to live side by side in peace.
The US can be a catalyst for peace by accepting the Palestinians' right of self-determination, conditional on their accepting Israel's right to secure borders and peace with its neighbors. Specifically, the US could make the following offer:
If the PLO will publicly and unambiguously accept United Nations Security Council Resolutions 242 and 338, and agree to a cessation of violence and to negotiations with Israel, the US will accept the Palestinians' right of self-determination and talk with the PLO about how to get negotiations going.
A recent article by Yasser Arafat's spokesman, Bassam Abu Sharif, as well as several statements by leaders in the West Bank and Gaza, suggest that Palestinians would respond positively to such an offer. In any case, the US should now test Palestinian intentions with a reasonable and specific offer.
Shultz could also negotiate and announce a joint US-Soviet statement in support of a peace conference. The recent Geneva meeting between Assistant Secretary of State Richard Murphy and his Soviet counterpart may represent progress toward this possibility.
The Moscow summit supported superpower cooperation in resolving regional conflicts, including in the Middle East. The Reagan administration, to its credit, accepted the idea of an international conference more than two years ago. The USSR apparently now accepts that such a conference would have limited powers.
The conference being considered would not have power to impose agreements on the participating parties or to veto any agreements they reached. The conference would, however, create a climate and framework for negotiations, help mediate difficult issues, and provide essential support and guarantees for peace.
A joint statement by the US and the Soviet Union, possibly at the UN General Assembly this fall, would significantly increase momentum for an international conference. The absence of US-Soviet agreement so far has allowed parties in the conflict to treat talk of such a conference as not really serious. There is no region where US-Soviet cooperation is more urgently needed or where the benefits of cooperation for prospects of world peace would be greater than the Middle East.
To the extent that Shultz and President Reagan are willing to take steps along these lines, they could lay the basis for a historic breakthrough for peace in the Middle East. While clearly some advisers will counsel against doing anything controversial before the elections, Shultz could demonstrate as much courage and creativity in the months ahead as he has shown determination in the months since his initiative was launched.
If the Reagan administration does decide to move to break the Middle East stalemate, it will need and deserve the broadest possible public support. Our challenge is to help mobilize such support.
Ronald J. Young, executive director of the US Interreligious Committee for Peace in the Middle East, is author of ``Missed Opportunities for Peace: US Middle East Policy, 1981-86.''