ISRAEL watched with relief as coalition forces destroyed the offensive military capability of its most powerful enemy. And it won new friends and financial aid with its willingness to forgo retaliation for Iraqi Scud attacks. Yet the dynamics of the crisis may now put Israel on the spot, as new urgency is given to resolving the Palestinian problem. The government is working to preempt any radical new US peace proposals by promoting its own May 1989 initiative. The plan calls for elections in Israeli-occupied territories, but stops far short of Palestinian demands for self-determination.
The 39 Scud missile attacks hardened the government's opposition to territorial compromise. And Prime Minister Yitzhak Shamir is hoping to find Western sympathy for his adamant opposition to talks with a discredited PLO.
Israeli Cabinet ministers are again talking about ``alternative representatives,'' although most Palestinians still insist that the PLO remains the only legitimate voice.