DURING my last trip to Israel, I was interviewing Dan Meridor, a former Likud minister of justice and one of the more thoughtful ''Young Princes'' - as the new generation of Likud leaders is known - when the telephone rang. Binyamin Netanyahu, the Likud leader, was on the line. For the next 10 minutes the two debated the political impact of the Likud's association with the growing tide of settler opposition to the Rabin government's diplomacy with Yasser Arafat.
Mr. Meridor argued forcefully against Likud's identification with the settlers, bemoaning the fact that Likud banners were prominent in televised pictures of traffic jams caused by demonstrators blocking Israel's major highways. His message to Mr. Netanyahu was that outrageous settler behavior was a political liability to the Likud, not an asset.
I could not hear Netanyahu's responses, but it was clear that he was not won over to Meridor's point of view. The settler campaign beginning in mid-summer had captured both the headlines as well as the vanguard of those opposed to the policies of Rabin's government. Netanyahu was content to ride this dangerous wave, whose main instigators were drawn from settlers further to the right than the settlement movement's ''mainstream,'' as represented by the settler council YESHA. Opponents of YESHA's comparatively accommodating line - men like Elihakim Ha'etzni, who argued for a civil revolt against the government, and the Zu Aretzenu (This is Our Land) movement, one of whose members filed a charge of treason against Prime Minister Rabin - were now leading the settler opposition to the government's reconciliation with the Palestinians.
Their strategy complemented that of the more traditional settler leadership, which was deeply enmeshed in coordinating increased security measures with the Israeli Army in anticipation of the latter's redeployment. Unlike these deliberations, the actions of Zu Aretzenu - stopping traffic along Israel's highways or charging up West Bank hilltops to establish ersatz settlements - garnered headlines and mobilized large numbers of Rabin's rightist opponents. Prominent among these are both settlers for whom the Oslo process marks the beginning of the end of Jewish control over the West Bank and religious Jews who believe that the Oslo agreements are yet another sign of Israel's debasement as a Jewish state.
Beginning this summer, what was once the rightest fringe within the settler movement emerged as its most vibrant force. It enlisted what had until then been more moderate elements, like the articulate, English-speaking community in the settlement of Efrat near Bethlehem. There, a campaign of so-called ''civil disobedience'' was launched, claimed by its originators to be in the tradition of Thoreau and Martin Luther King, but with the aim of sabotaging any territorial concessions to the Palestinians.
This ''battle for the hilltops'' was followed by a vitriolic assault on the government. Rabin and Foreign Minister Shimon Peres were vilified in public demonstrations, Rabin was portrayed as a Nazi, and government ministers were physically harassed. Rabin's car was vandalized by rightists who boasted that if they could get to his car, they could also get to the prime minister.
The Likud, led by Netanyahu, was content to lend its aura of respectability to many of these incidents, some of which occurred, without condemnation, during rallies addressed by party officials. Netanyahu, unlike Meridor for example, saw political advantage in the increasingly poisonous atmosphere that attended public discussion about Rabin's policies toward the Palestinians.
Within the government there were two views on the meaning of the growing virulence of the campaign to delegitimize government policy. Most viewed it as a dangerous, yet containable, challenge to Israel's democratic tradition, whose history has been punctuated by extreme rhetorical condemnation of political opponents, most recently during the war in Lebanon over a decade ago. Demonstrators and right-wing leaders were handled leniently by Israel's legal and security systems.
This forbearance of settler challenges is deeply rooted in the Rabin government's, and indeed in Israel's political tradition. Throughout its tenure, the Rabin government has refrained from a direct frontal challenge to the settlers, even the most extreme among them.
This forbearance made it difficult to convince leaders such as Rabin to take the full measure of the transformation that was occurring among his more extreme opponents.
Reports began circulating in early September about increased security measures implemented to protect Rabin from extremists, but these changes were soft-pedaled by government officials. Reports of the possibility of attacks on ministers were also circulating. One minister, Benjamin Ben Eliezer, was lucky to escape unhurt from a mob. Rabin, however, like most Israelis, continued to view the extremists as essentially a political, not a security or a legal, problem.
Rabin's assassination by an Israeli with ties to extremist settlers has destroyed this political equation, not only among Labor ministers, but in the Likud and the country at large. The killer was among those facing off against a confused and hesitant army in last summer's ''battle of the hilltops.'' He had stalked Rabin on at least two other occasions.
The assassination will undoubtedly end the debate about the seriousness of the violent challenge posed by extremist settlers and religious fanatics. Heads will roll in Israel's security establishment.
But the power of the most adamant opponents of any reduction of Israeli control on the West Bank is first and foremost political. Rabin attempted to build an Israeli policy for the West Bank's future on what he rightly considered to be a broad national consensus - a policy that left the Israeli Army in strategic control of the occupied territories, and the settlers, despite their apocalyptic visions, with an unprecedented measure of protections aimed at securing their future. He paid with his life for his efforts.
Perhaps it is time for Rabin's successors to reevaluate these goals and to confront the power of the settlers and those fanatics who sanction divine retribution against their mortal enemies.