TERROR AT A CROSSROADS

By LISA BEYER/JERUSALEM

ISRAELIS SHOULD HAVE BEEN BRACED for the blow. The Palestinian Islamist group Hamas had vowed to take revenge for Israel's assassination two months ago of Yehia Ayyash--or "the Engineer," as he was known--the organization's master bombmaker. Yet when the fury burst forth, its savagery was stunning. First, in two explosions spaced 45 min. apart, Hamas suicide-bombers claimed 26 victims, first on a bus in Jerusalem, then at a hitchhiking post outside coastal Ashkelon. Then, exactly seven days later, the militants struck again, eviscerating another bus in central Jerusalem, this time killing at least 20.

It was by far the worst spasm of violence since the Israeli-Palestinian peace accord of September 1993. Citizens of Jerusalem were only just recovering from the city's first explosion when news broke of the second on the very same bus line--No. 18. Many wondered how the peace process could go on. Israeli President Ezer Weizman said, "It can't continue this way. We have to really stop and think."

At the same time, though, Hamas itself appeared to be confused. The successive Bloody Sundays appeared to be the work of a disciplined, skilled terrorist organization committed to achieving definite ends by any means. That is the conventional image of Hamas, and these attacks, the first since last August, suggested it was conducting business as usual. In fact, the bombings revealed an organization that is divided, searching for a means of remaining relevant as the Israeli-Palestinian peace process moves forward. While one faction within Hamas took responsibility for the first two bombs, another denied it. Even those who claimed responsibility offered Israel a kind of truce. But within days it was broken. The bombings, deadly as they were, carried a paradoxical message: While Hamas can still kill, its unity has been shaken.

Hamas' goal has been the destruction of Israel and the creation of an Islamic state in the whole of Palestine as it was defined under the British mandate. Israel's peace partner, Yasser Arafat, has instead settled for limited self-rule in the West Bank and Gaza Strip as a prelude, he hopes, to a secular Palestinian state alongside Israel. The fear among Hamas followers is that if Arafat succeeds, their vision will die, so their group and a smaller offshoot, Islamic Jihad, have engaged in a terror spree that has claimed at least 123 lives since the peace accord was signed. If Hamas causes enough damage, the theory goes, Israel will abrogate the accords and the edifice of peace will tumble.

But the sabotage campaign had, at least through last week, failed: Israel and the new Palestinian Authority continued to make progress toward implementing their agreements. Last fall Israeli troops, already departed from the autonomous part of the Gaza Strip, withdrew from most West Bank cities. Then, this past January, the Palestinians held elections, which Arafat won by a landslide--and Hamas boycotted. Polls showed unprecedentedly strong support for the peace process among the Palestinian public, and popular support for Hamas--once as high as 40%--dropped into the low teens.

Its cause in disfavor, Hamas during the past year has become embroiled in debate over whether to suspend military operations and focus on taking a share of the power now available under self-rule. Hamas has always been principally a political organization, delivering medical, educational, religious and welfare services to the public. The notion was to await a better day to destroy Israel and meanwhile participate in the game. Then Israel killed Ayyash by planting a bomb in his mobile telephone. That gave the hard-liners what they saw as justification to act. They were moved not only by vengeful anger but by the desire to prove that Ayyash's demise had not crippled them and by the need to bring Hamas back to the fore after the marginalizing effects of the elections. "We want those who are planning to ignore us to know that we are bigger than they think,"says "Odeh," a Hamas activist in the West Bank.

Still, the group's political and military wing together offered a cease-fire if Israel would release all Hamas prisoners, "stop terrorism" against the militants and halt all "aggression against Palestinian civilians." The organization has dangled truces before, but never in the name of the military wing. The cease-fire was supposed to be good until March 8 but plainly did not have the backing of all of Hamas' terror cells.

Why were some of the militants looking for a pause? "Ramzi," a figure in the military wing of Hamas, says even hard-liners like himself are weary of being excluded from negotiations. "Arafat should not be the only one who decides what is good and bad for the Palestinians," he says.

Israel has its own ideas of how to deal with Hamas. Immediately after the first bombings, Israel launched a dragnet in the areas still under its control, and military chief of staff Lieut. General Amnon Lipkin-Shahak demanded from Arafat the arrest of specific individuals, extradition of fugitives from Israeli justice and expansion of the P.A.'s intelligence network.

Anxious about looking like a tool of the Israelis and fearful of going on the offensive against an armed movement that still retains significant support, Arafat has usually made only token efforts to make Hamas pay for its crimes. P.A. officials, however, were outraged by the meeting with Lipkin-Shahak. According to one, it devolved into a shouting match: "They treated Arafat like a kid in school, telling him to do this and do that." Nevertheless, the P.A. rounded up some 250 Hamas members and renewed an old, largely unenforced demand that residents turn in unlicensed firearms or face prosecution.

Worse for Hamas, Israel has again decided to close its borders to Palestinian laborers, causing hardship for tens of thousands of families. In the aftermath of the first bombings, Labor Prime Minister Shimon Peres lost his 15-point advantage in the polls over the opposition Likud's chairman Benjamin Netanyahu. The fallout from the most recent blast will further erode Peres' position. With elections scheduled for May 29, the government must appear firm. The borders may remain closed for months.

Though left-leaning Israeli officials have broached the idea of a dialogue with Hamas in the past, the election campaign precludes such a controversial move now. Foreign Minister Ehud Barak rules it out altogether. "Their objectives so deeply contradict the very existence of Israel that [conciliatory] gestures can only be interpreted as an attempt at manipulation," he says. "They will pursue terrorism as long as they can, and they should be answered in a determined way." In reply, "Ramzi" says, "One day we will force Israel to change its approach." Both sides should brace for new blows.

--With reporting by Jamil Hamad/Nablus and Aharon Klein/Jerusalem

With reporting by JAMIL HAMAD/NABLUS AND AHARON KLEIN/JERUSALEM