PERES' TERRIBLE CHOICES

By LISA BEYER/JERUSALEM

THE MOOD IN THE CABINET ROOM was so tense that the air seemed almost inflammable. A few hours earlier, another Palestinian suicide bomber had blown himself up, this time in downtown Tel Aviv amid a crowd of schoolchildren, killing 13 people. After the fourth such atrocity in little more than a week, even the most liberal leaders within the Israeli government sought vengeance. With a mob outside screaming for blood, ministers advocated sending Israeli troops to reoccupy the Gaza Strip. Others prescribed mass deportations of Palestinians. One even urged razing the villages from which the bombers came.

Israeli Prime Minister Shimon Peres took it all in. The bombers, Islamist radicals determined to wreck the Israeli-Palestinian peace process, had just claimed their 56th victim in nine days. They had turned Israeli public opinion so strongly against Peres' dovish policies that he was in serious danger of losing power in May 29 elections. For the first time, terrorists had put the nascent peace, the project on which Peres' place in history depends, in serious jeopardy.

Still the Prime Minister would have none of this talk of wild retribution. "He was like a rock," says Uri Dromi, director of the government press office. "He never lost his calm, never raised his voice. He listened to everyone, and then he said, 'Please, let's not waste time. If we return to Gaza, then what? If we reoccupy Nablus, then what? Please, give me viable suggestions.'"

It was with this sangfroid that Peres shaped the government's response to one of the worst spasms of terror in the history of Israel or any other country. And more carnage may be ahead: Mohamed Abu Wardeh, the man who recruited three of the recent suicide bombers, has been imprisoned by the Palestinians. Security officials tell TIME he has admitted that five more bombers have been given their devices and are waiting to strike. Nevertheless, Peres has ordered no cataclysmic counterblow, no unleashing of Israel's superior might but rather a dogged effort to undo the terrorists through the conventional means of enhanced intelligence, mass arrests and collective punishment. Peres vowed the peace process would continue, but for the first time he linked its pace to the success of antiterrorist efforts by his Palestinian partner, Yasser Arafat.

The calibration of Peres' reaction reflects his dilemma that whichever way he moves, he has everything to lose. If his answer to the bombings is too soft, his constituents will throw him out of power as punishment and elect an opposition that threatens to freeze if not reverse the peace process. If Peres hits back too hard, he risks unraveling the peace by making an enemy of Arafat and hopelessly antagonizing the Palestinians. Between those alternatives there isn't much room. Said former U.S. Ambassador to Israel Sam Lewis: "Both the peace process and Shimon Peres are on life support."

Associates say the Prime Minister is bearing up well under the strain of making his terrible choices. "He doesn't believe his world is falling apart," says newspaper columnist Mira Avrech, a close friend of the Peres family. On the other hand, says another longtime associate of Peres, "there is a swing between two poles. One is his inclination toward optimism; the other is the pain of loneliness" since the assassination in November of Yitzhak Rabin, Peres' ancient rival and recent partner in peacemaking. "When Rabin was killed, Shimon lost both a burden and somebody to lean on," says the friend. "Today Peres is alone."

The radicals of the Islamic Resistance Movement, or Hamas, along with the smaller Islamic Jihad, hope to provoke Israel into abrogating its agreements with Arafat's Palestine Liberation Organization. Rather than achieve an accommodation with Israel, the radicals want to destroy it along with Arafat's agreements, which they consider betrayals of the Palestinian cause. If terror undoes the historic reconciliation between the Israelis and the Palestinians, the radicals will have achieved their ends.

More than any other Israeli, Peres drove the negotiations that led to the Oslo accords, and voiding them would require an enormous psychological sacrifice on his part. In contrast, opposition Likud leader Benjamin Netanyahu has stood against the deal all along, so Hamas' strategy has a better chance of working if he comes to power. He says he will honor the agreements signed so far that grant the Palestinians limited self-rule, but only as long as the P.L.O. does. Strictly speaking, that is Peres' policy as well, but Netanyahu is far more apt to cry foul. And he is unlikely to go the next step. The autonomy accords are meant to be temporary, with Israel and the P.L.O. starting in May to negotiate the final status of the West Bank and Gaza Strip--presumably a limited-power Palestinian state. The Likud vehemently opposes a Palestinian state, preferring restricted autonomy in perpetuity, which the Palestinians fervently reject.

Before the last wave of bombings, Peres' Labor Party was solidly ahead in the polls, buoyed by voter sympathy after Rabin's death at the hands of an extremist Israeli assassin opposed to the peace accords. So favorable was Labor's position that Peres advanced the election date five months; now polls show Peres and Netanyahu running neck and neck. The collapse of Peres' lead reflects a lack of confidence in the whole exercise with Arafat. The basic assumption of the accords was that in exchange for self-determination, Arafat's regime would do its utmost to ensure that violence against Israel stopped. Israel's security forces do bear much of the responsibility for confronting Hamas, since most of the West Bank and a large part of the Gaza Strip remain under their control. Still, the principal ringleaders of the Islamist groups operate out of that part of the Gaza Strip that is under Arafat's jurisdiction, and until now he has made only sporadic efforts to constrain them.

Peres has intensified the pressure on Arafat to perform. Previously, the Prime Minister insisted that the peace process should continue regardless of the level of terrorism. Now he has explicitly linked continued concessions to the Palestinian Authority's success in breaking the Islamists. He has also indefinitely sealed Israel's borders with the West Bank and Gaza Strip--a measure that costs Palestinians $1.2 million daily in lost earnings. With few exceptions, P.A. officials, including Arafat, were forbidden to travel into Israel or through it to get between the Gaza Strip and the West Bank. "Arafat is now a prisoner in Gaza," says an Israeli Defense Ministry official. "He can't get to the West Bank even with a helicopter." Peres' most potent means of coercing Arafat was the threat of sending Israeli forces "to any corner" to track down terrorists--in other words, back into areas now under Arafat's control. That would be an outright violation of the accords and would destroy Arafat's credibility with his supporters.

Arafat has responded more forcefully this time than he has to past bombings. Last week his forces arrested hundreds of Islamist activists, including seven of 13 big fish that Israel specifically targeted. Arafat even invited Israeli troops to accompany P.A. forces on some raids. In an interview with two Israeli newspapers, Arafat's senior aide, Mahmoud Abbas, said the P.A. was determined to "demolish the vicious organizations" of terrorists. "Enough is enough," he said.

But what if this offensive against Hamas by Arafat ultimately proves as ineffectual and half-hearted as those of the past? Despite Peres' threat, Israeli officers are loath to blatantly re-enter land under P.A. control and risk a broad confrontation between Israel's forces and Arafat's. The military would favor covert operations in Arafat's jurisdiction, like the assassination in January of Hamas' master bombmaker, Yehia Ayyash, in the Gaza Strip. Says the Defense Ministry official: "If we have intelligence about someone in Arafat's zones, we'll give the information to the P.A. And if they won't move, we'll act, but only through commando operations." Those operations would also violate the accords, and Arafat would surely object, but at least Israel would have plausible deniability.

Meanwhile, in the areas of the West Bank still under Israeli rule, the occupation authorities have launched a crackdown. Palestinian residents were forbidden to travel outside their hometowns. In the village of Burqa and the refugee camp of El Fawwar, where three of the four bombers lived, troops herded together every man and teenage boy and forced them to sit on the ground awaiting questioning. All male relatives of the bombers, down to and including first cousins, were detained for interrogation. The Israelis renewed an old and widely criticized practice of sealing the family homes of terrorists in preparation for their demolition.

Adding to his tactical difficulties, Peres has a credibility problem. He has a reputation in Israel for being weak on security issues. In part, this is because he was never a combat soldier, unlike many other prominent Israeli political figures. His penchant for making dreamy, naive predictions about "the new Middle East" has also earned him suspicion. Says Sam Lewis: "He has a tendency to paint a larger picture than the paintbrush can fill in." On top of all that, Peres strikes many Israelis as too slippery in general. In a country that prizes simple virtues, he dresses a little too well, speaks a little too glibly. It was no surprise then that a large part of the military brass saw Peres' response to Hamas as insufficient. Peres' initial rejection of the army's proposal to deport families of the suicide bombers to Lebanon caused frustration. "We think that in the future these guys will think twice if they know that after they're gone, we're going to put their parents on a boat with two sandwiches and dump them on the Lebanese shore," says a high-ranking officer. Peres was said to be reconsidering the option.

Peres must be concerned, however, with the effect of any radical punishment on Arafat's standing among his own people, who tend to hold him accountable for the excesses of his Israeli partners. "It's in the interest of the government to pressure Arafat but not to deliver a knockout punch," says Yaron Ezrahi, a senior fellow at the Israeli Democracy Institute. Nor can Peres afford to incite the Palestinian public so much that it turns violently against the accords. Says "Ghazi," a figure in the military wing of Hamas: "The Israelis are laying the ground for a revolution, and we are going to lead it."

Last week leaders of Hamas' political wing publicly asked their military cohort to suspend their attacks. The political leaders were apparently worried that Arafat would begin shutting down the many institutions of Hamas--schools, clinics, mosques, charities--that anchor it deeply in the Palestinian community. In a leaflet, the military wing purportedly acceded. Ghazi, however, insists the document was a fraud. "I tell you frankly and clearly, there is no truce," he says. "We will continue our war."

As he fights that war from his side, Peres must contend with the sometime fecklessness of Arafat, the rage of the Israelis, the bitterness of the Palestinians and the mistrust of his own military--all while an election rapidly approaches. So far, he has navigated quite coolly, but he sails a narrow channel, and the seas may well grow higher.

--With reporting by Dean Fischer/Washington, Jamil Hamad/Nablus, Aharon Klein/Tel Aviv and Eric Silver/Jerusalem

With reporting by DEAN FISCHER/WASHINGTON, JAMIL HAMAD/NABLUS, AHARON KLEIN/TEL AVIV AND ERIC SILVER/JERUSALEM