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No Confidence, No Real Peace

THE dream of real, lasting reconciliation between Israelis and Palestinians lives on. But it is not clear whether the new agreement signed at the end of September (''Oslo-2'') will help make it a reality.

The best part of the agreement is the opportunity it gives the 2 million Palestinians of the West Bank and Gaza to hold nationwide elections. This could start to bring democratic norms and institutional stability to a leadership now dangerously reliant on one man - Yasser Arafat.

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The elections are planned for next April. Polls show Mr. Arafat as a shoo-in for the slot of ra'ees (chairman or president). But voters will also elect an 82-member council. The council will likely include people from numerous political trends. It could provide a forum for serious deliberation of tough issues, as well as a much-needed check on Arafat.

But the rest of Oslo-2 does not look so hopeful. The questioning stems, first and foremost, from the reaction to the agreement by the two peoples themselves. A fanfare of support greeted ''Oslo-1'' in 1993. In both national communities, Oslo-2 has generated much more doubt and opposition.

It wasn't supposed to be that way. Ever since 1978, the American (and Israeli) formula for dealing with Palestinian claims has been based on an open-ended ''transitional'' period in the West Bank and Gaza, with negotiations for the final outcome starting only after establishing a transitional regime.

American arguments for this approach were based on the need to build confidence. We have now seen the first two years of such a transition. And far from having grown, confidence between Palestinians and Israelis has clearly eroded in that time.

Do not be fooled by press reports of the negotiators having formed warm personal friendships. What matters is the broader relationship between the two peoples.

The erosion of confidence has quite clear causes. Visiting Jerusalem this summer, I found many Israelis upset that Oslo-1 did not bring the sense of personal security they longed for: Bombings of Israeli civilians by Islamic hard-liners had continued. And Palestinians said their experience of ''transition'' was that the Rabin government did not release Palestinians from jail in the numbers expected, that it disregarded agreed ''target dates,'' accelerated the building of Jews-only settlements in East Jerusalem, and imposed harsh collective punishments on Palestinians.

It is easy from the outside to see that these two processes of confidence-erosion have been reciprocal. A truly helpful outside sponsor of the process would have pointed this out - reminding Yitzhak Rabin as well as Arafat that actions on the ground could push the ''confidence'' of the other side either way. As it was, only Arafat got lectures from Washington. Mr. Rabin continued with his settlement-building and the debilitating ''closures'' of Palestinian areas - and was rewarded with increased US aid.

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Will the remaining 40 months of the ''transition'' see confidence-erosion transformed into confidence-building? Israel's refusal to live up to its clearly stated promise to release all female prisoners is not encouraging. And 1996 brings elections in both Israel and the United States - not a good time for visionary policies in either place.

The need for mutual accommodation between Israelis and Palestinians has never been greater. The whole fragile structure of relations between Israel and Arab countries depends on it. But there is a real danger that Oslo-2 will not (as the original formula promised) lead to another, more hopeful, arrangement. Instead, whether Rabin wins or loses his election, the present arrangements could gel into place for years, giving Palestinians a fragmentary authority - less, even, than was given to South Africa's Bantustans.

Hard as it might seem in an election year, the Clinton administration has a huge stake in pushing for a better outcome than that.

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