SOAKED IN BLOOD

By LISA BEYER/JERUSALEM

The scene is so horribly familiar. A sunny afternoon. Shoppers crowding a city street. Then the deadly blast of a bomb, carnage and chaos. Neither the former peacemaking Labor government nor the present security-minded Likud government has figured out a way to stop it.

This time the bombers came well dressed, one in a dark suit, one in a light suit. A car dropped them off just outside Jerusalem's main food market, and they walked into the crowded center of the bazaar, carrying attache cases. At 1:10 p.m., positioned 100 ft. apart and apparently in eye contact, one of them, standing in a covered lane, detonated a lethal parcel containing about 20 lbs. of TNT packed with rusty screws and nails. Three seconds later, the second man exploded his suitcase bomb along an open street crammed with lunchtime shoppers. "This is madness," cried an anguished onlooker amid the tangle of human limbs, blackened flesh, crushed fruit and building rubble. The blasts also blew away the lower portions of the bombers' bodies, leaving their still unidentified faces gruesomely intact.

The suicide bombers killed 13 and wounded 170 in the attack, which was claimed by the radical Islamist group Hamas. The bloodshed scotched the latest attempts at reconciliation between Israelis and Palestinians and set back U.S. plans to reinvigorate the comatose peace process. Palestinian leader Yasser Arafat has suffered yet another blow to his fragile authority, cornered dangerously between militant Islamists and enraged Israelis. Also in political trouble within his ruling coalition, Prime Minister Benjamin Netanyahu now probably faces more pressure to move further to the right.

The terror strike last Wednesday was the worst since Netanyahu came to office 13 months ago, vowing he could deliver progress toward peace together with the security Israelis crave. While he has borne much of the criticism for stalling peace negotiations, he laid the blame for the bombing squarely on Arafat, who has lately made vigilance against Islamist militants a low priority. Within hours of the blast, Netanyahu responded with a program of unprecedentedly tough retaliatory measures. These amounted, in Arafat's view, to "a declaration of war," a characterization Netanyahu didn't even bother to dispute. "You can't have peace," he declared, "when people are blown to smithereens."

In Washington, President Clinton was equally tough on the Palestinians. "There is no excuse and there must be no tolerance for this kind of inhumanity," he said, demanding "concrete steps" by the Palestinians to fight terror. But fearful that violence could beget more violence, Administration officials began to think something bolder was required. The President postponed for only a week a planned mission by Middle East mediator Dennis Ross--his first since last April--to regenerate confidence, and huddled with his security advisers to consider what else Washington could do to repair the diplomatic damage. "It's pretty clear," said a U.S. official, "that it will be hard to get this on track unless there is a high degree of security cooperation."

To Arafat the cascade of events felt like an avalanche. By being lax on security issues, he had flirted with trouble, and the extremists had taken advantage. Before the bombing, the U.S. was prepared to lean on Netanyahu to make concessions that would restart negotiations, but now, suddenly, the full weight of American pressure has been shifted onto the Palestinians. In addition, the sting of Israel's reprisals comes at a time when Arafat's government is squirming under revelations of corruption.

None of these points were lost on the Palestinian extremists who claimed responsibility for the explosions. "Our first goal was to bring down Arafat's administration," says "Abu Assad," a senior figure in the military wing of Hamas. According to him, the group was trying to prevent the anticipated full resumption of joint antiterror measures between the Israelis and the Palestinians. "This cooperation," notes Abu Assad, "is done at our expense." Then, in a boast that might be only bravado, the Hamas activist claimed, "We were about to assassinate Dennis Ross" on one of his previous peace shuttles. U.S. officials say there have been several threats against Ross, but no "near miss" attempts. Yet Abu Assad's unconfirmable declaration bespeaks a growing Palestinian discontent with the American mediation role.

The opponents of peace are adept at timing their deadly attacks to coincide with the resumption of momentum. Only two days before the bombing, it looked as if relations between the Israelis and the Palestinians were moving back to normal after a four-month chill. The standstill had been provoked by Netanyahu's decision to build a new Jewish settlement in mostly Arab East Jerusalem, and that in turn led Arafat to restrict security cooperation, curtailing intelligence sharing and easing up on commitments to collect weapons, jail militants and stop calls to violence. On the Monday before the bombing, Israeli and Palestinian officials announced that at last the two sides would resume negotiations on outstanding disputes, paving the way for Ross to present an American initiative aimed at striking specific compromises. But the upbeat news was a call to arms for the Islamists, who are dedicated to sabotaging a peace process they regard as illegitimate.

When Arafat phoned Netanyahu an hour after the bombing to express his condolences, he received a furious dressing down. In a conversation Netanyahu's office called "difficult and pointed," the Prime Minister accused Arafat of having "encouraged the violence" by refusing to act against the Islamists. "You must change your policy 180 degrees," he insisted.

Netanyahu indefinitely closed Israel's borders to all Palestinians, putting some 100,000 day laborers out of work. He banned travel within the West Bank, cooping up Palestinians in their hometowns and handicapping normal commerce. For the first time, the Israeli government said it would stop paying out several million dollars it owes the Palestinian Authority in tax refunds. The Israelis also decided to jam broadcasts of the Palestinian Authority's official Voice of Palestine radio station, whose transmissions have recently been filled with anti-Israeli invective.

Taking on terror suspects directly, the Israeli government issued an arrest warrant for Palestinian police chief Ghazi Jabali, whom the Israelis accuse of inciting an attack on a Jewish settlement in the West Bank last month. Most ominously, Netanyahu's government warned that if Arafat didn't neutralize activists, Israel would send its forces back into areas now under Palestinian self-rule to do the job. That would be a blatant violation of the Israeli-Palestinian accords. "You're not going to see tanks or columns of soldiers going inside," says a senior Israeli officer in the West Bank. "We'll go in only if we have very good intelligence on someone and a good plan to get our soldiers out safely."

As if the pressures on Arafat from outside were not enough, they coincide with the worst domestic scandal of his tenure as Palestinian Authority chief. Last Friday his entire Cabinet resigned after the elected Legislative Council voted to demand that he dissolve his government and appoint a new one within a month. In the past, Arafat has capriciously ignored the council's resolutions, but the charges of abuse of power are badly undercutting his credibility. Says an Arafat aide: "The resolution left Arafat armless. He can't confront the Israeli measures and policies with a corrupt administration and with no public support."

While the resignation of the Cabinet gave Arafat breathing room, there are no easy choices for him when it comes to handling the Islamic militants. Palestinian officials show no great appetite for complying with Israeli and American demands to swoop down on them. Last week in Jericho a senior official counseled Arafat, "We speak and act as if we are puppets manipulated by the Israelis, and the time has come to stop this apologetic policy." Yet Arafat, according to one of his associates, is terrified that the Islamists will carry out more bombings, prompting a dramatic response by Israel that will bring an end to self-rule.

The result may be a middle course. The Palestinian Authority made a handful of arrests last week, but Israeli intelligence is not convinced it means business. Says an Israeli official: "Our assessment is that Arafat will cooperate on a small scale, but he has no intention of confronting Hamas right now."

Arafat may not see much to gain by bowing to Israel's demands, since he does not trust Netanyahu to proceed with expanding self-rule in return. Says an Arafat confidant: "He basically thinks nothing is possible with Netanyahu." The feeling, of course, is mutual. Even under the Labor Party, which reached the Oslo accords with Arafat, mutual violations of the provisions were common. But then the two leaderships had a solid relationship, providing a base more valuable than the written documents for peace to grow. Now it's gone.

After the bloody bombing last week, Israeli author David Grossman published a plea for help in the daily newspaper Ma'ariv: "Israel and the Palestinians are no longer capable of reaching, by themselves, an arrangement that will promise them true peace. They are the captives of their history and psychology and have lost the ability to save themselves from it." Asking Washington to intervene, Grossman wrote, "If somebody in the world still cares about what is going on here, he'd better do something." But even if the Clinton Administration decides to answer that call, it will be harder than ever to figure out what that "something" is.

--With reporting by Dean Fischer/Washington and Aharon Klein/Jerusalem

With reporting by DEAN FISCHER/WASHINGTON AND AHARON KLEIN/JERUSALEM