MIDDLE EAST: Cooling It in Egypt and Israel

But "linkage"remains the key point at issue between them

It was not only Christmas Day but also his 60th birthday, and Egypt's President Anwar Sadat was in an expansive mood as he addressed his countrymen on television. True, he castigated Israeli Premier Menachem Begin for seeking to create "a greater Israel extending from the Euphrates to the Nile." But he also voiced confidence that the Middle East would not revert to the "no-war, no-peace stalemate" of recent years, and he assured, "Peace will come, sooner or later."

Sadat spoke only hours after last week's meeting in Brussels between U.S. Secretary of State Cyrus Vance and high-level Egyptian and Israeli officials ended with the two Middle Eastern countries still at an impasse. But nobody sounded alarmed. Israeli officials said vaguely that they expected the negotiations to resume soon, and even though the Egyptians had spoken of a cooling-off period lasting a couple of months, they stressed that the peace process may be irreversible.

During the respite, Sadat worked to improve his relations with the moderate Arab regimes. He wrote letters to the rulers of Saudi Arabia, Qatar, Bahrain and the United Arab Emirates, assuring them once again that his initiative was aimed not at a separate Egyptian-Israeli peace but at a comprehensive peace in the Middle East. He also reaffirmed his determination to link any pact to progress on an overall settlement involving the Palestinians of the West Bank and Gaza Strip.

But while he quietly wooed the moderates, Sadat continued to give the back of his hand to Arab radicals. Egypt, said he, "will not pay attention to the diatribes and shallow viewpoints of the rejectionists." Sadat knows that the radicals alone cannot make war against Israel; he is also convinced that they cannot help the Palestinians as long as they refuse to enter the negotiations.

The Israelis too appeared to welcome the diplomatic pause. Government officials spoke of a plan to establish 20 more Jewish settlements in the West Bank over the next four years, but when members of Gush Emunim, the fanatical religious organization, tried to found two illegal settlements on the hills above Jerusalem last week, soldiers quickly evicted them. Many officials grumbled over a statement by Egypt's Acting Foreign Minister Boutros Ghali that "a political confrontation will occur during negotiations to define the powers of a Palestinian regime." Though this has been implicit in the Egyptian position all along, Israeli officials chose to interpret it as a raising of the ante. "If that's what the Egyptians are seeking," said one, "this is a new ball game."

That controversy goes to the heart of the Egyptian-Israeli dilemma. Three other key issues remain unsettled: Egypt's proposal for a review of security arrangements between the two countries after five years, the timing of the exchange of ambassadors and whether the treaty would supersede Cairo's other commitments to the extent that it would prevent Egypt from going to the aid of another Arab country attacked by Israel. Presumably these issues can be resolved in time.