ISRAEL'S NEW right-wing coalition government spent much of its first week insisting that peace can best be achieved by taking a hardline route: total refusal ever to negotiate with the Palestine Liberation Organization. The PLO, on the other hand, endangers its dialogue with the United States by refusing to condemn the recent Palestinian speedboat attack on Israel. These developments make the peace talks, already a remote possibility, even less likely.

Despite the national consensus long said to exist in Israel against such negotiations, however, the truth is that Israelis of various political shades have had clandestine contacts with the PLO over the last 15 years. Nor would it be unthinkable for such contacts to occur again.

Imad Shakur considers it inevitable. "We are very patient," says Shakur, who as PLO leader Yasser Arafat's chief adviser on Israeli affairs has kept the secret for years. Shakur has been a key figure in arranging and participating in the PLO-Israeli meetings in Europe, the United States, Africa and Asia, dealing with political, military and humanitarian issues.

"True, we PLO officials have been meeting secretly with Israeli officials," Shakur said in a recent interview. "But it's never secret at our request," he added. "The request for confidentiality always comes from the Israeli side."

Indeed, the secret encounters are the most sensitive issue in Israel's tumultuous domestic politics and could cause great embarassment. Yet some Israeli politicians, angry because their government's publicly stated refusal to negotiate with the PLO leads to clashes with the United States and a stalemate in the peace process, are willing to talk about their experience.

"The official policy is full of hypocrisy" said Avraham Tamir, a retired general and former director of the Israeli prime minister's office. "Of course, past and present Israeli governments were involved in direct and indirect encounters with the PLO."

Significant contact was first made a decade ago, when Tamir was a close aide to Ariel Sharon, then Israel's defense minister. In July 1981, U.S. envoy Phillip Habib negotiated a cease-fire along Israel's northern border between Arafat's PLO and Menachem Begin's government. "We did not meet then with PLO officials," recalled Tamir, "but it was clear to us that Mr. Habib and the Lebanese government were in touch with Arafat and brought before us the PLO's ideas and proposals."

The cease-fire held for a year until Sharon and Begin put an end to the tacit understanding with the PLO and sent the Israeli army into Lebanon. The June 1982 invasion, aimed to destroy the PLO military and political structure, marked a watershed in Sharon's thinking. Previously Sharon had entertained the notion that the Palestinians could have a state of their own but that it should be in Jordan. In the mid-1970s, Sharon had argued within the government that Israel and the PLO should plot together to depose Jordan's King Hussein and had even been prepared to discuss his ideas with Arafat. At that time, a secret channel of communication between Israel and the PLO was opened.

Left-wing Israelis, including retired general Matti Peled, publisher Uri Avneri and Labor Party politician Aryeh (Lova) Eliav, held secret meetings with PLO moderates in Paris, Vienna and London. The meetings were arranged by European leaders such as Chancellor Bruno Kreisky of Austria, Swedish Prime Minister Olof Palme and former French premier Pierre Mendes-France, and received the blessing of Israel's Labor government.

"After each meeting we secretly informed Prime Minister Yitzhak Rabin and our chiefs of intelligence," recalled Eliav. "At that time we had a narrow political aim: just to change the hostile atmosphere between the two sides and to lay the first seeds of future reconciliation."

In 1976, with his more ambitious plan in mind, Sharon approached Avneri and asked him to use his contacts to set up a meeting with Arafat. However, the PLO chairman refused. "He agreed that we would meet with our Israeli enemies but he was not ready then to meet personally with them," Issam Sartawi, a close aide to Arafat and participant in the secret dialogue, told us in February 1983. "Our chairman was concerned that such a meeting would provoke a storm in our movement and would be rejected by the radicals."

And, indeed, six weeks after our interview, Sartawi was gunned down in Portugal by assassins sent by Abu Nidal, a sworn enemy of Arafat and leader of the notorious Palestinian gang which rejects any compromise with Israel.

Nonetheless the clandestine encounters between Israelis and Palestinians continued. Since 1979, Israeli governments have sent special emissaries to negotiate directly with the PLO and even with radical terrorist groups led by Ahmed Jibril and Nayef Hawatmeh for the release of Israeli prisoners.

The emissaries, including Eliav and lawyers closely connected with the government, have been given a free hand in pursuit of their humanitarian mission, travelling to Arab capitals in Lebanon, Tunisia and Morocco, a step which in different circumstances would be labeled as treason.

At least five deals have been struck, swapping thousands of Palestinian terrorists, some of them involved in the killing of women and children, for Israeli soldiers and civilians.

Although the PLO was ready to continue meeting with left-wing Israelis, whom it calls "progressive elements," the organization did not hide its dissatisfaction with the slow pace of the dealings. "The Israelis almost always want a gesture -- prisoners or bodies of their missing soldiers," remarked Shakur. "But whatever Israeli does come to a meeting, he speaks only as a 'private citizen' and not an official envoy of his government." In 1987, in a surprising attempt to break the political deadlock, the PLO tried to open a secret dialogue with the Israeli right. "We realized that any peace settlement would need the sanctioning of the Likud," confided a PLO official.

Palestinian leaders from the West Bank approached Moshe Amirav, an Israeli government official within Prime Minister Yitzhak Shamir's faction in the Likud Party central committee. Amirav recalled: "The Palestinians told me 'We are not terrorists as you the Likud depict us. We are a moderate force. Let's open a dialogue.' "

The West Bank leaders made it clear to Amirav that their move was approved by Arafat. Amirav, in turn, informed his colleagues Ehud Olmert and Dan Meridor, then Shamir's closest advisers and today ministers in his cabinet. "In my presence," Amirav said, "they talked about it with Mr. Shamir who sanctioned our dialogue but also warned us to keep it secret. He was very concerned about the political embarrassment that might be created."

Indeed, after several meetings in August 1987, in Amirav's house in Jerusalem, some details reached the Israeli press. The revelations that one of the participants was Faisal el Husseini, the prominent Palestinian nationalist, accused by Israeli intelligence of being the senior PLO officer in the occupied territories, caused Shamir just such embarrassment. Ariel Sharon, whose eyes are on Shamir's jobs as leader of the Likud and prime minister, accused his rival of "dealing with the enemy and softening the war against terrorism." The political storm forced Shamir and his confidants to deny their involvement and to expel Amirav from the Likud for "ideological deviation." The "Amirav Affair" proved to be a missed opportunity. Three months later, in December 1987, the 1.7 million Palestinian inhabitants of the West Bank and Gaza Strip began the intifada.

Israel has attempted to suppress the uprising by military force and massive arrests of activists, including Husseini who was detained and released several times. Yet, swallowing its pride, the Israeli government sent Shmuel Goren, chief administrator of the occupied territories, to Husseini's prison cell in an effort to negotiate an end to the intifada.

In December 1988, Arafat renounced terrorism and recognized the right of Israel to exist alongside a future Palestinian state. While the Bush administration started talks with the PLO, the Israeli government hardened its position by passing legislation forbidding Israelis to meet in person with "representatives of a terrorist organization."

The PLO is defined as such by Israeli law. While some Israeli peace activists have openly broken the law and been sent to jail, others continue to deal secretly and unofficially under deceptively created "international auspices" with the PLO.

Shamir himself met less than a year ago with Jamil Tarifi, a prominent Palestinian lawyer from the West Bank. A few days later, as Israeli cabinet ministers confirmed, the lawyer informed PLO headquarters in Tunis. "No Palestinian leader from the territories," said Eliav, "ever takes any political step without first consulting by fax, telephone or in writing with PLO headquarters. It is clear to all of us that dealing with 'local leaders' also means dealing with the PLO." The Israeli twilight zone of unofficial or semi-official dealing with the PLO was further blurred in December 1989. Shamir accused Science Minister Ezer Weizman of secretly dealing with the PLO, thus violating government policy and law and "betraying" Israel. Weizman, a former air force commander and defense minister, was stunned -- especially when Shamir backed up his charges with classified information.

Israeli intelligence had apparently provided Shamir with transcripts of a meeting Weizman had in a hotel in Geneva with PLO diplomat Nabil Ramlawi and another PLO official. Israeli intelligence also bugged telephone calls from PLO headquarters in Tunis to the minister's home. Weizman, once a military hawk but now a political dove, openly advocates negotiations with the PLO. With the knowledge of Shimon Peres and other Labor Party leaders, he was quietly advising the PLO to accept a U.S.-Israeli plan for Palestinian elections.

Ramlawi, talking about the meeting for the first time, told us: "It was a very long and broad talk. Ezer Weizman is a nice chap and we agreed on almost everything. I drank coffee and he drank tea. That was the only disagreement."

Shamir's disclosures regarding Weizman sparked an uproar in Israel. That Israeli intelligence monitored the incoming phone call from Arafat's headquarters was not surprising But the fact that a cabinet minister's home telephone was involved made the disclosures politically sensitive.

More impressive was the fact that Israel's spies obtained a word-for-word record of what one of the PLO's top officials was doing in Europe, making it clear that Israeli intelligence had a valuable source near the highest echelons of the PLO. By going public with material given him by his espionage chiefs, Shamir, a former Mossad agent, violated a taboo -- not to drag the intelligence community into politics.

Since then, Shamir has been more cautious, refusing to disclose further intelligence provided him about secret talks involving Labor politicians. However, sources identify them as including Avraham Tamir, Yossi Beilin and Nimrod Novick, all close aides of Peres. According to a highly placed U.S. diplomat, the State Department was fully aware of these dealings and encouraged them.

According to PLO officials, the meetings spread over four years since 1985 and took place in Egypt, Holland, East Germany, Romania and the United States. The first meeting with Beilin, now a member of the Knesset, the Israeli Parliament, was mediated by Dutch officials. "The Dutch told us that he was Peres' man. We sent representatives from our Tunis headquarters. But we were very disappointed," said one of those representatives.

"He {Beilin} would not be specific and the conversation went nowhere," added the PLO official who said that things went no better with Tamir and Novick. "A PLO diplomat flew especially from Tunis to the U.S. for the meeting with Novick. He also talked to us in vague terms such as 'I am interested' and did not make clear whether he is an official envoy of Peres."

"The Israelis get close to talking to us and then retreat," said Imad Shakur, referring to the Israeli fear that negotiation would lead inevitably to the creation of a Palestinian state. "They are afraid of stepping onto a moving conveyor belt, knowing they will be pulled along and cannot stop it. But we are patient. How long can the Israeli public tolerate the intifada, the violence and the killings?"

Yossi Melman, an Israeli journalist, and Dan Raviv, a CBS News correspondent, are the authors of "Every Spy a Prince: The Complete History of Israel's Intelligence Community," to be published in July by Houghton Mifflin.