THE IRAQ crisis has thrown American relations with Israel, the country long seen as its closest regional partner, into crisis. Israel is the partner that can only barely be acknowledged, whose policies have made it something between an inconvenience and an obstacle to necessary American cooperation with Arabs. Saddam Hussein plays shrewdly on the strains to lower the costs of escape from his brutal Kuwait blunder. Israel fears creeping American abandonment; the United States fears a desperate Israeli action. Israelis resist entreaties to accommodate Palestinians, Americans chafe as they do.

Yitzhak Shamir meets George Bush in Washington this week after a telling delay. As the elected leader of a friendly democratic country to which the United States has strong ties of sentiment and loyalty, he deserves respect. But he also leads the elements in his country that see peace as remote and dangerous and even illusory and prefer retention or control of the occupied territories, notwithstanding the desires of their Palestinian inhabitants. Answering the movement in the PLO's position on Israel, Mr. Shamir put forward a peace plan. He sidetracked it when he found that Palestinians were moving toward testing it. This was a troublesome situation on the eve of the Iraq crisis, a situation politically all but made for Saddam Hussein's shrewd manipulation.

Mr. Bush and Mr. Shamir need to talk about how to face Iraq, or at least about how to consult as choices come along. Mr. Bush in particular needs to convey the American interest in post-crisis American diplomacy on three levels:

1) The PLO's statements accepting Israel and renouncing terrorism have been kicked in the head by PLO equivocation and by its support of Saddam Hussein's occupation of Kuwait. The Israelis are right to expect Palestinians to work their way back from these severe political offenses. It will take time. To ensure that nothing is done to "reward" Saddam Hussein, the project can hardly even start while the Iraq crisis is unresolved; the current U.N. debate is largely a distraction. But it does not reward Iraq, it merely advances an already familiar, essential and under-played American policy goal for the United States to continue to press for progress toward a negotiated settlement of the Palestinian issue. This should be done.

2) The notion that all that the Middle East needs is an Israeli-Palestinian negotiation disintegrated on Aug. 2, however. An additional, broader Israeli-Arab discussion is required to engage the Arab states that have traditionally disdained any gestures to or contacts with Israel. Saudi Arabia and other Gulf states come to mind; also, in its time, Iraq. The dangers that lie in letting the extended Arab world sit apart were amply demonstrated when the PLO leadership and its constituency turned in their respective ways of policy maneuver and popular action to the purposes of a vicious, threatening Baghdad.

3) This larger negotiation, finally, must move to a deeper agenda than Israeli-Palestinian and Israeli-Arab accommodation. Treatment of political issues must extend to treatment of security issues, including levels and kinds of arms and the roles of outsiders as suppliers and guarantors. This is the necessary work of a decade, perhaps of a generation. Nor can the consummation of part of it hinge on the completion of all of it; Iraq's proven menace must come first. But it is the sort of enterprise that changing world conditions were making possible and that the Iraq crisis has now made urgent. It will take vision, courage and persistence, and it is not too soon for Mr. Bush and Mr. Shamir, despite their complex political situations, to begin.