The Middle East, beset by conflict and suspicion for decades, is in the throes of euphoria. For once, appearance meshes with reality. An unprecedented opportunity for a breakthrough toward Middle East peace beckons.

The optimism coincides with the advent of Prime Minister Ehud Barak. But it is no derogation of either the quality of the new Israeli leader or of his extraordinary electoral triumph to emphasize that he represents a culmination rather than a new departure.

For 25 years, Israel has traded land for peace, sometimes reluctantly, always ambivalently, because the quid pro quo for its territorial sacrifice consisted essentially of revocable assurances.

Nevertheless, Labor's Golda Meir gave up forward positions in the Sinai and on the Golan Heights for limits on the military forces confronting each other. Labor's Yitzhak Rabin exchanged the Sinai passes for -- in effect -- the main elements of the end of a state of war with Egypt. Likud's Menachem Begin, in 1979, accepted the 1967 Egyptian/Israeli border and vacated the Sinai, including Israeli settlements, to achieve formal peace with Egypt. Likud's Yitzhak Shamir participated in the Madrid peace conference in 1991 that included representatives of the Palestinians.

Labor's Rabin and Shimon Peres in 1993 concluded the Oslo agreement that is the core of the existing peace process with the PLO. And Likud's Binyamin Netanyahu overcame his party's longstanding opposition to the land-for-peace approach when, in the Wye agreement, he conceded 13 percent of the remaining West Bank territory in return for strengthened security guarantees -- thereby accepting the principle of partition and ultimate Palestinian sovereignty. In one of history's ironies, Netanyahu, now denounced as a superhawk, may one day be remembered for having made possible the national consensus that enables his successor to undertake the final lunge toward peace.

Israel has moved in this trajectory because every prime minister -- whatever his initial misgivings -- concluded that there was no alternative in the face of the casualties imposed by the intifada, the drain of southern Lebanon and the impossibility of achieving a conclusive military victory against the far more numerous Arab neighbors. And if Israel is perceived as the obstacle to peace, the indispensable relationship with America is at risk.

The Arab countries have gone through a similar evolution. Treating Israel as essentially illegitimate, too many Arab leaders have considered recognition of the Jewish state as the sole quid pro quo required of them. The PLO has insisted on borders that it had never accepted before the 1967 war and lately has been arguing for the 1947 U.N. partition plan that would reduce Israel to vestigial, unsustainable limits.

But the hard-liners are increasingly isolated. Egypt and Jordan have concluded formal peace treaties. The remaining holdouts are learning that they have in fact no realistic alternative. The Soviet Union has disappeared as a major arms supplier, and Russia is in no position to provide convincing diplomatic support. The Gulf states have made clear that, while prepared to give the Palestinians economic assistance, they will not go to war over West Bank issues. Syria's Hafez Assad wants to minimize turmoil in the region as he seeks to arrange a succession for his son. All this accounts for the unprecedented conciliatory sounds emanating from Damascus and the more cooperative public attitude of the Palestinians.

Nevertheless, the new atmosphere is not self-fulfilling. The issues that produced the impasse remain unresolved. They concern borders, the future of Jerusalem, Jewish West Bank settlements and the right of refugees to return. These issues are enormously complex, and U.S. mediation remains essential.

American diplomacy has kept the peace process moving forward over six administrations and made possible all the landmark agreements. But it is also true that two seminal initiatives -- Sadat's trip to Jerusalem and Peres's and Rabin's negotiation of the Oslo agreement -- were triggered because the Middle East parties sought to preempt American efforts they perceived as misguided. Sadat journeyed to Israel to forestall a U.S. push to reassemble the Geneva conference with Soviet participation. Rabin and Peres opted for the Oslo negotiation to avoid a comprehensive proposal by the new Clinton administration. Still, in the end, both initiatives required an American follow-up to bring them to fruition.

Barak's visit to Washington provides an opportunity to place U.S.-Israeli diplomatic cooperation on a new basis. This cooperation is not easy in the best of circumstances. Israeli negotiators, however appreciative of American material help, instinctively resist American pressure for fear of establishing a pattern that gradually would prod them beyond the limits of Israel's security -- especially because the margin that determines the survival of a country whose maximum width is measured in tens of miles inevitably appears trivial to a continental power such as the United States. Hence, Israeli negotiators are forever tempted to make the extraction of concessions so painful as to discourage an escalation of demands.

U.S. mediators, however strong their theoretical conviction about American-Israeli friendship, too often respond with a mixture of exasperation and exhaustion, by pressing their own preconceived ideas, generally regurgitating the Rogers plan of 1969, which endorsed the '67 borders with "minor rectifications" and lately hinting at an unlimited right of refugees to return. Or they split the difference between the two sides, in the process giving an incentive to each party to put forward its most extreme position. These inherent tensions have been overcome in earlier stages of the peace process and, in Rabin's second term as prime minister, were substantially eliminated.

In recent years, however, a dangerous rift has opened up. Netanyahu may well have pursued a strategy of demonstrating his vigilance as a prelude to leading his recalcitrant party toward final peace in his second term, as he occasionally asserted in private conversations. But in the process, he so strained his relations with his American interlocutors -- who did not like his party in the first place -- as to defeat his design. Israel has a duty to insist that it remain the ultimate arbiter of the elements of its security, but its leaders must never forget that working relations with the United States are themselves a key element of their country's security. When U.S.-Israeli tensions turn this confrontational, the peace process is in jeopardy. Such a state of affairs compounds rigidity by all parties as Israel digs in, waiting for the storm to blow over, and Palestinians wait for America to impose their maximum demands.

The recent Wye agreement is a case in point. It represented a compromise between the Palestinian demand for more than 20 percent of the disputed territory as an entrance price into final status talks and the Israeli offer of 10 percent. The ultimate compromise of about 13 percent eased tensions temporarily, but in the absence of a definition of either security or peace, it failed to allay ultimate concerns. Many Israelis saw it as part of a process to push them back, step by step, toward the indefensible '67 borders. And some PLO radicals may have viewed it as an exercise in using American pressure for their own purposes.

To elicit genuine Israeli flexibility, there needs to be an understanding between Washington and Israel about both the extent and the limits of Israeli withdrawal -- such as existed in the first disengagement agreement in 1974, which launched the peace process. Such coordination is not a favor to Israel. It is the precondition to persuade the Palestinians that we can deliver what we promise and to reassure the Israelis that we will not push them beyond what they see as their vital security interests.

As the peace process reaches its final stage, America's role will be no less important for being more subtle. As a former chief of staff, Barak is unlikely to be less conscious of the requirements of Israeli security than his predecessors. In any event, Washington is not in a position to draw final lines or to stage-manage indefinitely a series of tactical compromises. At the same time, the Palestinians have a right not only to statehood but to the greatest degree of territorial contiguity and conditions of life compatible with their dignity.

The challenge to American diplomacy is to leave space for the kind of conceptual breakthroughs that were the essence of the Sadat and Rabin/Peres initiatives -- within which the parties, with U.S. help, can work out the details. The challenge to Israel is to transcend the trench warfare that has characterized its recent approach to the peace process and develop a far-seeing scheme. The challenge to the Palestinians is to recognize that progress requires compromises and not only rhetoric; that simply accepting the Jewish state is not a sufficient concession; and that, unless the PLO modifies some of its positions, especially on borders and the control of terrorism, the United States will be unable to advance the peace process.

Arab-Israeli peace will not be a blissful state in which all tensions magically give way to an era of cooperation comparable to the European Union. But an Arab-Israeli peace would endow the region with a much greater degree of normality. And it would deprive Arab radicals of opportunities to undermine moderate governments.

What needs to be reconciled at this stage is the impossibility of Israel's return to the '67 frontiers with the Palestinian necessity of its own state with contiguous territory; the Israelis' basic belief in the indivisibility of Jerusalem and the need for an Arab foothold somewhere in Jerusalem other than in the Old City, and a special status for the holy places.

Barak has forsworn new settlements, but any new borders will leave some settlements on the other side of the line. No Israeli government can survive their abandonment. The international status of those beyond Israel's final borders will be perhaps the most intractable challenge. But it will not get easier for being deferred.

Paradoxically, the issues between Israel and Syria are simpler conceptually. Rabin already had offered to return to the international boundary in exchange for a full peace. The most intractable issue in the Syrian negotiations will be the future of Israel's early warning stations on Mount Hermon and adjoining ridges. A similar challenge found a solution in the Sinai negotiations by placing them technically under U.S., and later U.N., supervision.

At this stage, however, what is most needed are not negotiating expedients but a conception of the objectives. If the Clinton administration can give an impetus to a definition of the ultimate destination of the Middle East peace process, it will leave a breakthrough toward peace as one of its legacies.

The writer, a former secretary of state, is president of Kissinger Associates, an international consulting firm that has clients with business interests in many countries abroad.