The terms on which Egypt would accept a peace agreement with Israel appear to be softening on some crucial points.
Egypt, authoritative sources say, is now prepared to settle for a restoration of its sovereignty over the Sinai Peninsula and a commitment in principle from Israel to pull out of the West Bank of the Jordan and the Gaza Strip in the future, with the questions of sovereignty over those territories and the political future of their people left to later negotiations.
The word used here to describe this is "fig-leaf" - a thin cover that would allow Egypt to claim as a comprehensive solution what would be viewed by critics as tantamount to a separate peace with Israel.
The Egyptians have reportedly convinced their backers in Saudi Arabia that they will insist on a comprehensive settlement, especially since Sadat rejected a bilateral solution with Israel at the Ismailia summit. But the definition of comprehensive solution is thinning rapidly, according to Egyptian officials and informed diplomats.
Even this figleaf solution may be out of reach at least in the first round of talks between the Egyptian and Israelis foreign ministers and U.S. Secretary of State Cyrus Vance scheduled to open Jan. 16 in Jerusalem, some informed Egyptians believe. This is either because Israel actually wants to annex the West Bank or because the Israelis are not yet psychologicially prepared to accept Egyptian assurances that real peace with the Arabs is possible if they meet Egypt's minimum terms.
Egypt's rock-bottom minimum, without which President Anwar Sadad and his negotiators insist that there cannot be peace, remains an Israeli commitment in principle to the eventual end of its military occupation of Arab territories captured in the 1967 war.
Egypt's public position on the terms for peace, however, has not changed since Sadat went to Jerusalem - full withdrawal from the occupied territories and self-determination for the Palestinians, leading to a comprehensive agreement between Israel and all its Arab neighbors.
Sadat, in an interview with the Cairo magazine October said that after his trip to Jerusalem. Prime Minister Menahem Begin, the "hawk of hawks," has "changed his opion and wants peace, not war." He also said that Israel's "sacred dreams such as that of a Great Israel from the Nile to the Euphrates have vanished."
He went on to say, however, that "as this point it is impossible for an agreement to exist between us and the Jews" on the question of Palestine.
Despite President Carter's comments after his talks with Sadat in Aswan on Wednesday, which seemed to put him close to the Egyptian position on the future of Palestine and the need for Israeli withdrawal, the Egyptians have no confidence that the Americans are going to get tough with Israel on these issues, or that Israel would succumb to American pressure.
Foreign policy professionals here look on Carter and his advisers as amateurs incapable of adopting a clearcut Middle East policy and carrying it out. 'Carter isn't enunciating policy," one official said of Carter's zigzagging declarations on the Palestine question. "He's just thinking out loud and it depends on who he heard from last."
According to authoritative sources, the Egyptian strategy going into negotiations this month is following the lines hinted at by Sadat in his public statements. Egypt will continue opinion and to the Israeli lobby in the United States to accept Egypt's good faith and make the commitment in principle to an eventual withdrawal from the occupied territories, and once that is achieved do everything short of dishonor to turn it into an agreement that Egypt can sell to the other Arabs.
That would enable Egypt to move quickly toward recovery of the Sinai, while leaving the difficult details on other fronts - such as the political future of the Palestinians - to be worked out in later negotiations.
A source close to the negotiations said Egypt "cannot accept anything less than self determination" for the Palestinians.
But he said Israel would not be expected, as part of the price of peace, to agree to the formation of an independent Palestinian state, which Israel refuses to consider. He said it would be sufficient for Israel to withdraw from the West Bank and return it to Jordanian control, promising not to interfere if the Palestinians and the Jordanians wanted to work out some other arrangement in the future.
he said Egypt could not make peace without this or some other arrangement acceptable to "most Palestinians." That did not include the Palestine Liberation Organization, which in Sadat's view threw away its chance to participate in these negotiations by joining the rejectionist Arab states opposed to Sadat's initiative.
The Egyptians think their willingness to enter peace talks without the PLO by their side should be seen by the Israelis as evidence of Egypt's sincere desire for peace.
"I believe Sadat legitimately and earnestly believes in an arrangement for the Palestinians and not just as cover for a separate peace," an informed official said. "But he realizes that if we started this process in 1973 and it's now 1978 and it took until now for us to get this far, then a comprehensive settlement for the Palestinian problem will take a bit longer."
He said Sadat "wants a good start" on the Palestine problem to quicken the peace for Sinai.
According to well-placed officials, Egypt is willing to go a long way toward meeting Israeli demands for peace terms, provided the basic commitment on the West Bank and some new status for the Palestinians is forthcoming.
Egypt might, for example, accept minor adjustments to the pre-1967 borders, or anextended timetable for withdrawals or restrictions on the weapons that could be brought into a Palestinian state on the West Bank. But the Egyptians are also beginning to think about what might happen if even all this is not enough, if they come home from the Jerusalem talks empty handed.
The first recourse would apparently be a new appeal to the people of Israel not to throw away the chance for peace, to force Begin to reconsider in the interests of furture generations.
"The Jewish people have a special problem." Sadat told October, "which we must know so as to understand their stands and learn how they adopt their decisions. The Jews have been living in fear for thousands of years. They lived in ghettos fearing majority populations everywhere . . . As a mater of fact Jews feel that the whole world is their enemy. When they established Israel the imagination became a reality and fear became a certainty. They are strangers in a strange land. They are surrounded by millions of hostile Arabs."
The Egyptians believe that Sadat's trip to Israel made - or should have made - a decisive breach in that wall of fear. If the Israelis are not forthcoming with peace terms acceptable to Sadat in return for his gesture and his understanding. The Egyptians say, their most potent weapon is the threat of a return to the situation that existed before the Jerusalem trip.