Israel's policy of building civilian settlements in occupied Arab territories - the issue that most seriously divides it from the United States - has also caused a bitter split within the government of Prime Minister Menachem Begin.
This became clear yesterday as a Cabinet meeting that was to provide new guidelines for the sensitive issue ended inconclusively after five hours of reportedly intense debate.
After the meeting, Begin was quoted as saying that "problems have accumulated and we are stopping and thinking" about the settlements, which have become a major issue in the stalled peace negotiations with Egypt.
The special session of the Cabinet to confront the first domestic challenge to Begin's policy on settlements came as Assistant Secretary of State Alfred Atherton arrived to begin a new round of shuttle diplomacy aimed at breaking the deadlock in the peace talks.
Atherton's first task will be to try to bring about an agreement on a "declaration of principles," which has so far cluded all diplomatic efforts since Christmas.
Despite the length of yesterday's Cabinet session, not all of the ministers had a chance to present their views, the official communique said. The issue is to be brought up again Sunday at the Cabinet's next regular meeting.
No one in the Cabinet completely opposes Israeli settlements in the occupied territories. But there are those who agree with Defense Minister Ezer Weizman that all settlement activity should halt temporarily because the entire issue is hurting Israel both with the American and the Egyptians.
On the other side are those who, to varying degrees, agree with Agriculture Minister Ariel Sharon that Israel ought to push ahead with the selective colonization of the occupied territories to stregthen its hand in future negotiations. The more Israeli settlements there are in the areas of the occupied territories that Israel wants to hang on to Sharon contends, the more difficult it will be to move them out.
The debate yesterday spilled over into a general discussion of politics, according to informed sources, and so intense are the feelings involved that personalities and political rivalries have become intertwined with the issues.
There is a group within Deputy Prime Minister Yigael Yadin's party, the Democratic Movement for Change, that wants the Democratic Movement to leave the government coalition, if the government does not agree to halt activity on the settlements.
The U.S. position for 11 years has been that all Israeli civilian settlements in the territories Israel captured in 1967 are illegal. Secretary of State Cyrus Vance recently took the issue a step further by sayingthat because they are illegal they should not exist. This infuriated Begin and both said he and Foreign Minister Moshe Dayan said the United States had lost its impartiality and taken the Arabs side.
Egyptian President Anwar Sadat told opposition leader Shimon Peres - the last Israeli to meet with Sadat - that the Israeli position on settlements had made him almost despair of the prospects for peace.
American Jewish leaders have also been frustrated in their efforts to persuade Begin that, on this issue. American Jews could not stand as solidly behind Israel as they have in the past.
The debate within the government now is whether a moratorium should be declared to ease negotiations and to improve the atmosphere for Begin's strip to Washington next month.
Weizman thought he had an agreement to temporarily halt settlement activity in the Rafiah area, which separates the Gaza Strip from the rest of the Sinai desert. All occupied territories come under military jurisdiction and Weizman thought as minister of defense. But Sharon is chairman of the ministerial committee on settlements and Sharon urged that work be pushed ahead.
Begin can be expected to try to paper over any differences within his Cabinet, but emotionally and religiously attached to the concept of Jews settling in all of what was once British Palestine and the thought of uprooting any Jewish settlement anywhere is painful to him.
While others may thing of the Rafiah salient simply in terms of Israel's security. Begin adds to security the dimension of deep personal belief. Therefore he talks about the civilizing ular desert is not his to make bloom, while others, including the Americans, are trying to tell him that particular desert is not his to make bloom.
While the previous Labor Party Government of Yitzhak Rabin and Peres would have asked for territorial concessions on all fronts it was also willing to make territorial concessions in all the occupied territories. The Begin government is more forthcoming about giving back the Sinai desert to Egypt because it is unwilling to give back anything on the West Bank and Gaza and thereby hopes to buy Egypt of by offering to return virtually all of the Sinai to Egyptian sovereignty.
But the settlements and the air-bases that Israel wants to remain in the Sinai have been the sticking point. The question has been how can you keep Israeli settlers protected by Israel troops in an area that is supposed to be returnd to Egyptian sovereignty?
The peace plan that Begin pesented to President Carter in Decmber was not precisely the same as that presented to Sadat on Dec.25 because the Israeli Cabinet pointed out the holes in Begin's plan concerning administration and law governing Israeli settlements in Egyptian territory.
In short, Sadat will not accept Begin's proposal, but he can legitimately point out that neither Egypt nor any other Arab state ever agreed to the previous government's idea of territorial concessions either.
Another difference in setttlement policy between this government and the previous government is that, on the whole, the previous government preferred not to settle Israelis near the Arab population centers. The present government is dedicated to settling in the heartland of the Arab population on the West Bank.
Some Israelis, even within the government, feel that the government has less than honest in its settlement policy.
Dayan said that settlements would be restricted to existing army camps for a year. But settlers have been allowed to set up camp on the site of ancient Shiloh on the West Bank on the pretense that they are preparing an archeological dig. The government gave them archeology permits, not permission to settle, but they say openly that they are establishing a twon and the government has done nothing to prevent them.
Another problem is the creation of "Ghost settlements" in the Sinai - plots of land miles from actual settlements that are called extensions of those settlements. The charge has been made that these ghost settlement are being prepared to provide something to bargain away to the Egyptians. This has been officially denied but, privately, even some in the Cabinet see in this another attempt to deceive.
As of Jan. 1 there were 91 recognized settlements within the occupied territories, according to the Jewish Agency. Twenty-seven are on the Golan Heights, which was captured from Syria: seven are in the Gaza Strip and 10 are just to the west in the northern Sinai's Rafiah salient. Three others are in the southern and eastern Sinai.
On the West Bank there are 44 settlements - 17 of them in the Jordan River Valley.
These figures are not entirely accurate because they do not include the numerous Jewish residential and industrial developments around East Jerusalem, which Israel has annexed and does not consider occupied territory.
The present government added eight new settlements since it came to power in June and legitimized three more than existed under the old government but had not been authorized.
The Begin government has added approximately 1,500 new settlers to the areas in the occupied territories, bringing the total number of Jewish settlers to about 10,500 according to the Jewish Agency, a Zionist group that has financial responsibility for the settlements.
The majority of Israelis in all major political parties agree that some of the settlements should remain. Some people, such as Weizman stress the security aspect while others the religious and biblical claims of Zionism.
The West Bank and Gaza, which Jordan and Egypt captured in 1948 and lost in 1967, were parr of the old British Palestine mandate. Israel contends that its claim to these areas is as strong as any other county's claim and there is overwhelming support for the government's resistance to the creation of a Palestinian state.
When it comes to the Sinai and to the Golan. Israel does not claim the right to the land but says simply that certain areas are needed to guard Israel's security.
Neither the Arabs nor most of the rest of the world agree with Israel on the settlements issue and it appears doubtful that even if the government decided to declare temporarily a moratorium on settlements it would solve the basic issue: what can Israel reasonably expect to keep of peace with the Arabs?
Sadat basically told the Isrealis they could have peace in exchange for lands taken in 1967 but the Israelis want both. When it comes to areas such as the Jewish Quarter of the Old City of Jerusalem and the historic Wailing Wall, there may be room for eventual compromise but it is doubtful that peace negotiations will reach a successful conclusion on the basis of Begin's present plan for the settlements in occupied territories.