With major unresolved issues still blocking a peace agreement, the Israeli Cabinet met long into the morning today to decide whether Israel will modify its positions on the last scheduled day of President Carter's personal peacemaking effort in the Middle East.
Prime Minister Meanachem Begin convened the extraordinary meeting late last night, and it ended at about 5:20 a.m., after more than six hours.
President Anwar Sadat of Egypt was believed to have insisted on changes of some sort in all three of the U.S. proposals that the Israeli Cabinet approved a week ago. The Cabinet was believed to have considered these proposed changes as well as other key issues that emerged -- and which American officials said could prove to be an even greater obstacle to the accord sought by Carter in his dramatic on-the-spot diplomacy.
After the Cabinet meeting, Begin told reporters the government had made "very reasonable decisions" about the Egyptian terms, although the declined to go into any detail.
"I am hopeful, always," the prime minister said. "I expect a positive reply from Egypt."
As the meeting began last night, Carter administration officials appeared less than optimistic as they awaited word from the Israelis. Secretary of State Cyrus Vance was made available to the Cabinet all night all throughout the predawn hours in case he needed to clarify or help explain U.S. understanding of the Egyptian concerns, according to a senior Whit House official.
Begin said he expected Vance, who was kept informed of the Cabinet decisions, to inform the president before Carter was to attend a second Cabinet meeting, which was delayed for two hours until 10 a.m. today.
Later today, Vance is expected to fly to Cairo with the latest Israeli positions if they are viewed by the Americans as having a chance of winning Egyptian approval, the White House official said.
If the U.S. officials feel the Israeli Cabinet proposals would only be rejected outright by Sadat, Vance will not go to Egypt -- and tht will be interpreted as the public signal that the U.S. officials have concluded that the president's peace initiative has failed for the time being.
At a state dinner at the Israeli parliament, the Knesset, Carter and Begin presented a sharp contrast in their assessments of where the talks stood going into the crucial Israeli Cabinet meeting.
As Carter looked on grim-faced, Begin said: "It is my duty to say to you, there are many serious issues and difficult problems."
Begin also repeatedly referred to Israel's security needs, and in an apparent gibe at the U.S. refusal to recognize Israeli sovereignty over Jerusalem, he twice referred to "the eternal capital of the land of Israel -- the indivisible Jerusalem."
Carter, however, while also mentioning difficulties in the talks, placed more emphasis on his confidence that a treaty will be signed, saying: "We are now in sight of an important initial phase of that [peace] objective."
Yesterday was a day of unusually long sessions involving Carter, Begin and their highest-level advisers.
From 11:15 a.m. until 1:30 p.m., the two delegations met in the Cabinet room of the prime minister's office. Then sandwiches and beverages were brought in for a working lunch that lasted for 1 1/2 hours. After lunch, the delegations talked again from 3 to 3:35 p.m. They adjourned so that each side could caucus separately.
And then the two sides reconvened from 5:05 to 5:35 p.m. -- and it was here that Begin told Carter he would be calling a special Cabinet meeting for 10 p.m., one hour before the state dinner had been scheduled to end.
From that point on, at Carter's instruction, the U.S. delegation began preparing suggestions for the Israeli Cabinet to consider, positions on all outstanding issues that might be viewed favorably by the Egyptians. The suggested positions, one White House official said, might then become the basis for an agreement.
After the last of the meetings, Dan Pattir, Begin's press secretary, said: "We still have some serious problems. But we have made some progress."
After several days of expressing cautious optimism about the outcome of the talks, however, some Israeli government sources last night began alluding again the Egyptian "salami tactics," a term frequently used here to describe attempts to force Israel into making new concessions just as agreement appears within reach.
They expressed confusion over whether Egypt's changes in the U.S.-sponsored compromise proposals reflect a tactical bargaining position by Sadat, or whether the Egyptian president is signaling his intent to back away from the peace process because of pressure from other Arab states.
Sadat made changes in all three of the last Carter proposals agreed to earlier by the Israeli Cabinet. But an American official said these are not the most severe of the Egyptian-Israeli differences.
The major stumbling blocks are the four areas that were not part of the Israeli-approved Carter compromise, the official said. These four issues are:
Sinai oil wells: Israel will be handing them back to Egypt. Egypt agreed at Camp David that it would consider Israeli requests to buy oil from these wells in good faith and would treat the requests on the same basis as those of any other country.
But the new government in Iran, which formerly supplied about 60 percent of Israel's oil needs, has shut off all oil sales to Israel and Israel is now demanding the right to purchase all the oil the Sinai wells produce and all the oil they are able to produce in the future, even as their production increases.
Egypt has refused to consider negotiations over Sinai oil until after the treaty is signed and relations with Israel are normalized.
Exchange of ambassadors: Israel considers an exchange of ambassadors important to show the level of normalized relations that are to be achieved. Egypt wants and exchange of diplomats at a lesser rank at least at the beginning.
Gaza: Egypt, expecting that Israel will have problems with Jorda on negotiating autonomy for the West Bank, wants Israel to show its good faith by beginning the process of autonomy with the Gaza Strip, occupied by Egupt between 1948 and 1967.
Egyptian role in Gaza: If Gaza autonomy begins first, there is a dispute over whether Egyptian officials would have a role in determining the autonomy process in Gaza and would be able to maintain a liaison office in the territory.
The Carter proposals dealt with issues that bad been stumbling blocks ever since the talks began in earnest -- linking the separate Egyptian-Israeli provisions of the treaty to self-rule of Palestinians in the West Bank and Gaza Strip, a target date for holding Palestinian elections in these occupied territories.
The Carter proposals were approved by the Israeli Cabinet a week ago, only to be changed to some degree by Sadat in his meetings in Cairo and Alexandria with the U.S. president. They are:
A "target date" for autonomy in the Palestinian areas. Sadat had wanted a target date for elections to be held before relations could be normalized between Egypt and Israel. Israel feared Palestinian guerrillas and Jordan could thwart the elections and thus sabotage the accord.
Under Carter's compromise, negotiations for Palestinian self-rule would begin one month after the treaty signing and would have to be completed within one year, and elections would beheld "as soon as possible."
Sadat is understood to have accepted the concept that the "target date" would refer to the end of the negotiations. But he is said to have made some changes in the question of how firmly to refer to the requirement that elections be held.
The link between th Egyptian-Israeli accord and Palestinian autonomy: Egypt has sought to make its commitments to Israel dependent on implementation of West Bank and Gaza autonomy and Israel has sought to separate the two issues.
The compromise language says that although the bilateral agreements are part of a comprehensive pact, that connection does not diminish the obligations of Egypt and Israel -- irrespective of the "action or inaction" of other parties, such as Jordan or the Palestinians, in the negotiations for self-rule in Gaza and the West Bank.
The supremacy of the treaty: Also in dispute is whether Egypt would not be allowed to subordinate her obligations under the Israeli treaty to mutual defense pacts it has with other states in the event of outbreak of hostilities in the Middle East.