JERUSALEM, JUNE 20 -- Israel tonight welcomed the decision by the United States to suspend its dialogue with the Palestine Liberation Organization and said Prime Minister Yitzhak Shamir would soon forward new proposals to Washington for restarting the Middle East peace process.

Avi Pazner, a senior aide to Shamir, called the U.S. move "an important and positive decision" that would allow Israel "to reach a better understanding with the United States on how to continue the peace process."

Officials said Shamir is drafting a letter to President Bush with specific ideas on how to initiate Israeli-Palestinian negotiations without the PLO. Pazner gave no details but said isolating the PLO leadership of Yasser Arafat would make it easier for Israel to initiate talks with Palestinians living in the Israeli-occupied West Bank and Gaza Strip. "The PLO will no longer be considered by {Palestinians} as a major factor in the process, so I think they will be more able to choose representatives in further peace talks," he told reporters.

Shamir has sought to persuade U.S. officials that the PLO continues to engage in terrorism despite its renunciation of such tactics. When guerrillas from the Palestine Liberation Front, a PLO faction, launched a seaborne attack at a beach near Tel Aviv May 30, officials here demanded a break in the dialogue.

Today, the minister of police in Shamir's new government, Ronnie Milo, told parliament that Israel had conclusive evidence that the attack was aimed in part at the U.S. Embassy in Tel Aviv.

Although the Labor Party officially opposes direct negotiations between Israel and the PLO, several of its leading figures said the U.S.-PLO dialogue was necessary to keep the peace process alive.

On television, former defense minister Yitzhak Rabin, leader of Labor's conservative wing, said the U.S.-PLO contacts had been worthless, but he accused Shamir of deliberately thwarting the peace process.

The dialogue "did not contribute a thing," Rabin said. "But the problem is first of all ours. Are we ready to continue the peace initiative in cooperation with Egypt and the United States when the address is the Palestinians in the territories and not the PLO? This initiative was cut off by {Shamir's} government, and my feeling today is that any event is exploited for the purpose of stalling the peace process by this government."