Prospects for Middle East peace lay in tatters last night after the worst day of violence in the occupied territories since trouble erupted a fortnight ago.

Two Israeli soldiers were killed by rampaging youths who broke into the police station where the soldiers were being held after straying into a Palestinian area. Viewers tuned to television news stations watched in horror as a ringleader of the lynch mob appeared at an upstairs window, his hands dripping with blood.

Israel responded with rockets fired from helicopter gunships at buildings thought to have some connection with the attack. Targets included the broadcasting center of Palestinian television, blamed for inciting local youths to riot, and the Gaza headquarters of Yasser Arafat, accused by Israel of failing to bring his people under control.

U.S. President Bill Clinton, watching the diplomatic prize of his term in office slipping away, appealed for calm. "While I understand the anguish the Palestinians feel over the losses they have suffered, there can be no possible justification for mob violence," he said. "I call on both sides to undertake a cease fire immediately and immediately to condemn all acts of violence."

Secretary of State Madeleine Albright earlier called upon "the entire international community to join the United States in urging Chairman Arafat to take the steps necessary to bring this senseless and destructive cycle of fighting to an end."

U.N. Secretary-General Kofi Annan called the lynching and mutilation of the Israeli soldiers' bodies "a chilling act."

The soldiers, both reservists called up to active service in the last few days, had driven their armored vehicle into part of the Arab-dominated West Bank town of Ramallah — whether by accident or design was last night unclear. Palestinian police arrested them and locked them in the cells as a 300-strong crowd, maddened with pent-up rage, gathered outside.

As the mob surged forward, guards reportedly offered little or no resistance. Then the crowd, who included several dozen waiting newsmen as well as rioters who'd stormed the police station, heard two shots ring out.

The two dead bodies were pitched over the balcony to the street below, where youths beat them with scaffolding poles and dragged them through the streets. Young men and women in western clothes cheered and clapped, smiling at the orgy of violence.

The gruesome spectacle of blood on Arab hands provoked Israel into her most forceful retaliation in 14 days of conflict, which has now left 89 people, mostly Palestinians, dead.

Targets for precision strikes ranged from the police station where the atrocity took place to three rubber patrol boats of the Palestinian Navy, moored in Gaza marina. Israeli tanks later circled Palestinian cities and the army clamped an internal closure on the areas, preventing Arabs from leaving their communities.

A smiling, defiant Mr. Arafat was cheered by hundreds of Palestinians as he toured sites hit by Israeli rockets and visited the wounded at a Gaza hospital.

"Our people don't care and don't hesitate to continue their march to Jerusalem, their capital of the independent Palestinian state," he said, adding that the Israeli actions were tantamount to "a declaration of war."

Israeli Prime Minister Ehud Barak dismissed the claim as "nonsense, bullshit and propaganda." Interviewed by CNN correspondent Christiane Amanpour, the former general added ominously: "It doesn't amount to anything. It was not one in millions in what we can do if we are really in war." Israeli military spokesmen later added that their operations were designed to eliminate terrorism.

Many in the region described yesterday's chaos as a nail in the coffin of the peace process in which Israel, the Palestinians and the United States have invested so much over the last seven years. The Palestinian authorities responded by freeing 31 jailed militants from the extremist group Hamas, whose spiritual leader, Sheikh Ahmed Yassin, warned Israel she would pay "a heavy price" for the rocket attacks on Arab soil.

The releases contravened the terms of the 1993 Oslo Accords and subsequent Wye River Agreement, under which the Palestinians are responsible for ensuring Israel's security and for clamping down on terror campaigns being plotted and carried out from within their autonomous areas.

Some analysts believe Mr. Arafat needed a fight with Israel to shore up his wavering authority among his own people. At the Camp David talks earlier this year, Mr. Barak offered unprecedented concessions by an Israeli leader, including some disputed parts of East Jerusalem. But the two leaders' positions ultimately proved irreconcilable, with neither willing to cede control over holy sites in the Old City.

Now, such talk seems to belong to a distant dreamland. In the here and now, the ancient hatreds that divide Arabs and Jews speak more loudly than any rhetoric of peace. Yesterday's madness has all but drowned out the hopeful mood music of those few short weeks ago.
 

Middle East peace campaigners redoubled their calls for dialogue last night after violence in the occupied territories caused widespread destruction to property and claimed two more lives, bringing to 89 the number of people killed in the present round of troubles.

In Ramallah, Palestinian police intervened to try to save two Israeli soldiers, who'd driven their car into the West Bank town in an apparent blunder, from being dragged out and seized by locals angry over recent violence and living conditions under the U.S.-brokered Oslo "peace process."

But when a 300-strong crowd converged on the town's dilapidated police station, where the Israelis were taken for their own protection, officers were overwhelmed and could not prevent the pair from being shot and killed.

By this stage, international news crews, in Ramallah to cover the funeral of a Palestinian shot by Israeli soldiers, had been alerted to the standoff by local activists and converged on the police station. They were treated to a gruesome spectacle.

First, two shots rang out from within, then, shortly afterward, a young man appeared at the window with blood smeared on his hands. The soldiers' bodies were tipped over the balcony to the street below, where they were beaten with scaffolding poles to cheers from some onlookers.

The scenes caused anger and frustration in Israel, where they were repeatedly shown on television news bulletins. But Uri Avneri, a founder of the Peace Movement, said the media had failed to prompt Israelis to reflect on their treatment of the Palestinians, instead presenting events in such a way as to instill "total contempt for the other side."

He predicted that calls for a hard-line approach would be short-lived and replaced by a strengthened resolve to make genuine peace, something opinion polls suggest is still favored by most Israeli voters.

Three hours after the killings at Ramallah, Israeli helicopter gunships launched rocket attacks on targets including the police station itself, the broadcasting center of Palestinian television, which Israel blames for inciting riots with emotive reporting, and Yasser Arafat's headquarters in Gaza City. No one was killed in the attacks after Israel issued specific warnings of intended targets.

But for many Palestinians the action underlined the arbitrariness and impunity of the occupying forces in territory Israel first gained in the 1967 war. Negotiations in the seven years of the Oslo process have concentrated on the proportion of land to be "given back," in spite of U.N. resolutions that declared the occupation illegal and called on Israel to withdraw forthwith.

Troops closed off entire Arab communities yesterday, a frequent occurrence, which adds to the unpredictability of everyday life for Palestinians. An army checkpoint just south of Bethlehem obliged Ibrahim Issan to scramble over a nearby hill to reach his office at the Hope Flowers school, which places peace and coexistence at the heart of the curriculum.

When movement between areas is possible, Israeli volunteers teach Hebrew, science, English and computer skills to local children; in return, they learn Arabic and Palestinian culture. Mr. Issan founded the school to help overcome negative perceptions as a contribution to peace from the grassroots: "We have a lot of fanatics, but my dream is for Muslims, Jews and Christians to live together. It will not happen without hard work."

Classes were abandoned for the day only after soldiers refused to allow a water carrier to get through. Water is not piped to this part of the West Bank, another frustration underpinning the conflict. The writer Norman Finkelstein estimates that for every liter of water available to a Palestinian in the territories, an Israeli settler consumes 876 liters.

Some analysts believe fears and grievances over so basic a need as water prove the conflict must be seen — and peace sought — in a wider Middle East context. Israel's chief stated concern is invariably "security" — neighbored as she is by countries that still deny her right to exist. The kidnapping of three Israeli soldiers at the weekend by Hezbollah has fed these concerns. Syria supports the Lebanese guerrilla group and wants the Golan Heights, more territory Israel annexed by force in 1967, to be returned. Negotiations brokered by the United States foundered earlier this year.

The Golan forms the eastern shore of the Sea of Galilee, the "Kinneret" that supplies much of Israel's water; downstream lie the occupied territories, which rely on whatever is left to flow further south in the River Jordan. If Israel is to be relieved of pressure from Hezbollah, she may have to return the Golan to Syria on terms that provide for some sharing of access to water from the Sea.

Syrians in turn are nervous about their water, most of which comes presently from the Euphrates. Upstream, Turkey is now building a massive dam, flouting international law, which could reduce the Euphrates to a trickle. Besides providing irrigation, the Ilisu Dam would inundate areas where Kurdish separatism has flourished, an issue affecting other countries with Kurdish minorities including Iraq and Iran.

Johan Galtung, director of the TRANSCEND international peace network, called yesterday for a Conference for Security and Cooperation in the Middle East, to consider all parties and all their issues together, with recognition on all sides of Israel's right to exist and of the Palestinians' right to be represented by their own independent state.