JERUSALEM, Aug. 5 (JTA) — The Middle East is in a tense state as it awaits an American diplomatic initiative aimed at salvaging what”s left of the Israeli-Palestinian peace process. At the same time, Israelis are hoping and praying that the July 30 twin suicide bombing here was not the harbinger of a new wave of bloody violence. The new American effort to restore some dynamism to the crumbled relations will initially take the form of an open-ended mission by U.S. Special Middle East Coordinator Dennis Ross slated for the end of the week. Ross” mission, postponed from last week, has taken on a new urgency in the wake of the terrorist attack that claimed 13 victims. Already tense relations between Israel and the Palestinians hit rock bottom this week as the two sides traded vehement rhetoric and cut off virtually all contact. Unlike his previous shuttles since the peace process became stalemated in March, Ross is believed to be armed this time with some pointed letters from President Clinton and U.S. Secretary of State Madeleine Albright that are aimed at both Israel and the Palestinians. In what has been called by pundits both “a package proposal”” and “an ultimatum,”” the Clinton administration is expected to urge Israel to desist from further settlement construction in the near future while talks between the two sides resume. The talks would be aimed at addressing issues still unresolved from the 1995 Interim Agreement as well as the permanent status of the West Bank, Gaza Strip and Jerusalem. From the Palestinians, the Clinton administration is expected to demand a total war on terror and unfettered cooperation with the Israeli security services in preventing acts of terror and eliminating terrorist organizations. This demand is expected to come with redoubled urgency after last week”s attack on Jerusalem”s Mahane Yehuda market, which also left at least 170 people wounded. The attack prompted Israel to round up more than 150 suspected Islamic militants in areas under its control. Israel also threatened to enter the self-rule areas to carry out further arrests if Palestinian Authority officials did not do so themselves and imposed a closure on the West Bank and Gaza Strip and halted the payment of tax revenues it regularly transferred to the Palestinian Authority under the terms of the signed accords. Israeli officials this week also demolished at least six homes that they claimed this week were illegally built by Palestinians. Israel had withheld a payment of tax revenues, which Palestinian Finance Minister Mohammed Nashishibi said amounted to $41 million. He charged that Israel was making it impossible for the Palestinian Authority to pay salaries and expenses. Palestinian officials also said the closure of the territories, which prevents tens of thousands of day laborers from entering Israel, was a “collective punishment”” against the Palestinian people. They also charged that the punishment was misdirected, claiming that the bombers, whose remains have not yet been identified, had come from abroad and had nothing to do with the Palestinian people. Defense Minister Yitzhak Mordechai countered this week that even if the bombers had not come from the self-rule areas, they would not have been able to carry out the deadly attack without help from the terrorist infrastructure operating in areas under Arafat”s control. In the aftermath of the bombings, the Israeli Cabinet this week took aim at what it described as Palestinian Authority Chairman Yasser Arafat”s refusal to honor the self-rule accords, particularly its commitment to fight terror. If Arafat did not clamp down on terrorists and their infrastructure in the territories, Netanyahu told the Cabinet on Sunday, “We will not unilaterally honor our agreements, and the agreement cannot survive.”” U.S. officials apparently shared Netanyahu”s charge that Arafat was not doing enough to fight terror. “The security cooperation has been uneven,”” Sandy Berger, the U.S. national security adviser, said Sunday on CBS television”s “Face the Nation.”” He added that the Palestinian effort against terror “has to intensify.”” House Speaker Newt Gingrich had even sharper words for the Palestinian leader in an interview Sunday, saying, “I think there are very few people who believe anything [Arafat] says, and I think he has squandered what was a great opportunity to build general peace in the region.”” Congress has recessed until September without extending a law that makes it possible for the Palestinian Authority to receive American aid and maintain offices in the United States. In Israel, meanwhile, security forces were on high alert throughout the week amid warnings that more terror attacks were likely. Hamas, which claimed responsibility for the Mahane Yehuda attack, threatened this week to launch a series of attacks against Israeli targets. Meanwhile, the measures adopted by the Israeli Cabinet in the aftermath of the bombings prompted criticism and appeals from European countries. The 22-member Arab League also criticized Israel, saying that the measures it adopted amounted to “a declaration of war”” against the Palestinian Authority. The league also held Israeli policies responsible for last week”s attack. Washington also sought to persuade the Israeli government to reconsider its actions. On Tuesday, the State Department specifically called on Israel to transfer the tax revenues it owed to the Palestinian Authority. Ross and his superiors clearly have their work cut out, in this environment, to re-establish the trust and goodwill needed to relaunch meaningful negotiations. Yet some observers have suggested that the very precariousness of the current situation may actually bolster the American envoy”s chances of obtaining a package deal with Netanyahu and Arafat. If he succeeds, and perhaps even more so if he fails, his mission is likely to be followed up Albright herself, who has yet to visit the region since her appointment. Both Albright and Clinton have repeatedly rejected the theory that American officials are turning away from energetic involvement in Middle East peacemaking to let the two sides “stew in their own juices”” for a while. While waiting for Ross, regional players have been at pains to engage in high-profile diplomacy of their own. Egypt”s President Mubarak held separate meetings in Cairo with Arafat and Foreign Minister David Levy. Jordanian King Hussein invited Arafat to Amman and telephoned Netanyahu to set up a visit of his own to Israel. The king later changed his mind, deciding instead to dispatch his brother, Crown Prince Hassan, for a visit this week to Jerusalem. Within Israel itself, recent events have intensified political discord. Labor Party leader Ehud Barak urged his colleagues to hold off from criticizing Netanyahu until after the mourning period ends for the Mahane Yehuda victims. But, in closed door meetings that were quickly leaked to the media, Barak attacked the prime minister”s policies and his recent boasts that his government, unlike the previous Rabin-Peres administration, had put a stop to terrorism against Israel. Nonetheless, the premier and Barak met alone Sunday — an event that has given rise to renewed speculation about a possible unity government. Netanyahu also met with President Ezer Weizman — even in the face of headlines that Weizman would make a state visit to the United States next month — his first since taking office more than four years ago — and that he would use the visit “to salvage the peace process.”” These reports maintained that the invitation to Weizman was itself a reflection of the Clinton administration”s distaste for Netanyahu”s policies. The premier and his aides reportedly were upset over the invitation to Weizman. But Netanyahu rejected that speculation. He publicly welcomed the news of the impending presidential conclave at the White House — although he added pointedly that he had first learned of it from the media.