DAMASCUS, Syria--Secretary of State George P. Shultz yesterday met with President Hafez Assad to report on the Moscow summit and the faltering U.S. plan to set up Arab-Israeli peace negotiations.

Shultz met with the Syrian leader a day after bluntly telling Israel its occupation of the West Bank and Gaza Strip and "frustration" of Palestinian civil rights were a "dead-end street."

The summit pointed the United States and Soviet Union in a more cooperative direction in dealing with regional disputes, and Shultz hopes Syria will take a cue from Moscow.

Syria is the Soviet Union's principal ally in the Arab world and has the only missile arsenal that can approach Israel's in capability.

Israeli officials say Syria has put chemical warheads on some of its missiles and that they can reach Israeli cities and military targets.

Shultz is reporting to Assad that the U.S. plan for Middle East peace talks ran into a dead-end in Israel and Jordan.

The secretary of state found neither King Hussein of Jordan nor Israeli Prime Minister Yitzhak Shamir prepared to negotiate under terms set by Washington.

The plight of American hostages and the Syrian military deployment in Lebanon were also on the agenda.

Since there is virtually no U.S. contact with Iran, the Syrian government remains the main U.S. channel for information from Tehran. Syria is Iran's main Arab ally.

While the U.S. State Department routinely affirms its support for Lebanon's indpendence, Syrian influence in the war-battered country is considered preferable to the rise of Iranian sponsored Islamic fundamentalists believed to hold U.S. and other foreign hostages there.

Shultz flew to Damascus from Cairo, where he had spent the night after flying from Jerusalem where he had talks with Shamir.

He was met a Damascus airport by Syrian Foreign Minister Farouk al-Sharaa before heading to the U.S. Embassy.

Shultz, on his fourth trip to the region this year to promote his peace plan, held two meetings with Shamir in Jerusalem on Sunday in an effort to persuade him to agree to make a commitment to Jordan that Israel will exchange part of the occupied territories for Arab recogniton.

He also met in Israel with Foreign Minister Shimon Peres, Shamir's coalition partner and political rival; Defense Minister Yitzhak Rabin; and members of the parliament's Foreign Affairs and Defense committees.

In a public statement, Shultz told Israel, "The continued occupation of the West Bank and Gaza and the frustation of Palestinian rights is a dead-end street." He added: "The belief that this can continue is an illusion."