WEDNESDAY'S press conference in Geneva highlighted the major point of disagreement between the United States and Iraq: the Palestinian situation. Secretary of State James Baker ruled out explicitly "linking" a solution to the Gulf Crisis with a discussion of the Israeli occupation. His strategy is to use military means to scare Iraq into complying with U.N. resolutions.

Iraqi Foreign Minister Tariq Aziz countered that discussion of the Israeli occupation is a precondition for peace in the Gulf. His strategy--"yes, absolutely, yes" to go to war with Israel in the case of U.S. attack--is designed to undermine Arab support for the international coalition. Even if Hussein loses the ensuing war, he will go down in history as a brave martyr for the Palestinian cause.

Since these strategies are irreconcilable, war seems inevitable.

But the press conference did reveal one way the crisis could be resolved: An Iraqi withdrawal from Kuwait following statements from U.S. officials that America believes in finding a peaceful solution to the Israeli occupation.

Would this be perceived as "linkage"? Not if it were merely a continuation of Baker's current willingness to "talk" about the Israeli situation, as he did for several hours with Aziz on Wednesday.

Baker should talk about how he has long believed in peace talks between the Israelis and Palestinians. He should talk about how he helped open a U.S. dialogue with the Palestine Liberation Organization. And he should talk about his personal commitment to autonomy for Palestinians on the West Bank.

Of course, as he did in Geneva, Baker should not make any promises that would link his "talking" to a solution to the Gulf Crisis. As he did in Geneva, he should insist on resolving the Iraqi invasion apart from any negotiations over the West Bank and Gaza Strip.

This strategy has one crucial benefit: It can serve to convince Hussein and the Arab world that war is not necessary to free the Palestinians from Israeli rule. In doing so, it undermines Hussein's strategy of fighting a war for the Palestinians; given a viable alternative implied in Baker's language, such a conflict would only hurt their cause.

MUCH of the extremist language of Hussein and the Palestinian Liberation Organization (PLO) towards Israel results from their belief that a peaceful settlement of the Palestinian issue is not possible. Any way the United States could undermine this belief would make Iraq hesitate before choosing war.

As Hussein well realizes, a war between Iraq and the U.S. would make the possibility of a solution to the Palestinian question remote at best in the foreseeable future. If Iraq attacks Israel, as it has said it would do, and Israel retaliates, as it has indicated, then the Middle East would be plunged into a bloodbath that would be unlikely to produce a Palestinian solution. Only an Iraqi military victory against tremendous odds would give Hussein the leverage to force territorial concessions from Israel.

With enough talk by Baker about U.S. support for a peaceful settlement, Iraq's best hope for "liberating Palestine" would become clear.

Once Iraq has withdrawn from Kuwait, the U.S. must continue its efforts to arrive at a Palestinian solution. Baker must make a major effort to move the peace process along, or else Iraq will question the U.S. commitment to a settlement and attempt to prove to the world, especially the Arabs, that peaceful negotiations over Palestine are truly an impossibility.

A perceived lack of U.S. initiative could anger Saddam to the point where any sort of attack on U.S. forces or Israel is possible. And with members of the Arab community also questioning Baker's sincerity, Saddam would surely drag the world into war this time.

On the other hand, serious negotiations between the Israelis and Palestinians might lead to a land-for-peace settlement. Though it could be argued that this result will be linked back to the Gulf Crisis, such a link would be tenuous at best. Baker would not have promised a thing before the Iraqi withdrawal--not even a conference. His subsequent efforts on behalf of a peaceful settlement would only be a continuation of already-established policy.

Meanwhile, a peaceful Palestinian settlement would remove a major stumbling block to stability in the Middle East. Even with the Iraqi war machine relatively intact, Hussein would have little cause to use it against Israel. Europe, the Soviet Union and the U.S. would stand united behind U.N. resolutions guaranteeing security for all states, including Israel. This crisis has made all too clear how a peaceful solution to the Palestinian issue is a prerequisite for Israel's own security.

ADMITTEDLY, Baker's "talking" may not lead to peace. Iraq might not buy Baker's statements about his support for Palestinian sovereignty. And no matter how hard the United States tries to establish a settlement, negotiations between Israel and the Palestinians still might fail.

But both of these cases would leave the world no worse off than it is now. Today, peace in the region--and the security of Israel--is in grave jeopardy. Rather than bracing for a bloody conflict, American diplomats should try to give Hussein every reason to comply with U.N. resolutions.

To use President Bush's own analogy, there is still one last mile the United States could walk towards peace.