Major General Uri Saguy, the head of military intelligence, said Syria will insist that Israel withdraw entirely from the Golan Heights which it captured in 1967.
The Israeli Prime Minister, Yitzhak Rabin, says he is only prepared for a "very small withdrawal" to be followed by further pullbacks over three years to test Syria's resolve about peace. The government-run Syrian newspaper Tishrin says Israel's offer reflected "a lack of seriousness" about peace. The impasse appears to doom US Secretary of State Warren Christopher's attempt to end the deadlock in the Syrian-Israeli talks even before it begins.
The intelligence survey combines the assessment of the external security service Mossad, internal security Shin Bet, military intelligence and the Foreign Ministry's research arm. General Saguy said the PLO Chairman, Yasser Arafat, had no alternative but to carry on the peace talks, but continued stalemate would lead to internecine Palestinian violence and more attacks on Israeli targets.
If the assessment is correct it is bad news for Mr Rabin's government which needs a period of calm with no fresh bombings, or a breakthrough in negotiations with Syria if it is to stand a chance of winning the general election next year.
Israel believes that although there have been no fresh bombs since one in Beit Lid on 22 January killed 21 people, Mr Arafat has made no effort to smash the infrastructure of Hamas and Islamic Jihad in Gaza. This means the absence of suicide bombs is the result of a tactical decision by Islamic militants and not because of action by Palestinian or Israeli security.
Although Israeli intelligence says the probability of war over the next year is low, Israel is fighting two small-scale wars, one with Hamas and Islamic Jihad at home, and the second with Hizbollah, neither of which is going well. Even on the West Bank, where Israel still controls security, it has failed to do more than force Islamic militants to move house every few days.
The real intentions of Syria have been a matter of controversy in Israel. Although intelligence says Syria took a strategic decision for peace in the early 1990s, it also used aid from Saudi Arabia to buy 700 T-72 tanks and 300 self-propelled guns from eastern Europe. The Syrians have not rebuilt their airforce to cope with Israeli air superiority but have reinforced their ground-to-air missiles. They want to buy the Russian SA-10 but Moscow will not sell until Syria's military debt is paid.
While Israelis speak of the growing strength of the Egyptian armed forces, the enemy they take most seriously is Iran because they believe it could build a nuclear bomb in eight to 10 years. Israel has started a publicity offensive against Iran with the apparent aim of getting the US to pressure Russia and China not to sell it nuclear components. Although Iran bought the 1,300km No-Dong missile from North Korea it has not been delivered, probably because of the nuclear power deal agreed last year between North Korea and the US.