Why Arafat could lose the peace: The PLO is controlling the Palestinian negotiators at the Middle East talks. But, says Sarah Helm, its power may slip away if Israel agrees to self-rule

In an executive suite in the Grand Hotel, Washington, four senior officials of the Palestine Liberation Organisation have set up a bank of fax machines and computers. As the Palestinian delegation continues its negotiations with the Israelis at the US State Department, its controllers are monitoring every move, overseeing every policy decision, and reporting back to the PLO chairman, Yasser Arafat, 6,000 miles away in his Tunis headquarters.

But the PLO's role as invisible controller of the Palestinian peace team is increasingly ambiguous. Although Mr Arafat is ultimately in charge, the new Palestinian leaders are rapidly growing in stature. Everyone has heard of Hanan Ashrawi, the Palestinian spokeswoman; but who has heard of Nabil Shaath, Mr Arafat's senior official watching the talks, who tells her what to say?

The fate of Mr Arafat and the PLO may depend on how they manage relations with the Palestinian authority proposed for the West Bank and Gaza. Will self-rule signal the PLO's demise and the rise of new, home-grown Palestinian leaders such as Mrs Ashrawi and Faisal Husseini? Or does Mr Arafat plan to return and stand as president in a new Palestinian state?

Israeli sensitivity means that the world has to pretend the PLO is not involved in the Middle East peace talks. But since these negotiations began, it has been clear that nothing could happen without the agreement of the PLO, which represents nearly 2 million Palestinians in the West Bank and Gaza and 3.5 million in exile. It is also clear that the Palestinian negotiators from the Israeli-occupied territories are mostly PLO loyalists, selected by the PLO.

The problem for the organisation is that this charade has exacerbated tensions between the 'outside' leaders in Tunis and the emerging leadership from the West Bank and Gaza. While local leaders have no desire to usurp power, and while Tunis protests that it has nothing to fear, the high profile of the 'insiders' makes them appear more confident and independent by the day.

As a nationalist movement with a peripatetic existence, the PLO has learnt to live with the tension between its diaspora, which wants the the right to return home, and the Palestinians in the occupied territories, whose desire is to achieve self-rule.

The immediate dilemma for the PLO chiefs is what role the organisation will play during the interim phase of self-rule, which is now being negotiated. With 92 embassies and 28 lower-level foreign representations, the PLO will represent the new Palestinian entity abroad. But in all other areas, the policy of the new autonomous region will be decided by an elected council or assembly. Somehow this will have to be linked with the decisions of the PLO's main policy body, the Palestine National Council - the Palestinians' parliament in exile.

Palestinians from the occupied territories have 180 seats on the PNC out of 482, but they cannot take them up because of Israel's ban on contacts between local Palestinians and the PLO - a ban Israel is belatedly reconsidering.

Some PLO leaders are said to have argued against general elections in the occupied territories, fearing a clash between the two governing bodies. They also fear that local Palestinian elections would play into the hands of the Israelis. 'The dream of the Israelis since the Sixties has been the emergence of a local leadership under their boots,' said one PLO official.

Dr Shaath says there need be no conflict between the PNC and the elected self-rule body: it will be no harder for the outside PLO leadership to direct elected representatives than it is now for it to direct ad hoc officials. He envisages the PNC operating as a 'federal government' overseeing a local Palestinian council.

The elected Palestinians would also be members of the PNC: the proposal that the self-rule council should be 180 strong is no coincidence. 'This will give us integral unity - inside and outside working together. So long as the new body does not have a sovereign status it will have to be part of the overall Palestinian leadership structure,' he says.

Such a solution will be hard to achieve. The Israelis have refused to contemplate more than 15 elected members on the self- rule council. They may increase the number, but they will never allow 180. 'We hope eventually we may get 50 to 100,' says Dr Shaath, although even that is highly optimistic. One school of thought says that Israel's best course would be to grant the local Palestinians all the legislative powers they want, to boost their standing at the expense of the PLO.

A second problem is that there is no knowing who will be elected to the self- rule council. If the increasingly powerful Islamic militant group Hamas makes gains, the PLO's influence will be immediately diminished. The PLO recognises this as a real possibility. But Dr Shaath says: 'If you believe in democracy you have to accept what democracy brings.'

Third, there is speculation - albeit unwelcome to members of the current delegation - that newly elected leaders, mandated by their own people, might resent taking directions from a PLO still based abroad. PLO officials today compare the chain of command between Tunis and the West Bank leaders to that between a commander-in-chief and his chief of staff.

The outside PLO leaders are having to face the possibility that once interim self-rule is established they may be left out in the cold. They will remain responsible for the problems of the diaspora - primarily the intractable dilemma of the refugees' right to return. But the Palestinian power centre will shift to the new interim authority. 'Their position is awful. They will be left with only refugee issues to deal with,' said one senior Arab delegate in Washington.

Looking further into the future, the prognosis for the PLO becomes suddenly simpler in the eyes of Dr Shaath and his colleagues. After a period of interim self-rule, a Palestinian state will be established to which all Palestinians will have the right of return or a carefully negotiated right to compensation. 'The moment a Palestinian state is declared, the PLO will vanish,' says Dr Shaath.

'They will all become Palestinians inside the new Palestine. Eventually the communities outside and inside will merge. Anyone who wants to continue to play a political role will return. If Yasser Arafat wants to continue as leader and be president of Palestine he will then have to return for election.'

What Dr Shaath cannot predict is the kind of opposition Mr Arafat would face in an election for the leadership of the Palestinian state.

(Photographs omitted)