Arafat OKs an Offstage PLO Role in Peace Talks : Mideast: He accepts the offer of such talks and an active role for Palestinians in the occupied territories.

In a letter made public Friday at a conference of Jewish peace activists, the chairman of the Palestine Liberation Organization, Yasser Arafat, endorsed an active role for Palestinians from the West Bank and Gaza Strip in peace talks with Israel.

The statement was the first direct indication from Arafat that he accepts the offer of such talks and that Arabs in the occupied lands would take the lead in them. Egypt, which has been working with the United States and Israel toward setting up Israeli-Palestinian talks, had been pressuring the PLO to give West Bank and Gaza leaders a prime role.

In his letter, Arafat said that Palestinians in exile also would take part, a proposal that Israel rejects.

“The PLO once more leaned over backward and approved the idea of a dialogue between representatives of the Israeli government and representatives of the Palestinian people in the occupied territories and the Diaspora,” the letter said.

Arafat demanded that the talks be aimed at reaching a “comprehensive and final settlement” of the Israeli-Palestinian conflict based on an election proposal put forth by Israel, as well as ideas endorsed by Egypt that include a withdrawal by Israel from territory occupied in the 1967 Arab-Israeli War.

He insisted that the participation of local Palestinian leaders did not mean the demise of PLO influence. He suggested that Palestinians will accept only a settlement endorsed by the PLO. For the Palestinians, he wrote, “the only guarantee of their own security and their political future lies in the full participation of the PLO in all stages of the peace process.”

It is expected that if Palestinians from abroad take part, they would be the most direct conduits for PLO authority.

Nonetheless, the letter from Arafat appears to accept an offstage role by the PLO at least in initial stages of talks. This willingness may put pressure on Israel to accept an invitation from Secretary of State James A. Baker III to hold preliminary talks on the formation of a Palestinian peace panel. Baker wants to convene a meeting with the foreign ministers of Israel and Egypt to work out a list of Palestinian delegates.

Arafat’s letter provided a surprise finale to a three-day international conference on peace sponsored by the Tel Aviv-based International Center for Peace in the Middle East.

Rita Hauser, a peace activist from New York, told reporters that the letter was received Thursday by telefax from Tunisia, where the PLO is based. She said it was kept secret until Friday because organizers of the conference were unable to “get it fitted in” the conference’s agenda.

However, other sources at the conference said that organizers had worked for weeks to get such a letter sent. They had backed off at the last minute out of concern for appearing to interfere in sensitive diplomatic affairs. But the letter, dated Feb. 17, arrived anyway and the organizers had no other recourse but to make it public.

In 1988, Hauser played a role in persuading Arafat to make pledges to renounce terrorism and recognize Israel’s right to exist. The pledges, made by Arafat in Geneva, led to the opening of a dialogue between the United States and the PLO.

A spokesman for Prime Minister Yitzhak Shamir said today, “The government is not interested in the PLO’s position in peace talks.”

Israeli politics are convulsed over the issue of whether to enter peace talks. Shamir’s Likud Party is badly split over the prospects. Many of its members feel that negotiations will inevitably lead to the loss of the West Bank and Gaza, which the rightist Likud views as part and parcel of Israel.

In an interview published Friday in the Jerusalem Post, Shamir rejected any PLO role.

“The only thing (the PLO) should do is dismantle itself,” Shamir said, “because its minimal demand is a Palestinian state, and a Palestinian state cannot coexist with Israel.”

The center-left Labor Party, which is the other pillar holding up Israel’s coalition government, has set a two-week deadline for movement on negotiations. Party leaders have threatened to pull out of the government, a move that will lead either to a new coalition headed by Labor or Likud, or a general election.

The talks also hold risks for Arafat. A back-seat role for the PLO could give unprecedented prestige to West Bank and Gaza Palestinian leaders.