TERRORISM : Greece Turns Page With Bomb Trial : Move to Prosecute Arab in Jet Crash Signals Athens’ Stiffening Resolve

Poised uncomfortably between touchy Arab neighbors and new-found friends in Washington, the young conservative government of Prime Minister Constantine Mitsotakis is turning a cautious new page in Greece’s confrontation with terrorism.

Mitsotakis, who has personal loathing for terrorists, has ordered a trial in Athens for Mohammed Rashid, a 40-year-old jailed Palestinian accused of the 1982 in-flight bombing of an American jetliner over the Pacific.

The United States had long sought Rashid’s extradition for the bombing, which killed a Japanese teen-ager and injured 15 other passengers on a Tokyo-Honolulu flight. Rashid’s lawyers demand a prompt trial, probably early next year.

If Mitsotakis’ rejection of the extradition request is a gesture to the Arab world, his decision to prosecute Rashid for murder before a Greek court signals a stiffening of official Greek resolve. It is also a gamble, helping to repair Greece’s anti-terrorist credibility at the risk of a terrorist backlash.

Greece is the only European Community nation still prey to domestic terrorists. In addition, under Socialist Andreas Papandreou, the autocratic prime minister for most of the 1980s, Greece became a staging area--and, critics say, a safe harbor--for Middle Eastern terrorist groups.

Papandreou, whom Mitsotakis defeated at the polls last April, took pains to extend Greece’s strategic and ideological ties with the Arabs, who support Greece against Turkey in the longstanding dispute over Cyprus.

“The Greek government’s anti-terrorism policy appears to be one of complete surrender,” charged nine U.S. congressmen protesting Papandreou’s stubborn refusal to extradite Rashid, who was arrested at Athens airport on an American tip in 1988 as he tried to enter Greece on a forged Syrian passport.

At the head of a conservative free-market government, Mitsotakis does not want to alienate Greece’s neighbors or jeopardize trade with the Arab world. He has moved decisively toward the West, nonetheless, becoming the first Greek prime minister in 26 years to visit Washington as well as seeking common cause with impatient European Community partners. Gripped by deep economic crisis, Greece is the sick man of the new Europe and needs costly care.

Nor does Mitsotakis have any time for terrorists: His Parliament member son-in-law, Pavlos Bakoyannis, was assassinated in downtown Athens last fall by members of a small Greek terrorist gang called 17th of November, which has sporadically killed prominent Greek officials with impunity since 1975. Its American victims include CIA station chief Richard Welch in 1975 and the American defense attache, Navy Capt. William Nordeen, in 1988.

That same year, Arab terrorists thought to be part of the Abu Nidal group killed nine people in an attack on a tourist ferry returning to Athens from a day’s cruise around nearby islands.

Rashid will be tried here under a new Greek law that authorizes prosecution for crimes committed abroad. American investigators assembled the evidence that Greek prosecutors will use against him. Two U.S. witnesses, an FBI agent and a Palestinian defector, may be called to testify for the prosecution, according to Rashid’s lawyers.

American officials say they would have preferred to see Rashid tried in the United States. Officially, though, the State Department, stressing its excellent relations with a Mitsotakis government strong in “its determination to fight terrorism on all fronts,” said it has no objection to trial in Greece. The department expressed “confidence in the commitment of the Greek government to prosecute Rashid aggressively.”

An investigating magistrate accuses Rashid, a self-described operative of the armed wing of the Palestine Liberation Organization, of premeditated murder, planting explosives and damaging an aircraft. Defense lawyers, who have told reporters in Greece that they are being paid by the PLO, say they will demonstrate Rashid’s innocence. If convicted on the murder charge, he could get life in prison.

“The U.S. seems to be pressuring the Greek government to hand our client the heaviest sentence possible,” said defense attorney Spyros Fytrakis, who applauds the Mitsotakis decision to hold the trial in Greece.