NEWS ANALYSIS : Spain Sees Itself as Natural Place for Conference : Diplomacy: Citizens are eager to reassert a historic claim as crossroads of Jewish and Muslim worlds.

For Spaniards, Madrid’s selection as the site of the Mideast peace conference is a romantic chance to redress the troubled history of 500 years ago and reassert Spain as a crossroads of the Muslim and Jewish worlds.

Spaniards, in fact, believe that this history and their special geography make Spain a natural host for the conference scheduled to start Oct. 30.

In recent years, Spain has been trying hard to make the world realize that it has a special role as a bridge between Europe and the Arabs. Barcelona Mayor Pascual Maragall, for example, likes to call his Mediterranean city “the north of the south and the south of the north.”

Spain was the host of Muslim and Jewish civilizations long ago. Although Spaniards scorned this heritage for most of five centuries, it has now become fashionable for many to uncover proof of some Arab or Jewish ancestry, sometimes both.

A Spanish historian leaned over at dinner recently and confided proudly: “Have I told you yet that we have discovered a Jewish ancestor in our family?” A well-known Madrid television journalist boasted recently that he had both Arab and Jewish blood, though much more Arab.

These are astounding boasts in a country where pureza de sangre , or purity of blood, had to be demonstrated by Spaniards seeking government and military jobs at the turn of the century.

The Mideast peace conference will get under way just two months short of the quincentennial commemorations of 1492--a date that most Americans memorize as the year Columbus “sailed the ocean blue” to discover the New World. Spaniards celebrate that as well, of course, but they also guard 1492 in their memories for two other cataclysmic events in Spanish history.

King Ferdinand and Queen Isabella, known to every Spanish schoolchild as “the Catholic monarchs,” conquered the last Muslim stronghold of Spain in Granada in 1492, and, in a related act of cruelty, expelled all Jews from the Spanish realms in that same year. A harsh and stark Christianity was never again challenged in Spain.

In 1992, Spain will mark the 500th anniversary of this momentous year by hosting the Olympics in Barcelona and the World’s Fair in Seville. A host of other special events are planned, including a sumptuous exhibit of Muslim art that New York’s Metropolitan Museum of Art will mount within the palace of the Alhambra in Granada.

For much of the medieval era, Spain was a powerful, sophisticated outpost of great Arab dynasties. The Alhambra, one of Spain’s most popular tourist sites, is an example of Arab architectural magnificence, a wonder on a par with the Taj Mahal or the Egyptian pyramids.

After the conquest of the Moors, Spaniards tolerated Muslims in their midst but later ordered them to convert or leave. Many Arabs chose to convert and stay. As a result, colonies of Christians with Muslim ways persisted in parts of Andalusia in southern Spain for centuries.

As recently as 30 years ago, for example, a visitor could find Spanish women wearing yellow veils and carrying water jugs on their heads in the bleached white hill town of Mojacar in Almeria province on the Mediterranean coast.

With this kind of history and a geography that puts the Iberian peninsula of Spain so deep into the Mediterranean that it almost touches North Africa at the Strait of Gibraltar, it is natural that many Spaniards feel they have a special relationship with the Arab world.

The Spanish government, thus, has long advocated creation of a conference on security and cooperation in the Mediterranean, much like the Conference on Security and Cooperation in Europe.

Like the CSCE, which became a meeting ground for the Western democracies and the Communist east and produced the Helsinki human rights accords in the 1970s, the new conference, presumably headquartered in Spain, would serve as a meeting ground for Europe and the Middle East. Spanish Foreign Minister Francisco Fernandez Ordonez has often insisted that such an organization could bring Arabs and Israelis together.

Spain’s relationship with its Jewish past is far more troubled than the relationship with its Arab past. Thousands upon thousands of Jews converted to Christianity in the 15th Century rather than endure expulsion. But they were never accepted as real Spanish Christians. They were known as Conversos , or new Christians, or simply Jews.

The terror and torture and fury of the Spanish Inquisition, first convoked by Ferdinand and Isabella, bore down upon these converted Jews to root out and burn at the stake all those backsliding into Jewish ways.

The island of Majorca still has a class of despised Christians descended from converted Jews. Although these people attend church regularly, they are known as Chuetas , a Majorcan word that means Jews. When Spaniards talk about having Jewish ancestry, they usually mean that one of their ancestors was a Converso.

This history has led to tense feelings. When Spain decided to honor the Sephardic Jews of the world--descendants of those expelled from Spain--with its highest honor, there was difficulty at first in persuading any prominent Sephardic leader to accept it.

And yet there are ties that linger. When Dr. Solomon Gaon of Yeshiva University in New York, a 77-year-old Sephardic Jewish leader, finally came to Spain to accept the award on behalf of his fellow Sephardics, he tried to explain his feelings about Spain.

“How can it be that . . . a people like the Sephardics who were thrown out of Spain have never ceased to love Spain?” he said to a Spanish journalist. “Why? Because we lived 2,000 years in Spain, we were part of Spain. . . . For me Spain is another homeland. Israel is the Holy Land. But Spain is like home.”