Regional Outlook / Mideast : Arafat’s Close Call: What Would Have Happened if . . . : * Palestinians and the rest of the world began trying to answer that after the PLO leader survived a plane crash.

Last month, at a stormy meeting of top Palestine Liberation Organization officials, a dissident posed a sharp question to PLO leader Yasser Arafat about his one-man grip on the group’s financial affairs.

“What would happen,” the questioner inquired with a mixture of irony and concern, “if, God forbid, you should suddenly die?”

It’s a question that flashed across minds in Washington and Jerusalem as well as Tunis last week when Arafat narrowly escaped death in a plane crash deep in the Libyan desert.

The incident has given added urgency to longstanding questions regarding possible future leaders and methods of operation within the Palestine Liberation Organization. In Israel and the United States, officials ponder what the Middle East would be like without the peripatetic Arafat. And behind them, 5.3 million Palestinians in the world wonder whether there is anyone around who would champion their cause in the PLO leader’s absence.

The near-miss highlighted a central paradox of the PLO: Sighs of relief at his escape underlined recognition of Arafat’s central role in the organization, while panic during hours of uncertainty over his fate stressed for many the need for him to relinquish significant power.

As word of his plane’s disappearance spread through the PLO’s Tunis headquarters-in-exile, members faced the stark realization that the already troubled organization would probably fall apart if Arafat was dead. “The PLO was looking into the void,” said a Western diplomat.

Powerful tremors were already sweeping the membership in the form of a growing legion of critics calling for no less than a Palestinian perestroika that would alter the function, style and makeup of the PLO--a national liberation movement firmly rooted in the 1960s.

The dissident voices are not those of hard-liners who resent the PLO’s willingness to engage in Middle East peace talks. Rather, they are the traditional voices of moderation within the PLO demanding an end to Arafat’s autocratic style. This style gives Arafat paramount importance. But when he blunders, it can make him a walking disaster.

Last month’s meeting involved leaders from Fatah, the majority faction of the PLO and Arafat’s unwavering and traditional source of support. Two delegates circulated a memorandum criticizing Arafat’s “miscalculation” in supporting Iraq during the Gulf War. In unusually blunt language, the memo asserted that Arafat had “pushed the PLO, the Palestinian cause and the Palestinian people into a catastrophe.”

Further, the PLO chieftain had insulated himself from advice by setting up a court of young yes-men, the critics charged. The memo called Arafat “a shortsighted totalitarian” whose control over PLO funds--an amount estimated to total $2 billion--is a “recipe for disaster.” Arafat walked out of the meeting twice, but eventually agreed to take the criticisms under advisement.

In an interview here, Farouk Kaddoumi, the PLO’s foreign minister and a close Arafat associate commented defiantly: “We should ask these people what they really want. Arafat and I are in charge here and we don’t see the need for such changes. We are doing our best to minimize problems.”

Nonetheless, Kaddoumi cautiously suggested that changes are in order. “We are a transitional organization and as such, we can be very agile,” he said.

In the short term, the critics are calling for some form of democratic decision- making and the kind of oversight that would avoid the error of the Gulf War. They also want a widening of the talent pool with access to Arafat as well as a more open control of the PLO’s money. The money question became important after donations from oil-rich Gulf states dried up in protest of the PLO’s pro-Iraq war stance.

The near revolt in Fatah was led by Hani Hassan, who is known to be sympathetic to Egypt and Saudi Arabia. Both of those countries have long been suspect in Arafat’s eyes--each sided with the United States in the Gulf War. Recovering favor with both nations would go a long way toward rebuilding the PLO’s diplomatic position in the Arab world--not to mention the advantage of regaining Saudi funding.

A mechanism for picking a successor to Arafat is also needed, dissidents argued, because of the infighting that would inevitably result when Arafat left the scene.

Two men considered potential successors have been assassinated during the last four years: Khalil Wazir, known as Abu Jihad, was killed by Israeli commandos who infiltrated his beachfront Tunis neighborhood in 1988, and political adviser Salah Kalaf was assassinated by the rival Abu Nidal Palestinian faction in early 1991. Within the remaining PLO leadership, Kaddoumi has some power, and the PLO central council has scores of members. But no other leader enjoys the popular authority of Arafat among the widely dispersed Palestinians.

One close observer from a Western embassy here opined that if Arafat had perished in the air crash, he would have been replaced by a quarreling collective because no one man is agile enough to keep the organization intact. “Arafat plays on personal rivalry; he divides and conquers like no one else in the organization can,” the diplomat said.

Commented An Nahar, a Palestinian newspaper in East Jerusalem: “The drama . . . showed the necessity of putting the transfer of authority on a constitutional base.”

The PLO’s world was changing long before Arafat’s latest close call, of course, and before the Gulf War. The contraction and the eventual demise of the Soviet Union and the democratization of Eastern Europe robbed the PLO of wide diplomatic and military support.

The combined result of the Gulf War and the changes in Europe left the PLO with only one main arena of operation: the Palestinian uprising in the West Bank and Gaza Strip.

But the revolt has been flagging for about two years and economic problems among the Palestinians have created discontent with the PLO leadership.

Those difficulties helped push the PLO into accepting America’s--and Israel’s--terms for peace talks, even though those terms have in effect pushed the PLO to the sidelines.

Even though the PLO keeps close watch on the proceedings and takes a decisive--albeit, indirect--hand in important moves, the agenda itself logically undercuts the authority of the group by formally excluding it.

As talks go forward, power is meant to flow to leaders in the West Bank and Gaza Strip who are representing the Palestinians at the talks.

Although these leaders preach loyalty to the PLO, the eventual passage of power into their hands would give the outside organization little to do but watch.

Even if the Palestinians succeed in establishing a state, PLO power would be diluted immediately by a likely confederation with the group’s old nemesis, Jordan.

Already, Palestinians inside the West Bank and Gaza are designing “institutions” to lay the ground-work for governing themselves. The future function of the vast PLO bureaucracy-in-exile is unclear. The ambiguous future of the organization is perhaps highlighted by Washington’s attitude.

Bush Administration policy-makers are probably relieved that Arafat survived last week’s crash: His death would have forced changes, and officials in Washington have at least grown accustomed to his presence.

At the same time, Secretary of State James A. Baker III and his inner circle consider Arafat to be yesterday’s man, a person who has become increasingly irrelevant.

The fact that Baker and Arafat have never met face-to-face underlines the PLO leader’s marginal position in U.S. eyes. Baker and his aides have, of course, worked closely with Faisal Husseini, Hanan Ashrawi and other Palestinian representatives from the Israeli-held territories who consider Arafat to be important.

But from the seventh floor of the State Department, the Palestinian leadership in the West Bank, Gaza and East Jerusalem seems more important than that in Tunis.

For the record, Administration officials maintain that the United States has nothing at all to do with Arafat or the PLO. It is possible that, if the search for Arafat had gone on much longer, Washington would have gotten involved. But Baker and his friends were clearly relieved that it never got to that point. (Early reports that the United States had relayed satellite information locating the wreckage proved false.)

Asked if she had a reaction to Arafat being found alive, State Department spokeswoman Margaret Tutwiler replied tersely: “No.”

Bush Administration officials say privately that Arafat has been helpful to the peace process by not blocking Palestinian participation. But they do not believe he is indispensable, and there seems to have been no particular concern that Arafat’s death would have derailed the talks.

From the U.S. standpoint, Arafat’s removal from the scene could be good news or bad news, depending on who replaces him. But as long as no one knows who the successor would be, most officials seem to be relieved that they’re still dealing with a known quantity.

For its part, Israel has long tried to sideline the PLO. The government of Prime Minister Yitzhak Shamir views the ban on direct PLO participation in peace talks as a triumph. If the death of Arafat would have further weakened the organization, so much the better, in Jerusalem’s view.

The PLO continues to issue hard-line warnings about the peace process, threatening a Palestinian walkout if Israel does not stop building settlements in the West Bank and Gaza.

“How can these talks proceed with this continued construction?” asked Kaddoumi rhetorically. “If we are not talking about land, then we are not talking about peace.”

But Kaddoumi stopped short of saying the PLO would pull out anytime soon, and with its internal power struggle pending, it is not clear the PLO can make important decisions. In effect, the PLO is relying on Washington to push its agenda, which is to recover the West Bank and Gaza Strip.

“It is up to the Bush Administration,” said Bassam abu Sharif, a top adviser to Arafat.

Times staff writer Norman Kempster, in Washington, contributed to this story.