Aid Palestinians? Kuwaitis Furious, Fearful : Mideast: The PLO’s wartime betrayal is not easily forgotten. But the emirate and other Gulf states will be pressured to finance a future Palestine.

From the halls of power to the palatial villas where the Kuwaitis hold their late-night gabfests called diwaniyas, the talk of this oil-rich emirate this week is as passionate with fury as with fear.

The fear: Kuwait’s postwar debt crisis that the government has warned soon could tear into the world’s most secure welfare state.

The fury: Kuwait’s Public Enemy No. 2, the Palestine Liberation Organization leader, of whom Kuwaitis speak with the derision of a nation that for three decades supported, housed and cared for half a million Palestinians--until Yasser Arafat embraced Saddam Hussein and the Iraqi strongman’s occupation of their tiny emirate three years ago.

Hardly fertile ground for the financiers of a future Palestine.

Yet, when Secretary of State Warren Christopher convenes a crucial international donors’ conference on Arafat’s behalf today in Washington, it will be Kuwait, Saudi Arabia and the other Persian Gulf states--increasingly cash-strapped countries for whom a shared resentment of the PLO’s betrayal during the 1990 Gulf crisis is still fresh--that will be the focus of the American effort to raise urgently needed aid for Arafat’s emerging Palestinian state.

At the United Nations in New York on Thursday, Christopher said he expects the donors’ conference to produce pledges of more than $2 billion, including significant money from Saudi Arabia and other Gulf states. “Frankly, I’m very encouraged by the response that we’ve gotten,” he said.

As representatives from dozens of countries and international agencies prepared to file into the State Department conference room for today’s historic seminar, commitments totaling just over $1 billion have already been made by the European Community, Japan and the United States.

But during the next decade, Arafat will need much more to supply enough industry, jobs and public services to consolidate self-rule in the Israeli-occupied lands, beginning with the sleepy town of Jericho and the impoverished Gaza Strip. It is a goal that remains as remote as this distant emirate.

So it is toward the Gulf and its oil-producing Arab states that most supporters of the Gaza-Jericho autonomy plan look for the remainder of the answer--toward nations such as this emirate with 10% of the world’s known oil reserves, where not a single Kuwaiti would openly advocate that their government contribute a penny to the Palestinian cause.

This is, after all, a country that summarily expelled more than 200,000 Palestinians in less than three years after the traumatizing occupation, in which thousands of Palestinians collaborated with the Iraqi tormentors in everything from interrogation and torture to national plunder.

“I don’t think the Kuwaiti people will support giving anything to the PLO,” said Sheik Saud al Sabah, Kuwait’s minister of information and a member of its royal family. “Even the government doesn’t want to give anything to the PLO.”

The aid issue already has cut deeply into the Kuwaiti consciousness, not only at the nightly diwaniyas, where Arafat is denounced routinely with unprintable expletives, but also in the newspapers and among the nation’s new, elected national assemblymen, who are expected to debate hotly any future government donations to Palestine when the Parliament reconvenes later this month.

But Minister Saud was quick to add during an interview with The Times this week that the issue of who will pay for Palestine goes far beyond Kuwait’s enduring national grudge against Arafat; it cuts to the heart of U.S.-Kuwaiti relations. And he confirmed that Kuwait’s powerful foreign minister will represent the emirate at today’s donor meeting, an emotionally difficult gesture that U.S. officials lauded as key indicator of Kuwaiti support for the peace process.

“We want to help our friends in the U.S.,” he said, conceding that the nation that led a 33-nation military coalition to liberate Kuwait has made it clear that a financial contribution to Palestine is synonymous with a personal favor to the United States.

“But we’re going to take our time and think about it,” the minister added, indicating that the Gulf states together will likely seek to form a fund, supervised by the United States or the United Nations, that would go directly to Palestinian projects in the autonomous zone, bypassing the PLO. “There’s plenty of time. I don’t think the whole peace process hinges on whether we pitch in or not.”

The PLO has established a new organization, the Palestine Economic Development and Reconstruction Authority, or PEDRA, to oversee the use of aid. U.S. officials have noted, however, that each donor country would retain the right to monitor and audit how its aid was being spent.

Throughout the Gulf, though, the issue is more than just an emotional one. To understand just how difficult such a contribution would be for Kuwait, in particular, and for its larger and more powerful southern neighbor, Saudi Arabia, is to first understand the depth of the Gulf’s current financial crisis.

Both countries are currently operating on multibillion-dollar deficit budgets, the result of low oil prices and hefty war bills. The Gulf War severely ran down the cash reserves of both nations, which spent tens of billions of dollars to reimburse the U.S.-led coalition for Operation Desert Storm and billions more on Western military hardware to build up their armies in the wake of the war.

For the first time since the oil boom made Kuwait one of the world’s wealthiest nations, the government is seriously discussing cutting back the state-financed education, health and bureaucratic systems that are the bread and butter of Kuwaiti society.

“I don’t think the Gulf countries have enough money to support the Palestinians and still take care of their own problems at home,” said Jassem Saddoun, a prominent Kuwaiti economist who is consultant to the Parliament. “The needs are so much, and the availability of money is so little. The PLO needs to buy the affection of Palestinian people everywhere, and that needs a lot of money.”

“It’s really the wrong time for us to put our hands in our pockets,” added Abdullah Sheyaji, a Kuwait University political science professor and adviser to the Parliament’s Speaker. “We have a difficult problem. We have wiped out more than half of our investment portfolio, and we have been hit by deficits. So for us in Kuwait, it’s a double whammy.”

It is the political “whammy,” though, that Sheyaji and other Kuwaiti and independent political analysts said will present the biggest hurdle to Kuwaiti contributions to the Palestinians. It was, after all, not just Arafat’s stance that hurt the Kuwaitis. It was the side chosen by thousands of Palestinians in Kuwait--chiefly PLO supporters--who served as active Iraqi collaborators.

“How do you explain (an aid request) to the average Kuwaiti--male or female who saw a Palestinian questioning a Kuwaiti at a checkpoint, or torturing a Kuwaiti, or acting as the Iraqis’ Fifth Column during the occupation?” said Sheyaji, who spent four months in the emirate under occupation. “How do we reconcile our grudge?”

For Sheyaji, it apparently is not so difficult. In a column this week in Kuwait’s largest-circulation daily, Al Watan, he advocated that the government provide direct support to Palestinian development projects after Israeli forces withdraw from Jericho and Gaza. His conclusion: “We’re going to pay regardless, so let’s make the best of it.”

Such conclusions will not come so easily for the large Islamic fundamentalist bloc represented in the same newspaper this week by Sheyaji’s brother, Abdul Razak Sheyaji, a professor of religious studies and leader of the Islamic fundamentalist Salaf organization. He wrote in the same space the following day that the entire peace plan was “a big conspiracy” by Israel and the United States with “hidden points that are torturous for us all.”

Foreshadowing the coming fight in the opposition-minded Kuwaiti Parliament against any proposed contribution to the Palestine fund, a statement issued by the six political groupings that hold an Assembly majority condemned the plan and called on all Kuwaitis “to curb Kuwait’s involvement in this fresh treason and to abort any obligations, whether moral or material.”

Within such rhetoric, most diplomats in Kuwait saw a clear irony: Kuwait, which has been roundly condemned by most of the world’s anti-U.S. regimes for selling out to the United States and its Western European allies both militarily and politically, finally found an opportunity to accuse someone else of doing the same thing.

“There’s nothing that makes a Kuwaiti feel better than to stand up and accuse Arafat of selling out the Arabs,” said one Western diplomat who has been making the rounds of the diwaniyas in the Kuwaiti capital. “But many Kuwaitis equally see the peace plan as a justification for Kuwait’s reliance on the U.S.-led coalition, and a direct result of the liberation of Kuwait, which really started the whole Mideast peace process in the first place.

“On the level of government, though, it’s clear the Kuwaitis are taking additional pressure on themselves just by sending their own representative to the donor meeting. But they’re doing it to bolster the U.S.-Kuwaiti relationship in the future.”

Times staff writer Doyle McManus, in Washington, contributed to this report.