Palestine puzzle: Can Hussein and PLO live together?

The two men looked like the closest of friends. Palestine Liberation Organization chairman Yasser Arafat, his checked Arab headdress neatly tucked back over a dark safari suit, warmly embraced Jordan's King Hussein as television cameras whirred.

This was the fifth such meeting in recent months. The two leaders were talking about a framework for a Palestinian-Jordanian state.

One could almost forget past history: the scenes of PLO commandos being driven out of Amman and Jordan in 1970-71 in bloody clashes with King Hussein's army.

In fact, neither side has forgotten. But the embraces were not simply political hypocrisy. They were evidence of a new political realism in the wake of the PLO's expulsion from Beirut and the current intense American interest in a regional Mideast peace settlement.

Both King Hussein and Yasser Arafat are aware that the last chance for a negotiated solution to the Palestinian problem may be slipping away. Each knows he cannot act without the other. On Feb. 14, the 530-member Palestine National Council, the PLO's de facto parliament, will meet to chart its plans for the future.

The Palestinians may finally be forced to resolve their relationship with Jordan - more complex than with any other Arab nation - which now holds the key to the Palestinian future.

''The Palestinians and Jordanians are so closely meshed in geography and on a personal basis that it is hard to disentangle them,'' says Rami Khouri, the Palestinian-Jordanian editor of the Jordan Times.

Their most overwhelming tie is demographic. Palestinians comprise around 60 percent of the 2.3 million Jordanian citizens on the East Bank of the Jordanian kingdom. This is the largest concentration in any Arab state. It does not include more than 800,000 Palestinians with Jordanian citizenship living on the Israeli-occupied West Bank of Jordan.

These statistics have encouraged some Israeli leaders, notably former Defense Minister Ariel Sharon, to insist that Jordan is the Palestinian state. Mr. Sharon has suggested that Palestinians take over the East Bank and oust the King while Israel keeps the occupied West Bank.

The Palestinian-Jordanian reality is far more complex. In 1922 the British severed the desert territory east of the Jordan River, known as Transjordania, from their League of Nations Palestine Mandate (with the legal blessing of the League) to create a kingdom for Hussein's grandfather Emir Abdullah. The area's population of 300,000 was largely nomadic and had no sense of nationhood.

But in 1950, Abdullah annexed the West Bank and east Jerusalem - left in his army's hands after the 1948 Arab-Israeli war - thus adding hundreds of thousands of Palestinians to his rule.

Unlike any other Arab ruler, he gave them citizenship. The Palestinians, better educated and more ambitious than their East Bank counterparts, came to dominate the country's economic and intellectual life, and its civil service, while also holding important government and Cabinet posts. They built Amman into a boom town of 700,000, at least 70 percent Palestinian, and spread like lava across seven hills of sprawling villas and apartment blocks.

But the Palestinians never controlled the levers of power: The monarchy maintained close hold over the army, the police, the intelligence apparatus, and of course the center of power, the royal court. Nor did the Palestinians ever really assimilate into the Jordanian state.

''The psychic infrastructure of Jordan and the symbol - the army, the monarchy - were set up before the Palestinians became a factor,'' says journalist Khouri. ''The Palestinians were injected sideways into this system, but never really changed it. The Achilles' heel of Jordan is that there has never been a clear definition of who is Jordanian, who is Palestinian, and what is the relationship between the two.''

Many successful Palestinian-Jordanians continue to teach their children that they are Palestinian.

''It was the only way to keep the question alive,'' explains Prof. Muhammed Barhoum of the University of Jordan, a sociologist who was born near Jerusalem. At the same time, Transjordanians and Palestinians became increasingly bound by ties of marriage and business.

In 1970, the Palestinian factor nearly destroyed the kingdom. The PLO - based in 10 refugee camps brimming over with West Bank homeless persons who fled the 1967 Arab-Israeli war that cost Jordan that region - openly challenged the Hashemite throne.

The King expelled the PLO in a series of bloody battles in 1970-71. When the Arab League in 1974 recognized the PLO as sole representative of the Palestinians, the King responded by ''Jordanizing'' his kingdom. He dissolved Parliament, which remains dormant today but whose membership at that time was half-West Bank Palestinian. He also sharply cut back Palestinian representation in the Cabinet.

Relations with the PLO began to thaw in 1978. The Arab League set up a ''steadfastness fund'' of money to be funneled into the West Bank - a reaction to the Camp David accords negotiated by Israel, Egypt, and the United States, which called for West Bank self-rule but excluded the PLO.

Jordan and the PLO set up a joint committee in Amman to administer the money, giving the Palestinian organization its first toehold back into Jordan's capital since its expulsion.

In the wake of the Israeli invasion of Lebanon, this slow current of PLO-Jordanian rapprochement has turned into a torrent that is forcing both Jordanians and Palestinians to look closely at the knotty question of their future relationship, which for years had stayed on ice.

The King and the PLO have set up a high-level coordinating committee in order to explore a joint approach to possible negotiations for return of the West Bank. As a basis for such a joint approach, the committee is working on a framework to spell out the relationship between the East and West banks, between Jordanians and Palestinians, should the occupied land ever be returned.

The question dominating debate among inhabitants of both the East Bank and the West Bank is whether the goals of Palestinians and Jordanians are compatible.

''Politics is a game in which the most qualified will prevail,'' says one knowledgeable West Banker. ''The King is betting that he will come out ahead of the PLO, and the PLO is betting that it will outsmart the King.''

Many West Bankers who chafed under political restrictions during Hussein's rule there are nervous about his return, though most would accept any leadership that could get rid of Israeli occupation.

The short-term goals of both sides are easy to define. ''What makes the King want to enter negotiation for the West Bank is the fear of trouble if he stays out,'' says Dr. Jamal Sha'er, a member of the King's Consultative Council.

The King now fears that if he doesn't move, Israel may try to solve the Palestinian problem by unseating him.

For the PLO, alliance with Jordan offers a buffer against its alliance with Syria, a link to the West Bank, and a last-ditch negotiating partner acceptable to Israel and the US.

But the crunch in this friendship of necessity comes when trying to define the future Palestinian-Jordanian relationship, should the West Bank be returned to Arab sovereignty.

The King described his idea of a Palestinian-Jordanian state in an interview on BBC television in November.

''What we see,'' he said, ''. . . is an entity in Jordan, an entity in Palestine, a flag here and a flag there, a nationality here and a nationality there, a representative assembly on both sides joined at a higher level by an [ overall] representative assembly, . . . and a government . . . which could deal, in the main, with defense and foreign policy.''

Spelled out by other Jordanian officials, this amounts to a federal - not a confederal - system. It would be similiar to that proposed by the King in 1972 and rejected then by the PLO. It would put the King on top, but establish a federal government that controls key functions, with the Palestinian and Jordanian ''entities,'' or cantons, carrying out local functions. It is far from clear whether a separate Palestinian passport and flag would be acceptable, although they agree that a new name would be necessary for the united country.

The Palestinians, on the other hand, insist they want a ''confederation,'' meaning union between two equal states with equal powers. ''We want a passport, a flag, and an independent state,'' says a PLO official in Amman. ''Down the road, we can talk of confederation.''

Some PLO leaders hypothesize that this contradiction could be overcome by having a briefly independent West Bank state immediately declare linkage with the East Bank. PLO leaders deny any intention to take over the East Bank.

But a Palestinian businessman in Amman scoffs, ''Who ever heard of a democracy confederated with a monarchy? Accommodating both in one arrangement is impossible.'' But, he adds, ''The King is counting on the fact of a long transition period . . . in order to get West Bank people accustomed to the idea of his remaining over them.''

There is general agreement in Amman that were the West Bank to be returned, the entire Jordanian government would have to be restructured. Whatever the form of East Bank-West Bank linkage, an elected West Bank assembly would necessitate the return of some kind of democracy to the East Bank. This, too, has caused debate among East Bankers over whether the King would be willing to liberalize his monarchy.

A range of Palestinians on the East Bank and indigenous East Bankers worry that a new Palestinian-Jordanian relationship might not be in their interest.

''Many Palestinians on the east bank worry about whether they will have to renounce their Jordanian identity and move to the West Bank,'' noted one of the merchants. ''They ask whether stability here, which is so rare in the Middle East and so good for business, will be affected. They are nervous about the return of the PLO.'' Leila Sharaf, a Consultative Council member and widow of late Prime Minister Abdul Hamid Sharaf, says: ''It is the uncertainty of the future which makes some Transjordanians question whether the Palestinians might take over. . . . Once the Palestinians' national existence is secure, then they will be accepted here.''

But until there is progress on the stalled peace talks, the crucial questions will remain unanswered: Is there a possibility that Palestinians and Jordanians will finally meld into one kingdom? Or is this rapprochement just a desperate compromise to try to get back West Bank land at which time the final Palestinian-Jordanian struggle will be played out? Next: The Palestinians and the Israli-occupied West Bank