Egypt Struggles to Retain Its Role As a New Era Opens in the Mideast

NOT long ago, the spectacle of an Israeli prime minister and an Egyptian president sitting together and uttering words of mutual admiration was a remarkable enough image to attract worldwide media attention and offer a vivid contrast to the hatreds that always seemed insurmountable in the Middle East.

Similarly, in years past, when Yasser Arafat, chairman of the Palestine Liberation Organization (PLO), would appear before the Arab League in Cairo to argue his case for Palestinian statehood, his appreciative audience of senior Arab officials would give him a hero's welcome and reward every rhetorical flourish with thunderous applause.

But in these extraordinary days of reconciled foes and shattered taboos, the commonplaces of the past are being replaced by a new set of images better suited to a rapidly changing political order in the region.

Fourteen years after Egypt and Israel signed a peace treaty ending four decades of hostility, relations between the two nations are entering a new phase, heralded by last week's historic signing ceremony at the White House.

During the post-Camp David period, Egypt reaped substantial benefits from being the only Arab state to make peace with Israel. But for Egyptian President Hosni Mubarak, who met Sunday with Israeli Prime Minister Yitzhak Rabin in this Mediterranean port, the redrawing of the regional map poses challenges that could cost him and his beleaguered government dearly.

``As soon as the ink dries on Israel's first peace treaty with another Arab country,'' says one Western diplomat in Cairo, ``Egypt will lose its distinction as the `Great Exception.' ''

In 1979, as a reward for breaking ranks with the other Arab states and making a separate peace with Israel, Washington promised then-President Anwar Sadat an infusion of funds that quickly made Egypt the world's second-largest recipient of American largess (after Israel).

Egypt's loyalty as a cold-war ally further strengthened the special relationship between Cairo and Washington. Mr. Mubarak, Sadat's successor as president, skillfully exploited Egypt's role as a bridge between the West and the Arab world.

Egypt's special status was on display Sunday, when Mr. Arafat and Mr. Rabin visited Egypt concurrently - itself a remarkable break with past protocol. Each leader used the occasion to placate political foes who see the historic accord between Israel and the PLO as an act of betrayal. Cool and mundane

While the PLO chairman was in Cairo trying to calm the anxieties of Arab foreign ministers assembled for the biannual meeting of the Arab League - once Arafat's favorite public forum - Rabin visited Alexandria, Mubarak's summer home.

Arafat was accorded a cool reception by his former admirers, while Rabin's summit with Mubarak, a study in cordiality and diplomatic flattery, seemed downright mundane compared with the cataclysmic events of the past fortnight.

But the unspoken worry of many Egyptian officials is that the breakthrough in Israeli-Palestinian relations may imperil Cairo's profitable relationship with the West, particularly the United States.

In recent years, Washington has provided Egypt with more than $2 billion in annual military and economic aid. The prospect of losing this cash infusion is chilling, particularly since Egypt's main source of hard currency, tourism, has been devastated by terrorist attacks.

Washington has been careful not to threaten to cut aid cut and officials here are trying to put an optimistic spin on recent events.

``We don't believe that the breakthrough in the peace negotiations will affect our position with the United States,'' says one senior Egyptian government official. ``We believe peace will be far more beneficial for us, strategically speaking.''

Egyptian diplomats, however, many of whom have labored valiantly to keep the peace process alive after direct negotiations between Israel and her other Arab neighbors began in Madrid in 1991, were keenly disappointed not to have been involved in the back-channel negotiations in Norway that led to last week's breakthrough. Strategic value

Many here believed that Egypt's best chance of remaining in the good graces of the West was to prove its strategic value as a mediator in the Arab-Israeli dispute.

``Mubarak has been hoping all along to parlay Camp David into something bigger regionally - and to been seen to take the credit for it,'' one Western diplomat says, referring to the 1979 Israeli-Egyptian peace treaty.

For the moment, the Arafat and Rabin visits have shifted the spotlight back to Egypt, where many here say it belongs.

``There will always be a role for Egypt,'' says Mamdouh Beltagi, a Mubarak administration spokesman. ``The world expects Egypt to play the role of peacekeeper and arbitrator. This will not change.''