Arafat speech may reveal stand. PROVISIONAL PALESTINIAN STATE?

In a major address tomorrow night, Palestine Liberation Organization (PLO) chairman Yasser Arafat will throw his support behind a proposal to proclaim a Palestinian state and to set up a provisional Palestinian government, a ranking PLO official said here Saturday. The address, the first major public statement by Mr. Arafat since Jordanian King Hussein's plans to disengage from the West Bank were announced July 31, will be given in Strasbourg, France, to the 156 members of the 434-seat European Parliament who belong to Europe's socialist parties.

The official said Arafat had made this decision after 40 days of intensive internal discussions triggered by Hussein's action.

Arafat's decision was said to have been reached after rejecting several other options, one of which was to ask the United Nations to establish a trusteeship in the Israeli-occupied territories.

``There's only one option: independence and a provisional government. That cancels other options,'' the official said.

The PLO official stressed that the inclination to proceed with a declaration of a provisional state merely reflects Arafat's personal views, now backed by the ``revolutionary council'' of Arafat's dominant Al-Fatah guerrilla faction of the PLO. A final PLO decision will await the convening of the Palestinian parliament-in-exile, the Palestine National Council (PNC), perhaps as early as next month.

In fact, any statement of support by Arafat will represent a major step toward statehood since the PLO's four largest factions - all of which are now believed by Al-Fatah sources either to favor or to be leaning toward such an initiative - comprise a working majority of the PNC.

The four are Al-Fatah, the Palestine Communist Party, the Popular Front for the Liberation of Palestine, and the Democratic Front for the Liberation of Palestine. The last two are the largest Syrian-backed PLO factions.

Radical pro-Syrian and pro-Iraqi PLO factions remain opposed to the establishment of any Palestinian state that does not encompass all of Palestine, implying the extinction of the Jewish state established in 1948. The two-state solution now said to be favored by Arafat implies Israel's right to exist.

Many Middle East observers say that the PLO will have to link any statehood initiative to explicit recognition of Israel if it hopes to win US recognition and to clear the way to an international Mideast peace conference.

But several ranking PLO sources interviewed this past week in Tunis say the PLO has no plans to relinquish its principal bargaining chip before peace talks with Israel actually begin.

``We do not want to do a striptease prior to the international conference,'' said the PLO official Saturday. ``We will not put this card in the press; we will put it on the bargaining table.''

Arafat's appearance is shaping up as a major media event, with hundreds of journalists expected.