By Lee Hockstader
Washington Post Foreign Service
Tuesday, May 11, 1999; Page A13

JERUSALEM, May 10—Prime Minister Binyamin Netanyahu ordered the closure of offices in the Palestinian headquarters in Jerusalem today, risking a violent confrontation just days before Israel's national elections.

Tonight, there were signs that an 11th-hour compromise might be in the works to defuse the Israeli-Palestinian dispute, which has intensified since the Israeli government said last month that it would close down some of Orient House's activities.

But Netanyahu, who trails in the polls ahead of Monday's election, insisted Israel would carry out the closure despite warnings from Israeli security officials and the United States that the move could inflame Palestinian passions and ignite rioting.

The Israeli prime minister maintains that certain offices in Orient House -- the gated, turn-of-the-century Palestinian headquarters in East Jerusalem -- are functioning as agencies of Yasser Arafat's Palestinian Authority, in violation of the Oslo peace accords.

The government has been particularly galled by meetings the Palestinian representative in Jerusalem, Faisal Husseini, regularly conducts at Orient House with foreign diplomats.

"The decision was made after all the necessary legal procedures were exhausted, including long and thorough meetings with Orient House representatives," Netanyahu said in a statement.

Netanyahu's political opponents, as well as the Palestinians and some independent analysts, regard the crisis as a preelection ploy designed to revive the Israeli leader's floundering campaign. Israeli media also have reported that Netanyahu's minister of public security, Avigdor Kahalani, who was trying tonight to broker a compromise that would avert violence, has run afoul of Netanyahu, who wanted him to move faster to close the headquarters.

The Palestinians insist that officials at Orient House are carrying out their business in compliance with the Oslo accords, much as they have for the past several years.

"It's a sign of desperation," said an advisor to Israeli Labor Party leader Ehud Barak, who leads Netanyahu by an expanding margin in all preelection polls.

Scores of young Palestinians have gathered at Orient House in recent days, and Husseini has warned that any attempt by the Israelis to enter the building forcibly could trigger bloodshed. "We choose the way of peace . . . because it is the best option, but [the Israelis] would be wrong if they thought that this was our only option," he said.

Netanyahu has sought to make Jerusalem an issue throughout the four-month campaign, insisting that he is best equipped to protect Israel's control over what he calls its "eternal, indivisible capital" and suggesting Barak would divide the city with the Palestinians in a peace deal.

The Palestinians say they will declare an independent state this year or next, with a capital in Arab East Jerusalem, which they contend is illegally occupied by Israel.

Netanyahu's decision came after a U.S. appeal for restraint. "This is an extremely sensitive situation, and both sides have a responsibility to defuse it," a U.S. Embassy statement said.