Upstairs in the casino of the Playboy Club, Ismail Baluch had just lost [*] 50,000 ($86,000). Not as much as his Arab friend sitting next to him who was still smiling after losing [*] 170,000 ($292,000). But still, Baluch had enough gambling for one night. And he was in a good mood. It was time for some dinner. Some pretty women, some good wine, some fun.

A large corner table for eight was reserved for him in the darkened dining room where the walls are hung with pictures of graceful Arabian stallions. Next to him he seated Amira, the belly dancer, his old, old friend of seven years and the singer whom he had also befriended. They ordered champagne and caviar and the most expensive foods and wines.

Baluch asked for the pgotographer, a pretty black bunny, to take the jolly group's picture. He was expensive, tipping everyone who served him [*] 20. He knew that he wouldn't have to pay for dinner. Victor Lownes, the director of the club would see to that. Victor was good to Arabs. He understood that if someone loses [*] 50,000 at the gaming tables, the hospitable thing to do was to give them dinner on the house.

But a tiny dark cloud appeared on the horizon. The bunny asked them to pay [*] 12 for the photo. Baluch was in a rage. This was not done. A breach of hospitality. He had just lost [*] 50,000. Now he was being asked to pay [*] 12 to have his picture taken. Gloom fell over the group. Baluch paid, but with great deliberateness.

The group quit the table and was on the way out of the dining room when Baluch spotted Victor Lownes. "Victor," cried out Baluch, "Victor, a most terrible thing has happened. . ."

Victor quietly soothed Baluch, spoke to the manager, took care of the matter. This man, Victor told the manager, is one of our most important clients and one of our dear friends. This is inexcusable.

Baluch was happy again. He invited Victor and his party to the Scheherazade for an evening of belly dancing. All was well.

Later Baluch would be clapping and singing as Amira danced, undulating her rather ample body around the stage as her male fans applauded with enormous enthusiasm while their wives sat, stonyface, dressed to the nines, and bore it.

Amira knew her talents. At one point, she danced on top of Baluch's table, knelt on the table in front of him and wiggled. He took a wad of bills from his pocket and stuffed [*] 500 down her breasts. He gave a reporter another [*] 200 to do the same.

"You know," he said, grinning, "she will make at least [*] 1,000 tonight."

He lit Victor Lownes' cigarette. Victor admired Baluch's lighter, Cartier with gold and mother-of-pearl inlay. Baluch gave it to him. Victor tried to give Baluch his Playboy Club lighter, but the Arab refused.

Finally everyone decided to call it a night. Baluch, after lavishly tipping the hatcheck girl, climbed into his Mercedes and waved his friends off with a promise of an interview in the morning.

"I will send my car for you," he promised off-handedly.

The following morning the doorman of the Savoy hotel rang upstairs to a reporter's room:

"Madam," he said, the disdain fairly oozing from his lips, "your car is here." He paused. "You will recognize it, Madam. It will be the only gold Rolls Royce in front of the Savoy."

The Arabs have hit London in a very big way and their presence has had an impact on the life of every Londoner in every class, whether on the streets, in the restaurants, in the hotels and shops, whether financially or socially. . . the Arabs are there.

They have bought the Dorchester Hotel and now all the menus and signs are in Arabic. The Intercontinental, and the London Hilton, both alongside the Dorchester on the park are cluttered with Arab women in long black robes and burqas, the beak-like masks, and with men also wearing traditional Arab dress. Newsstands with publications only in Arabic are on many corners. Foyles bookstore now has whole sections for books in Arabic. Real estate prices have been driven sky high by the Arabs. King Khaled of Saudi Arabia bought a house recently for $ 1.6 million ($2.7 million, approximately) and is adding another [*] 400,000 worth of renovations.

Many hospitals cater to Arabs, particularly the Wellington, a private hospital which now has video cassettes of 32 Arab movies for its TV sets, an extensive wine list, gourmet foods and 24-hour room service to accommodate Arab patients.

The gambling casinos are jammed with Arabs and the nightclubs and restaurants are booked with Arab names. Expensive boutiques and shops in Mayfair are fronted with[Word Illigible]pulled up with Arab customers inside, jewelry stores are dominated by Arab customers. Harrod's and Fortnum and Mason are packed with rich Arabs.

Three older Arab women, dressed all in black robes and burqa masks, were rummaging enthusiastically through the sweaters on a counter at the chain department store Marks and Spencer (known affectionately as Marks and Sparks and internationally known as a haven for cashmere sweater bargain hunters). The Arab women were buying 20 or 30 sweaters each and they felt right at home in the store, for though it is owned by noted British Israeli supporter Sir Marcus Seif, many of the salespeople speak Arabic and signs in the store are in English and Arabic.

As the women were about to pay a group of young Arab men walked into the store and began shouting and cursing at the women in Arabic.

"How dare you," they accused the hapless women, who were staring at them in confusion, "How dare you buy goods at a Zionist pig's store." The women, devastated, dropped their armloads of cashmeres and fled tearfully from the store, into their waiting Rolls Royce.

The airport is packed with new Arab arrivals and their friends and relations there to meet them. There are signs and slogans on the streets in Arabic and any given day the London newspapers and television stations will inevitably have news relating to the Arabs. Two major daily Arab newspapers are being started in London.

All of this has been happening gradually, almost so gradually that many English people didn't think much of it. Until this year. This year the whole thing broke wide open. It started with an onslaught last summer of Arabs coming to London for the summer season. It was reported that 30,000 Kuwaitis alone were vacationing in London.

The British are just beginning to come out of their shellshock and they are trying to adjust, trying to sort things out, trying to understand what has actually happend, what caused it, how it all came about, seemingly so suddenly, where it is all going to end . . .

Long before the oil boom, long before most British had ever seen an Arab sheik in a majlis, an Arab woman in her burqa, there were rich Arabs. They were businessmen, merchants, among the oldest in the world. Even their prophet Mohammed was a merchant, they were proud to say.

So in the summer, when the heat and the torpor of the desert would rise to heights unbearable even for those accustomed to it, and their horizons were nothing but shimmering beiges and pale lucid blues, they would go away. They would go to what was once the Arab Cote d'Azur, the mountains and the coast of Lebanon. There, tucked away in their magnificent villas, they would party and eat and relax, waited on in comfort by their Arab servants, surrounded by the familiar language, food, music, customs and clothes.

The very rich, very sophisticated Arabs, those educated abroad, those who spoke fluent English and French, were considered the creme de la creme of Beirut society.

And even those who came from the newer states on the Arabian Gulf (known to the Iranians as the Persian Gulf) those with new money, those with unpolished manners were absorbed into the Arab culture of Beirut with little notice.

Some of the more adventuroous, less inhibited Arabs would go to Cairo for the summer. There they would find women and gambling and nightlife to make up for the rather repressive lifestyle they had in their native, strict, Moslem countries.

But then their whole leisure world fell apart. The war in Lebanon made it impossible for anyone to go there for pleasure. And the economy in Egypt began to plummet, the hotels were not as well run, the nightlife began to be seedy and a bit dismal, the poverty in Egypt was oppressive.

At the same time, the money from the oil began to pour in a serious way, there was so much of it, in fact, that they didn't know how to spend it fast enough, what to do with it. Suddenly the governments of the oil-producing states were doling out money, and their citizens had no place to go to spend it.

After the war began many Lebanese fled to Paris, a place where they had been visiting and studying for many years, and because French was the second language of Beirut, they felt more at home. The Syrians were not far behind. But the Kuwaitis, the Bahrainis, the Saudi Arabians and those from the lower Gulf states didn't all speak French. And, too, they resented being put in the same class with the 2 or 3 million lower-class Algerians who had settled there. Many of them had been educated in England or in English schools in Egypt. For them, there was clearly only one alternative.

London.

It was not only the luxuries, the cars and jewelry and flats, the nightlife and the elegance of London which appealed to them, however. There were other elements which figured into the Arab decision to choose London as their new watering spot, particularly in the summer.

For one thing, they seem to LOVE the weather. The colder, the rainier, the foggier, the damper it is, the more they love it. Several weeks ago during the queen's jubilee in London there was a very bad spell of cold rainy weather and all the British were moaning about having to unpack their winter clothes. Not their Arab visitors. On numerous occasions, when greeting each other, they would remark on how lucky they were to have such wonderful weather.

They love the greeness of London, the trees and plants and flowers and they will pay incredible sums for houses or flats overlooking Hyde Park. The one major hotel which they have bought, the Dorchester, is on the park, and their other two favorites, the Intercontinental and the London Hilton, again, are on the park.For them, the greatest luxury you can have is a lawn and only the richest (and that means very rich) can actually afford lawns back in the desert.

There is, too, another reason they like London. Many Arabs adore being pampered by their doctors. London has the best medical care in Europe and the private clinics and hospitals in London have adjusted very easily to the lavish style to which the Arabs are accustomed. Also, because their countries are only beginning to develop, particularly in the lower Gulf states, the Arabs have little first-class medical care in their own countries. So they often will plan operations and medical treatments for the summertime so they can make it part of their vacation as well.

Arab men and Arab women both adore coming to London on their vacations or even to live. They have, however, separate but equal reasons.

For the women it is freedom. Their lives, because of the strict religious laws, are repressive in their own countries. The women must wear veils. Often they are not allowed out in the streets without a male chaperone. They may not drink, dance or gamble. Marriages are almost always arranged.

When they come to London, the women can remove the veils, go shopping alone, they can drink, smoke, dance and, if single they can date, something unheard of at home.

For the men, they may gamble at the numerous and well-appointed casinos in London, drink, go to see belly dancers, have prostitutes or even girlfriends who are not Arabs. Meanwhile, many Arab women are piling up PhD's in every subject imaginable at the universities in England, way past their 30th year, just to stay there and keep from having to return home to marry a man they don't know or can't stand.

For two years a beautiful Arab woman in her mid-20s from a very rich and well-placed family studied Arabic translations of Shakespeare at Cambridge and was not approached by anybody. "People thought I was a princess," she says. "I intimidated them. I dressed simply but elegantly in European designer clothes. Never in jeans. I was very unhappy and very lonely. Then, I finally realized the problem. One of them told me that the way I dressed intimidated people. And there were so few Arabs at Cambridge, there was one Egyptian several years ago."

She got rid of her fancy car and bought a second-hand bicycle, stored her beautiful wardrobe and began wearing blue jeans. "All this to prove that I am not different," she says. "Now I know all the tricks. Now I have lots of friends."

The Arabs seem to feel at home in London because of the fact that the British, having colonialized half of the world, have had to assimilate so many races and cultures and nationalities into their own culture, most obviously the Indians, most recently the Africans. There are so many different ethnic strains in London that the Arabs don't feel particularly out of place.

And too, many Arabs have always resented the British colonialists who they feel are cold, disdainful snobbish. This, now, is their big chance to show off. To show off to their friends and peers certainly, but more importantly to say to their (now inferior in money terms) British hosts -- as one leading Kuwaiti in London put it --"Here I am. Just watch me go." They are just beginning to understand that they are the first generation Duponts and Rockefellers of the Arab world.

The Concorde has cut the trip from Bahrain, where it departs, to London, from six hours to three, not an inconvenient flight. The British have accommodated the Arabs by insuring that they can now direct dial their own countries by telephone with no hassle, no wait.

Beyond all of this, one thing is becoming increasingly clear. The new Arab wealth is the beginning of a great spending boom which signals an Arab reconciliation with the West.

"The Russians," says one British political observer, "had been making great headway with the Arabs until now. But now, with their great wealth, the Arabs have rediscovered the West as the cornucopia of capitalism."

So, for the moment, London is the place they will go, they will want to stay. Though some Arab observers believe that it won't be long before they head for New York -- and even insist that the migration has begun -- it will be several years before it becomes evident. The Arabs are wary of New York, wary of the large Jewish community there, wary of what they consider a less tolerant attitude toward foreigners.

However, many Arabs seem suprisingly impressed with Jimmy Carter and that may influence many of them to reconsider America as an alternative to London. As they say, familiarity breeds contempt and as the Arabs are becoming more familiar to the British and vice versa, the contempt is increasing on both sides.

One of the great sports in London these days is telling "dirty Arab" stories, particularly at dinner parties. There are hundreds of them going around, most concentrating on personal hygiene, a few valid, many apocryphal, all ostensibly true.

It enrages the Arabs, of course, and they have begun to fight back with --what else? -- "dirty Brit" stories, also all ostensibly true.

They go something like this:

A well-known European princess was distraught. Having rented her beautifully decorated London house to Arabs last summer, she returned, she told friends, to find a nightmare of filth and destruction. Grime and stains everywhere. On silks, on chintzes. Broken dishwashers . . . it was all too horrible. Never again.

The other side of the story is that the day after her Arab tenant had moved into the Princess' house (having rented it sight unseen), he had marched into the real estate office in a rage. "I cannot spend another moment in this house," he had insisted. "The place is much too dirty."

The main problem that the British are having is in distinguishing among the Arabs. Until a few years ago most Brits, if asked to name a well-known Arab would probably have said either Omar Sharif or (the British) Lawrence of Arabia. Things haven't changed all that much, even, in some cases, among the most sophisticated Londoners. An Arab is an Arab. Period. It is this lack of distinction which drives the aristocratic Arabs crazy and which has tended to put them in the same position as the so-called Ugly American of 20 years ago. All of them. This means that even the Arabs who have been staying at Claridges, the best hotel in London, for years, are now having to answer for their poorer cousins from the lower, less developed part of the Gulf.

Now the Arabs have replaced the Americans in London as the big spenders and the Americans coming into central London are priced right out of the market. Now a [*] 50-a-week house rents in the summer for [*] 750 a week.

The well-educated, sophisticated Arabs are very quick to distinguish among themselves who is who, and they despair over the image their lower-class cousins are creating. In the sophisticates' view, tinged with Western values.

The Arabs from Lebanon and Syria are worldly and sophisticated as are the Kuwaitis. The Moroccans are as well, but they are French-speaking and are not really considered the same. Bahrain is advanced socially and economically but not very sophisticated. The Saudis are somewhere in between -- they are the wealthiest, but often socially backward -- because of their religious restrictions. Those from Abu Dhabi and Qatar are the most backward, many of them straight from the tents. To compare a Kuwaiti member of the Al Ghanim family for instance, to a sheik from the desert of Qatar is like comparing a Cabot from Boston to a moonshiner in Appalachia. They are not the same.

Two very sophisticated Arab women dropped by one of London's best jewelry stores to shop. They were amazed to find the store closed -- it was 3 p.m. They knocked on the door until someone came to explain to them that they had the wives of two very important oil sheiks inside and that they wanted to give them privacy and the run of the store.

The new arrivals, controlling their laughter, finally persuaded the man to let them in as well. They were not surprised to find three fat women in the primitive black robes and masks, obviously from one of the southernmost Gulf countries playing with the jewelry as though they were playing with toys. The two women, prepared to spend thousands of dollars themselves, watched with some amusement as the store owners perspired over these women, paying little attention to the newcomers. Finally the three women in the robes, bored with their little outing, got up and left without so much as buying one gold bracelet.

"If they had made any effort to understand Arabs," said one of the women later, "they could have recognized which of the customers were worth their attention. The British just lump everyone together. And they pay for their mistakes."

One of the major drawbacks of this sudden influx has been the emotional toll, the culture shock for many of the Arabs, particularly those from the lower Gulf states. The depression of dealing with the two cultures has caused enormous angaist among them. There is one woman psychiatrist, an Argentinian in London, who has become the main shrink for most of them who will go. One of the problems she must help them deal with is the Arabs' conviction that the Western press is dominated by Zionists. They speak out but they feel that they haven't found the winning combination in terms of dealing with the press.

And they all feel that the stereotype of an Arab will be perpetuated for a long time.

A rich Arab was staying at a posh --but not large -- downtown hotel in London. His 7-year-old son liked to play with the elevators. Up and down, up and down he would ride, causing mass confusion and tying up the elevators for hours on end.

The management, driven to distraction, confronted the father and son together at the scene of the crime.

"Sir, this must stop immediately," said the manager, perspiring from frustration.

"Son," said the Arab to the little monster, "do you like this hotel?"

"Yes, father," grinned the child, pushing mischievously at the elevator buttons.

"Then I'll buy it for you," replied his father.

He did. And fired the manager. CAPTION: Picture 1, Even London's billboards.; Picture 2, herald the Arab arrival.; Illustration, a Saudi Arabian in traditional garb plus umbrella.; Picture 3, two Arab women walking in the West End., Photos by Robin Laurance for The Washington Post drawing from L Express magazine; Picture 4, A robed visitor sits near London's Arab-owned Dorchester hotel. Photo by[WORDS ILLEGIBLE]; Picture 5, Window shopping in London's West End.; Picture 6, Western domestic aids contrast with Arab traditions. Photos by Robin Laurance for The Washington Post