The World Bank -- one of the most effective vehicles for peaceful progress by Third World countries -- could be crippled by an internal political struggle.

Arab nations and their Third World allies are accusing the United States of playing politics. What makes the charges serious is that the United States no longer has the overwhelming clout it once had as the single biggest contributor to the Bank, and the Third World is no longer made up of have-nots alone.

The latest political confrontation involved the proposed admission of the Palestine Liberation Organization as an observer at the Bank's meetings. The United States is firmly opposed to admission of the PLO in any capacity. In fact, the House of Representatives, which must appropriate U.S. contributions to the Bank's loan fund, has voted overwhelmingly for a rider to the foreign aid bill that would cut off all American commitments to both the World Bank and the International Monetary Fund if the PLO is given observer status.

One of the most innovative proposals under consideration by the Bank -- creation of an "energy affiliate" -- is endangered by this political tug of war. The proposed affiliate would disburse $25 billion in loans to countries developing new sources of energy. Most of the funding for this program was expected to come from the oil-rich Arabs. "The PLO question," one source said, "has seriously jeopardized the creation of a dependable source of money for worldwide energy research."

The PLO issue was settled temporarily by the IMF-World Bank decision not to invite any observers to this year's annual meeting. While this was publicly presented as a compromise solution, in fact it was a U.S.-engineered rebuff to the Arab world and to the current chairman of the IMF-World Bank board of governors, Amir Jamal, finance minister of Tanzania.

Jamal, acting under rules of the IMF-World Bank charter, had issued the PLO an invitation. By intense backdoor maneuvering, however, the United States succeeded in getting the board of governors to change the rules, stripping the chairman of his authority to invite observers.

The PLO issue is not all that is causing serious friction within the international banking institution. Other examples:

After lobbying by the United States, the People's Republic of China was granted admission to both the IMF and World Bank with what many consider unseemly haste. The Bank's managers changed key rules to expedite China's admission. For instance, membership is supposed to be contingent on submission of a detailed economic report. But when Chinese officials failed to provide important statistics, on the excuse that most of them had been destroyed during the Cultural Revolution, the Bank's leadership waived the requirement, ignoring officials who wanted to hold off until more thorough research could be done.

In addition, China juggled its available statistics on per capita income -- the key criterion that enables a nation to qualify for poverty loans. iChina's per capita income was listed as $460 in last year's World Bank Atlas. Presto! This year it was cut in half to $230. This means the poorer nations of Asia and Africa will have to compete with the Chinese for the limited money available.

Vietnam is another sore point. Several months ago, World Bank President Robert McNamara assured Rep. Clarence Long (D-Md.), chairman of the House Foreign Operations Subcommittee, that he did not foresee any development loans to Vietnam. Several insiders complained that McNamara had exceeded his authority by making this assurance without consulting other executive board members.

In his letter to Long, McNamara cited "instability" in Vietnam as the ostensible reason for not advancing loans. But one Bank insider observed with some rancor: "The same criterion can be used for Turkey or Zaire, yet the Bank is beefing up its lending operations in both those countries. If this kind of politicking keeps up, the role of the bank as an independent and dependable source of loans may come to an end."