Arab leaders at a summit conference here secretly apporved a 10-year, $3.5 billion annual war chest yesterday to strengthen the remaining front-line Arabs now that Egypt appears ready to sign a peace treaty with Israel.

In a subtle tradeoff for the handsome financing, principally from moderate states with oil riches, radical Arabs backed off on some of their more extreme political demands.

Yasser Arafat, leader of the Palestine Liberation Organization, seemed to symbolize the compromise when he beamed and hailed the summit results as a "magnificent victory" even though they fell short of PLO demands at the outset of the 21-member summit meeting.

For reasons not immediately obvious, Iraqui Foreign Minister Saadoun Hammadi, the conference spokesman, declined to brief reporters about the resolutions when the four-day summit ended last night. But conference sources said the following decisions would take effect automatically on signature of an Egyptian-Israeli peace treaty:

Suspension of Egypt's membership in the Arab League.

Transfer of Arab League headquarters from Cairo to a yet undetermined country. Kuwait and Tunisia were rumored as front runners.

Boycott of any Egyptian companies that deal with Israel, along the same lines as the longstanding Arab League boycott of non-Arab firms trading with the Jewish state.

In what was seen as a sign of some hardening among moderate Arabs, King Hussein of Jordan persuaded Saudi Arabian Crown Prince Fahd to accept the proposal for removing Arab League headquarters from Cairo with an emotional appeal.

The automatic application of the measures also represented a victory for the radicals. Throughout the summit and a preparatory foreign ministers' conference earlier in the week, the moderates, led by Saudi Arabia, had sought to avoid automatic sanctions. They had argued that only if and when Sadat actually signed a separate peace treaty was there any need to consider punitive steps.

The moderates even insisted on sending a last-ditch mission to Cairo Saturday to dissuade Sadat from signing. But much to the radicals' delight, the Egyptian leader bluntly refused to receive the emissaries, in part because the Saudis had neglected to clear the move with Cairo beforehand.

Still, the moderates successfully resisted radical demands to break off diplomatic relations with Cairo.

Now was there any mention of several steps the radicals had suggested the conference would adopt. For example, they had hinted that Saudi Arabia was considering cutting off the estimated $1 billion to $2 billion in annual grants that help keep Egypt's faltering economy from collapsing.

Whatever reservations the Saudis may have about Sadat's peace policy, the rulers in Riyadh have even greater fears of the kind of radical regime that might replace Sadat.

Moreover, even radical sources conceded that the conference did not discuss sending Iraqi troops to Syria, which is the only step that might begin to fill the military gap left by Egypt's defection.

The only announced decisions concerned a now routine condemnation of the Camp David agreements, reiteration of Palestinian rights to self-determination and a homeland, and a call to hold yearly summit meetings. The final communique again called on Egypt not to sign a peace treaty with Israel and asked it to return to Arab ranks.

Spokesman Hammadi hailed the summit's "full success" and said it showed that "the Arab world could agree on a united stand to face the situation after Camp David."

Conference sources provided the following breakdown for the recipients:

Syria, $1.85 billion; Jordan, $1.2 billion; the PLO, $400 million, including $100 million for the Israeli-occupied West Bank and Gaza; and an unspecified additional $50 million for the occupied territories.

Pledging the funds were Saudi Arabia, $1 billion, and Iraq and Libya, $500 million each, with the rest coming from various wealthy oil countries on the Persian Gulf.

The money was to be paid three times a year under the agreement, the sources said. But recipients doubted they would receive more than half the pledged amounts. Payment of funds pledged at Rabat in 1974 to the same countries plus Egypt often were delayed.

Finally, a foreign ministers' conference to discuss Lebanon's reconstruction is to meet within three months, the conference sources said.

Among the summit's more notable developments were tactical reconciliations between the PLO and Iraq, after a series of assassinations that reached a peak last summer, and between the Palestinians and King Hussein of Jordan.

The rapprochement with Hussein began in earnest in September, when Palestinain leader Yasser Arafat traveled to Jordan for the first time since bloody fighting in 1970 when the king's army defeated Arafat's guerrillas.