The Palestine Liberation Organization has abandoned initial efforts to mediate the release of U.S. embassy hostages in Iran, but it seems to have kept the door open for any future mediation opportunities while resuming its attacks on U.S. policies in the region.

PLO leader Yasser Arafat, who said in an interview published yesterday that his organization would not mediate, added that, "our forces are all on alert and ready to assist the Iranian revolution or confront any Israeli move in south Lebanon."

A similar hardline Arab declaration came today from Tunis, where Iraqi President Saddam Hussein opened an Arab League summit conference with a demand that the Arab countries open an all-out offensive against Israel's friends and allies, including the use of the "oil weapon."

While Hussein did not specifically mention the embassy seizure in Tehran, several Arab foreign ministers, in preparatory meetings for the summit conference, had expressed solidarity with the Iranian revolution and the issue is still likely to come before the heads of state.

Reports from Tunis said Iran's revolutionary leader, Ayatollah Ruhollah Khomeini, had decided to send a delegation to the Arab summit to seek support for his country in its confrontation with the United States.

But Arab League Secretary General Chedli Klibi of Tunisia reportedly rejected the Libyan-backed proposal that the Iranian delegation be admitted to League sessions with observer status. He told a news conference that he acted on the ground that the league's statutes exclude observers from non-Arab governments. He said Khomeini's delegation would not be admitted unless the summit overruled his decision.

The 10th summit of the Arab League convened with representatives of 20 Arab nations and the Palestine Liberation Organization attending. Egypt, the most populous Arab state, was absent.

It was the first summit since the Arab League decided to move its headquarters from Cairo to Tunis last March to protest Egypt's signing of a peace treaty with Israel.

Arafat, who attended the opening session of the conference, told the Algerian daily Al Shaab that "We did not and will not mediate between the Iranian revolution and the United States concerning the American hostages in Tehran." The text of the interview was carried by the Palestinian news agency Wafa yesterday.

"The Palestinian and Iranian revolutions are both in the same trench. But we made contacts at the very beginning with our Iranian brothers because Iran is a friend of the Palestinian revolution. On this basis, we dispatched Brig. Saad Sayel to examine the situation," he added.

Sayel, codenamed Abul Walid and a senior military advisor to Arafat, was sent to Tehran shortly after the embassy siege began to "explore and see how much room the PLO could have in influencing maters," a Palestinian source said.

Arafat told Al Shaab that "ensuing developments, which began with the U.S. disruption of Iranian oil imports, the freezing of Iranian assets in U.S. banks and the U.S., British and Australian naval show of force all lead us to believe that these powers are seeking to draw Iran into a war."

The announcement by Pentagon spokesman Thomas Lambert last Wednesday that the U.S. aircraft carrier Midway had left the East African port of Mombasa, Kenya, for what were described as training exercises in the Arabian Sea, sparked sharp criticism from Palestinian groups in Beirut.

A Palestinian editor in Beirut explained the PLO's apparent change in position on mediating with Tehran by saying "the Palestinians did not realize then, and they do now, how emotional the embassy siege in Tehran is, and that they could not rationalize with leaders there. They have abandoned their initial move to intervene, but should there be any chance of successful mediation they will be the first to jump in."

News agencies reported these other developments from Tunis:

The states attending the Arab summit in Tunis were divided not only on the use of oil as a political weapon against Israel's supporters but also over the issue of the Palestinian guerrilla presence in south Lebanon.

In advance of the summit, Iraq had teamed with Libya to try to push for a firm "oil weapon" resolution from the conference but the move was stifled by Saudi objections.

Iraqi President Hussein had called on the Arb states to use "our economic resources" against "those who strengthen Zionist aggression."

In another development, diplomatic sources said Lebanese President Elias Sarkis was prepared to reject any summit compromise to Lebanon's working paper calling for an end to Palestinian attacks on Israel from Lebanon, which have provoked severe Israeli reprisals, and a halt to claims of responsibility for guerrilla operations from Beirut.

The PLO was expected to oppose the Lebanese move, with the support of Arab hard-line states.