Following are excerpts from an interview with Saudi Arabian Crown Prince Fahd:

Q: What are the prospects for peace in the Middle East now?

A: If the parties who are working for peace now can come up with a peace that is fair and just and accepted by all the parties concerned, we and others would definitely support it and accept it. If the Palestinians are not given their fair and just rights, however, if they are not given back territory to have their own country, then any peace would be shortlived and difficult to achieve.

Q: Does the failure of Egypt and Israel to reach the May 26 Camp David target date change the situation?

A: Sadat has given everything he possibly could. Now it is up to the Israelis to show they are serious about peace. If the Israelis have a sincere intention of achieving peace through negotiations with the Egyptians and Americans, the first thing they do is to withdraw from the Arab lands occupied in 1967, and work according to the resolutions of the United Nations. There can be a program for withdrawal to be discussed, to be negotiated in detail with the other parties.

Resolution 242 was accepted by Egypt, Israel, Jordan and Syria. This can be made a basis for a peace settlement, Israel should be encouraged after all that Sadat has done and all the compromises he has made.

Q: Do you believe Israel has to withdraw completely before peace can be made, or would a declaration of withdrawal bring an Arab response?

A: If Israel would declare its sincere intention of withdrawing from the lands occupied in 1967, Saudi Arabia would do its utmost to bring the Arabs to cooperate and work for a full settlement. When the Camp David conference was held, we hoped that the agreement would include a declaration from Israel that it would withdraw from the occupied territories. [But] it became clear from the beginning of the conference that there was no clear mention that Israel would withdraw from Jerusalem. It was clear from the conference that Israel has no intention of withdrawing from the Arab territories. If they have the sincere intention of withdrawing, there can be agreement between the Israelis and the Arabs. All complications can be solved. I can assure you that most of the Palestinians want peace. It can be worked out.

Q: Would specific steps be required to prove Israel's sincerity on withdrawal before Saudi Arabia would respond?

A: We take it that any sovereign country that respects itself and its word will be serious about its word. There will be men and countries in the Arab world who will take the Israeli word seriously and will start working for gathering the dissidents of the Arab rejectionists to wait for actual action to be taken by Israel.As long as there is no sign of that declaration, there will only be chaos and trouble and lack of peace in this part of [the] world, which only the enemies of democracy and peace will want. p

Q: How can the Iranian hostage situation be resolved? What was the effect of the failed rescue mission?

A: The taking of diplomats in an embassy as hostages is against diplomatic law and tradition all over the world. We are against that. Now there are some signs in the statements made by the Iranian officials . . . that there may be a solution for the American hostages. [The rescue mission] did make things a little more complicated and difficult. Now the voices of the hawks in Iran have become louder. There are of course people with a patriotic feeling who have seen this as an attack against Iran. We only hope that the new Iranian parliament will get a majority to vote for the release of the hostages.

Q: Was the hostage-taking also a violation of Islam?

A: The Islamic religion does not permit the taking of any action against people who have not hurt you. Islam does not approve of depriving the freedom of other people. In a case of course where you are defending yourself it becomes a different story. Islam is a tolerant and lenient religion.

Q: What has been the effect of the invasion of Afghanistan by the Soviet Union?

A: If the Soviet Union manages to stay in Afghanistan and make Afghanistan a part of the Soviet Bloc, the threat and danger will go beyond this part of the world. In my view there are two important things to be taken into consideration in the context: they are America's relations with its European allies, and the question of Pakistan. Europe is taking it easier, preferring more lenient and diplomatic ways, both on Afghanistan and the hostages in Iran. If they fail, they will have to be more inclined to go with the American way of taking some harder measures.

About Pakistan, we believe that America should have given much more help to Pakistan. The Soviet Union helps India with all kinds of arms. Maybe there is no danger right now of a clash, but India has also completed an atomic bomb.The threat now comes from the Soviet Union in Afghanistan.The Soviet Union may attack Pakistan through its puppet in Afghanistan. The United States should have given Pakistan much more than the $400 million offered, which does not do much for Pakistan, which needs to rebuild its Army. And there are more than 800,000 Afghan refugees in Pakistan.

If the danger arrives in Pakistan then it will be greater, and will be aimed toward other countries. The time may come when the United States will wish that it had given more to Pakistan. Pakistan did not really refuse the help of America. It was only that the help was too small. If Pakistan had accepted this help, it would have given the Soviet Union or Afghanistan the pretext to attack Pakistan and Pakistan would not have had the resources to defend itself. Pakistan would in fact welcome help and friendship with the United States. They want help that would be effective.

Q: Does Saudi Arabia favor the American plan to establish military facilities in Oman, Somalia and Kenya?

A: I don't think I can answer for any of those countries.

Q: Then what will Saudi Arabia do with the United States to enhance security in this region?

A: Presently I don't see anything threatening our security in the Gulf. Moreover, if you take any action that is not needed, this action may create more trouble than you are trying to control.

Q: What has been the effect of the attack on the Grand Mosque of Mecca in November?

A: In fact the story of the mosque is a very simple one. It was inflated outside by the media. These were a few fanatics led by a deranged man who thought he was a prophet, who promised to rule the world for seven years in peace. We did not want to damage the mosque or hurt the people inside, so we negotiated first and tried to prevent bloodshed . . . I assure you that it did not have any aftereffect. It was of even less importance than what happened in Guyana.

This is a stable country. This is a secure country . . . But since six months there has been a deliberate campaign against Saudi Arabia in the international media. There are people who want to damage the special relationship between Saudi Arabia and the United States. We can only guess that there are countries that feel jealous and bitter about this special relationship.

Q: What are the prospects for an energy compact between the oil-producing countries and the developed nations to ease the impact of oil-price rises, especially on Third World countries?

A: This is one of the very principles we work for. We want this kind of cooperation. We hope a thing like this can be realized. Anything that would bring down the prices of manufactured goods sold by developed countries to oil producers would act to bring oil prices down. In fact the two things are connected.

Q: Would you favor an international conference, perhaps a restricted summit, on this matter?

A: Anything that would contribute to tackling this problem, the problem of oil and other things, that would lead to a solution that is gradually acceptable, would be a thing that Saudi Arabia would support.

Q: Last June, Saudi Arabia agreed to a request from President Carter to increase its oil production and has maintained a production of 9.5 million barrels a day since then. Will you continue doing so in the second half of 1980?

A: The Kingdom of Saudi Arabia has shown it is willing to work and sacrifice a little more than others to decrease the suffering of mankind. At OPEC, we have been the only country seeking lower prices. The continuation of production at present levels depends on the absorption of this oil in world markets.