The ultimate survivor, chairman Yasser Arafat of the Palestine Liberation Organization, again has emerged from the thicket of guerrilla politics with what looks like considerable latitude to pursue any diplomatic opening to his liking.

At the recent Palestine National Council - or parliament-in-exile -- session in Damascus, Arafat's ascendancy was illustrated by the return to the mainstream of his former chief rival, Dr. George Habash of the Marxist Popular Front for the Liberation of Palestine.

The return of Habash to the 15-member PLO Executive Committee was a mere formality, which, nonetheless, formally laid to rest his radical rejection front.

The separate Egyptian-Israeli peace had rendered academic the once-bitter doctrinal differences between Arafat and Habash, who years ago abandoned militant views on Arab revolution and headline-grabbing airliner hijackings that had made him the commando movement's cutting edge.

Arafat's capped his control of the PLO by deft handling of otherwise depressing prosprects for Middle East peace negotiations.

An Arafat truculent in tone, but conciliatory in substance, used the prestige of the National Council to lay down seemingly tough conditions as his price for helping salvage Europe's slow motion Middle East peace efforts. Yet his Damascus meeting with Dutch Foreign Minister Christopher van der Klaauw, chairman of the 10-nation European Council of Ministers, seemed to signal readiness to help the European initiative.

For Arafat has nothing much to lose and perhaps something to gain in what he frankly describes as "these worst of Arab times."

Arafat is vulnerable to Israel's military might, scarcely encouraged by signs of outright hostility from the Reagan administration, weakened by Arab world splits and even criticized within commando ranks for his diplomatic endeavors, which have yet to pay off.

Whatever Arafat's inner doubts about the languishing, nearly year-old European effort, he is said to be determined to exploit Britain's special relationship with the United States. Britain is to assume the Common Market chairmanship in the second half of the year.

Arafat apparently has no illusions about the Reagan administration's attitude toward the PLO, which Reagan has described as a terrorist organization.

But Arafat, of course, is aware that Israel is in the midst of an election campaign and that the Reagan administration has not yet formulated a Middle East policy. If Lord Carrington, the British foreign secretary, can succeed in improving the PLO image in Washington, that -- to Arafat's thinking -- is more important than the European initiative.

With the Camp David peace process stalemated and with the possibility that the Reagan administration may be moving away from its initial concentration on spelling out its policy toward the Soviet Union , Arafat has every reason to encourage the British to keep the door open to the Reagan administration.

Arafat chided the Europeans in a speech to the National Council for their lackluster pace since unveiling their Middle East initiative last spring. At the same time, he endorsed Soviet President Leonid Brezhnev's call in February for an international peace conference as a "good basis for an honorable solution to the Mideast conflict."

Brezhnev seemed to have in mind a conference grouping Egypt and the other Arab states, the PLO, the Soviet Union, Western Europe and the United States that would work toward an independent Palestinian state and provide Israel with secure borders.

In other words, it was an initiative that would attempt to return to the days before November 1977 when Egyptian President Anwar Sadat visited Jerusalem and set in motion the separate Egyptian-Israeli peace and the Camp David process.

Coming from the Soviets, the initiative helped silence Arafat's radical wing. Even Habash's Popular Front for the Liberation of Palestine issued no public disclaimers at the time despite the implied recognition of the Jewish state that the group had sworn to dismantle.

Moreover, Arafat did nothing to prevent the resignation of Issam Sartawi, who was prevented from explaining to fellow National Council delegates his controversial -- and officially encouraged -- meetings with Israeli dissidents.

Internationally, Arafat's implied preference for the Soviet plan -- which he knew to be anathema to the anti-Soviet Reagan administration as well as to Israel -- could spur the British.

As he told the more than 300 delegates from 90 countries, "we commit a crime if we do not turn our military victories into political victories."

Such claims to political victories, required a suspension of disbelief since Palestinian victories of any kind are few and far between these days.

Indeed ever since Sadat's first visit to Israel, the Palestinian guerrillas have been hanging on, waiting at best for the rest of the world to come to the conclusion that Camp David could not produce peace in the Middle East without their consent.

Suddenly all the commando groups found themselves "in the same trench," as Arafat likes to put it, faced with the nightmare prospect of a separate peace.

If arafat was not in a negotiating mood on the only terms offered by the Camp David formula, then Habash no longer could justify his 1974 decision to resign from the executive committee. He had quit to emphasize his rejection of any willingness to consider the possibility of a Palestinian rump state made up of the West Bank and Gaza Strip.

The rejection front was also coming apart for other reasons. Hijacking airliners had focused worldwide attention on Habash's group in the early 1970s, but Habash led the majority of his group in condemning such acts.

Further splits bedeviled the organization as Habash's health declined, limiting his influence. Last year he had surgery in Prague for what was officially described as a benign brain tumor. He now walks with a cane and seems to have lost motor control of his right side.

Finally, for doctrinal reasons, the Popular Front for the Liberation of Palestine broke its longstanding ties with Iraq, judged too "pro-American" and guilty of attacking Iran. Habash has many ties with leftist Iranians.

Thus, where to go except return to the Arafat-dominated PLO?

Like Fatah, or the Marxist Popular Democratic Front for the Liberation of Palestine (another Habash breakaway), the Popular Front for the Liberation of Palestine is concentrating on working inside the West Bank and Gaza Strip.

Failure to hurt Israel militarily was so manifest that the Habash organization and the others started serious political work inside the West Bank and Gaza Strip.

In the series of setbacks that began with military defeat in Jordan in 1970 and continued through the PLO's involvement in the Lebanese civil war and Camp David, the only bright spot has been the growing loyalty of Palestinians in the West Bank and Gaza Strip.

Right now the guerrilla groups are as interested in pumping in funds to slow down, if not stop, the brain drain from the West Bank and the Gaza Strip as they are in setting off bombs inside Israel proper.

"We're keeping alive clinics which aren't really needed. That is hard for Israeli or international opinion to get mad at us about," said an official of a mainstream group.

Yet the fact is obvious that the PLO has been reduced to trying to persuade West Bank residents from emigrating away from there.

Reflecting this bitter lesson was the fact that the National Council met in Damascus, perhaps the only Arab capital willing to accept the responsibility or capable of finding even minimal acceptance in Palestinian eyes.

The Palestinians have no illusions about the Syrians after the repression they suffered in 1976 at Syrian hands or the Syrian diplomatic pressure, which dissuaded the PLO from attending the Arab summit conference last fall in Jordan.

It was Syrian President Hafez Assad's effigy that graced the wall during the first National Council sessions held at Damascus University. And it was the same effigy -- plus color photographs of Assad -- that were much in evidence when the proceedings were transferred to a trade union hall still decorated with slogans from a nearly year-old conference celebrating international solidarity with Syria.

"Where are the Arab weapons the Arab masses, the Arab funds, the Arab oil weapon?" asked Arafat as if defining the guerrillas' loneliness amidst the Arab world's plenty.