Palestine Liberation Organization Chairman Yasser Arafat, brushing aside criticism within his own ranks over his backing of a Saudi Arabian Middle East peace initiative, said yesterday that the Saudi plan remains "a good basis for a comprehensive and lasting peace in the area."

Although Arafat called the breakdown of last month's Arab summit over the plan a "loss" for the PLO, he said that the Saudi initiative is still alive and will be reconsidered when Arab leaders agree to resume the suspended summit.

"That will need some more months" to be arranged, Arafat said in an interview with The Washington Post, his first with the Western press since the aborted Arab meeting in Fez, Morocco on Nov. 25.

The summit broke down partly over disagreement on one of eight points in the Saudi proposal: the implied acceptance of Israel's right to exist. Such acceptance is rejected outright by Arab radicals, and even moderates disagree on whether the key bargaining card for establishing a Palestinian state should be offered in writing before negotiations with Israel begin.

But while Arafat himself is said to have opposed including "point seven" in the Saudi initiative, he again implied yesterday that it is a principle he is prepared eventually to accept.

"I accept international legality and United Nations resolutions," he said.

"Who is against international legality? Israel is the only state created by a U.N. resolution, and now they refuse every U.N. resolution."

Although he would not expand on his remarks, Arafat emphasized that he was referring to all U.N. resolutions -- presumably both the original U.N. creation of Israel, and resolution 242, which in 1967 called for Israeli withdrawal from Arab territories occupied during the 1967 war and international acceptance of the sovereignty of all states in the area.

The controversial point seven of Saudi Crown Prince Fahd's initiative merely reformulated that latter principle of resolution 242. The PLO consistently has rejected 242 because it does not mention the Palestinian people as such, much less the establishment of their own national state.

Although he had avoided making specific public comments on any points of the Fahd plan in his early, if qualified, endorsement of it, Arafat's words provoked bitter criticism of his leadership within the fractious PLO.

A final, pre-Fez meeting of the PLO's 15-member executive committee was unable to agree to support or reject the plan. Instead, Arafat was forced to bow to the committee's compromise linking the PLO position to that of its allies in the radical Arab Steadfastness and Confrontation Front: Syria, Libya, Algeria and South Yemen.

The decision meant that once again the PLO had decided to subordinate its voice in Arab forums to that of Syrian President Hafez Assad, who refused to attend the Fez meeting. Arafat has often differed with Assad in the past, in part over Syrian influence on PLO policy resulting from its patronage of radical groups within the PLO opposed to Arafat's dominant Fatah organization.

Asked yesterday about the PLO's relationship with Syria, Arafat described the Syrians as Arab "brothers" with whom the PLO has a "strategic alliance. We have our own policy, they have their own," he said, while acknowledging that PLO "drops of blood" had been shed in Syrian disputes with other Arab states.

The struggle for Palestinian rights, Arafat said, "is not a picnic. It is a revolution."

Asked yesterday if his acceptance of U.N. resolutions was binding on PLO radicals, Arafat, indicating that divisions on the issue remain, noted that the organization is a democracy but said, "I am the chairman of the PLO. I was elected by everyone on a platform that has been approved by everyone."

Although he denied hints from other Arab sources that he had a direct role in composing the Saudi peace plan, Arafat said he had "discussed" it before the conference with Fahd and Saudi King Khalid and had "the right to make some remarks here and there."

At yesterday's midnight meeting in one of his many offices in the well-guarded Palestinian sector of West Beirut, the PLO chairman was relaxed and clearly in good spirits. Speaking in English, he jokingly dismissed both European and U.S. initiatives in the Middle East.

Referring to last year's European Community declaration in Venice supporting the establishment of a Palestinian state and urging PLO participation in future Middle East negotiations, Arafat said, "I am pragmatic, dealing with facts. I know that the Venice declaration was only a political statement and nothing more. I was not expecting more from Europe."

Although by some interpretations, President Reagan's pre-Fez summit comments that at least point seven of the Saudi plan was a step toward peace were viewed as a conciliatory U.S. gesture toward the Arabs, Arafat said he found U.S. policy totally negative.

"The American administration is not looking for a solution," he said. "How can you imagine that this stupid military junta in Israel will accept any peaceful solution while the U.S. administration gives them unlimited financial, military, economic and diplomatic support?"

Arafat said the United States has given Israel a series of "green flashes" indicating its approval of an anticipated action against the PLO in southern Lebanon that would break the current cease-fire, including the recent signing of an agreement on strategic cooperation.

Asked about Israeli charges that a PLO buildup in the south would justify such an attack, Arafat refused to discuss specifics on grounds that these were secret military matters. But he said that the Israelis were "blowing up and exaggerating the story" to cover an increase in their own forces.

Describing Israel as America's "naughty, spoiled baby," Arafat pointed to what he called "arrogance" on the part of Israeli Prime Minister Menachem Begin, seen in a series of Israeli "insults" to the United States "from the moment Reagan came into power."

Arafat said he remains willing to talk to U.S. officials, but said he is "hopeless" over the possibility of a change in U.S. policy.

Arafat said that although the Reagan administration still "has many Sadats" in the region, it should not count on its close relationship with Saudi Arabia to provide a moderating conduit to either the PLO or other Arab states as long as it persisted in "ignoring facts and realities and supporting the Israelis."

But Arafat displayed optimism over what he called shifts in "the American conscience and public opinion."

Arafat acknowledged the need to better communicate the Palestinian cause to the American public. "You find me a monster?" he asked. "Believe me, I am a human being, and I hope that the American people will believe I am a human being and am living with my people in this tragedy."

Palestine, Arafat insisted, "is not a question. It is the conscience of this area."

The failure of the United States to realize "the meaning of Palestine [and] Jerusalem to the Arabs, the Moslems and Christians" and its inability to control Israel, he said, would ultimately destroy American interests in a region that is historical "quicksand."