The National Aeronautics and Space Administration signed an $11.6 million contract with a 22-member Arab organization yesterday to launch a communications satellite from the space shuttle in 1984.
Both Libya and the Palestine Liberation Organization are members of the "Arabsat" consortium.
The original proposal to build the satellite caused an uproar on Capitol Hill until the administration was able to persuade senators that the deal did not involve military technology or imply recognition of the PLO.
The Arabsat consortium belongs to the 22-member Arab League and its center of operations is to be in Riyadh, Saudi Arabia.
"The PLO owns six-tenths of 1 percent in the system. We argue and our lawyers agree that this in no way represents U.S. recognition of the PLO. They are in a number of U.N. bodies and we don't pull out of them. This was a straight commercial deal," said Deputy Assistant Secretary of State Leslie H. Brown.
The United States maintains that it will not deal with the PLO unless it recognizes Israel's right to exist.
The United States also has no diplomatic relations with Libya and has a policy of selling no military goods to the government of Muammar Qaddafi. Libya owns 18 percent of Arabsat, and when the administration first submitted the original deal to build the satellite to Congress, there were questions about its military applicability.
Brown said the satellite has one television channel and the remainder are telephone channels.
"It has the same military utility as any telephone," he said. "It has no encryption capabilities."
The members of Arabsat got no more than they already had through the existing Intelsat satellite communications system, Brown said.
There would be no transfer of technology involved in the deal since the satellite itself never would go into the hands of the Arabsat owners, Brown said. He added that ground control stations are to built in "friendly" countries -- Saudi Arabia and Tunisia -- and that the Saudis are to control the television programming for the satellite transmission.
Arabsat originally ordered three satellites from the French company Aerospatiale, but the components were built by Ford Aerospace of Palo Alto, Calif., a subsidiary of Ford Motor Co., in an $89 million deal.
Both the original deal to build the satellites and the launch contracts were caught up in the increasingly intense competition between the United States and Europe for the upper hand in the commercialization of space.
The first Arabsat satellite is to be sent up on a French Arianne rocket in early 1984, before the shuttle launch of the second unit. The third satellite ordered by Arabsat is understood to be a reserve unit should one of the first two fail.
The space shuttle went into commercial operations with last week's mission -- its fifth -- during which it launched two communications satellites, one for an American company and one for a Canadian.
Gen. James A. Abrahamson, associate administrator of NASA, said yesterday that the shuttle is a commercial service and such activities as the satellite launches "should not be considered a political activity."