A British stage production of "Animal Farm," George Orwell's biting satire of Josef Stalin's Soviet dictatorship, has been removed from the official program of an international theater festival in Baltimore next month, amid fears that four "embarrassed" Eastern Bloc countries would withdraw their entries.

As a compromise, the National Theater of Great Britain will still perform the play as scheduled on June 17 to 22, but as a production independent of Theater of Nations, the biennial festival sponsored by the 62-country International Theater Institute.

T. Edward Hambleton of Baltimore, the festival's producer, described the decision yesterday as "a cosmetic accommodation, a means of keeping the festival intact."

But the "Animal Farm" controversy has already had a divisive effect among some of the festival organizers and participants, has provoked newspaper and wire service articles, and has drawn attention in an unexpected manner to the festival's first North American staging in the theater institute's 30-year history.

In a statement released last week, Sir Peter Hall, director of both the National Theater of Great Britain and the "Animal Farm" production, said that the institute "is apparently afraid to present a political satire as part of an international festival. This seems to be extraordinarily craven."

Ironically, it was the organizers of the festival who originally suggested last November that "Animal Farm" be Britain's entry in the event.

The story, employing barnyard characters to depict leaders and followers of the Russian Revolution, was adapted to the stage -- for the first time -- by Hall, and has been a success since it opened in London in April 1984. But in the Soviet Union, Orwell's book, first published in 1945, is "considered the most dangerous contraband -- worse than drugs," said Vassily Aksyonov, 53, a Russian novelist who has been living in the District of Columbia for 5 1/2 years.

The first hint of a problem with the selection surfaced in March. According to National Theater spokesman John Goodwin, Hall received a telephone call from Wole Soyinka, the Nigerian playwright and former political prisoner who is president of the theater institute.

During the call, Goodwin said, Hall was "led to understand by Soyinka" that the four Eastern Bloc participants in the festival -- Poland, Hungary, Bulgaria and Czechoslovakia -- "might walk out" if "Animal Farm" was performed.

A total of 17 theater companies -- representing such countries as Japan, India, Sweden, Northern Ireland and the United States, but not the Soviet Union -- are scheduled to appear at the two-week festival.

Hambleton said that Soyinka had attended a performance of "Animal Farm" in London and "concluded that certain nations might be embarrassed."

Soyinka, who was imprisoned from 1967 to 1969 for his criticism of Nigerian government policies, is directing a play on the Caribbean island of Martinique and could not be reached for comment; nor could officials of the New York-based theater institute, an organization originally started by the United Nations Educational, Scientific and Cultural Organization.

Goodwin said Hall was initially amazed at the suggestion of a separate banner for his play and disputed a statement in a Hambleton memo that his company had been consulted about the compromise, but he readily agreed to bring his production to Baltimore anyway. "If that's what we have to do, so be it," Hall said in his statement last week.

Baltimore organizers of the festival, including Hambleton, have been quick to point out that they are working only as hosts of the event and made no decision themselves about excluding the "Animal Farm" production.

About 50,000 people are expected to attend the festival, and the organizers concede that publicity about the British production has probably increased ticket interest.

"There's been an awful lot of grandstanding going on between everybody involved," said Hope Quackenbush, one of three local festival directors and the managing director of Baltimore's Morris A. Mechanic Theater, where "Animal Farm" will be staged.

Quackenbush said yesterday that the controversy "is certainly not something we wanted or needed, but it does bring home the need for communication across lines through the theater, and it makes clear why an international gathering like this is important.

"If nothing else," she said, "people will come to see what the shouting is all about."