CAIRO, JUNE 7 -- Senior Palestine Liberation Organization officials today failed to take steps the United States has demanded as conditions for continuing its diplomatic dialogue with the PLO, but they warned that breaking those contacts would be a "blow to the peace process" in the region.

In a statement issued by the executive committee after a three-day session in Baghdad, Iraq, the PLO made no mention of last week's abortive guerrilla raid on Israel's coast and announced no disciplinary action against Mohammed Abul Abbas, whose radical PLO faction launched the foiled assault.

The United States has demanded PLO condemnation of the raid and removal of Abbas from the PLO executive committee. The Bush administration is now expected to come under increased congressional pressure to end, or at least suspend, its dealings with the PLO, which began after PLO Chairman Yasser Arafat recognized Israel and renounced terrorism in December 1988.

The United States made its demands after Israeli forces on May 30 intercepted two speedboats with Abbas's fighters, armed with machine guns and rockets, as they attempted to land on beaches near Tel Aviv. Four guerrillas were killed and 12 captured. No Israelis were hurt, and there have been contradictory accounts about whether the attackers had intended to target civilians on the beach or a nearby military installation.

Arafat dissociated the PLO from the incident, saying its "institutional and official forces" had nothing to do with the raid. But he did not condemn it and said Abbas could be removed from the executive committee only by the Palestine National Council, the PLO's legislative body.

According to sources here and in Baghdad, Abbas did not attend the executive committee sessions. At Arafat's request, a PLO official said, Abbas has not been present at any executive committee meeting since he masterminded the 1985 terrorist hijacking of the Achille Lauro cruise ship, in which one American was killed.

Although Abbas's actions have undermined Arafat's efforts to convince Israel that it should talk with the PLO, sources in the organization said, Arafat is reluctant to punish Abbas when seeming under U.S. pressure to do so.

The PLO leadership apparently was unable to show more flexibility on the U.S. demands because many of its rank-and-file members feel nothing has come from the U.S.-PLO dialogue so far, according to diplomats and PLO officials.

There is also widespread anger among the membership over last week's U.S. veto of a U.N. Security Council resolution to send an observer team to investigate Palestinian human rights in the Israeli-occupied territories, the sources said. The PLO communique denounced the veto as an attempt to "cover up" Israeli "crimes" against Palestinians.

Diplomats and PLO officials said a U.S. decision to break or suspend talks with the PLO would undermine moderates and give comfort to extremists in both Israel and the Arab world.

"Who will benefit?" asked PLO official Mohammed Subeih. "It will be Likud {the party of acting Israeli Prime Minister Yitzhak Shamir}, right-wing people in the Arab world and Palestinian extremists, who have been asking for this day and night."

Absence of dialogue also would make it difficult, if not impossible, to revive Secretary of State James A. Baker III's peace plan aimed at setting up direct talks between Palestinians and Israeli officials. That plan was rejected by Israel last March, after the PLO had agreed to most of its points.

Some sources suggested that the PLO officials who met in Baghdad may have gambled that if the United States breaks off the dialogue, an American desire for regional stability would eventually force it to restore contacts. "The United States would have to resume that relationship if it wants to resume any peace process," PLO official Nabil Shaath said. "We will continue our uprising and political activities on other fronts, and we will wait until the United States comes back to the relationship" if it is cut.

Arab League states today released a six-page letter delivered Monday to Robert Pelletreau, the U.S. ambassador to Tunisia, who has been conducting the talks with the PLO. The letter called on Washington to abandon "its policy of total bias toward Israel" and described current U.S. Middle East policy as "incomprehensible" and "unsatisfactory."

The Arab states said they expect Washington "to link its aid to Israel in any field with Israel's response to peace initiatives."