BAGHDAD, IRAQ -- Washington's suspension of its dialogue with the Palestine Liberation Organization has caused a crisis within the PLO as moderates scramble for a compromise to resume the talks and hard-liners push for a more confrontational attitude toward the United States.

Although the nature of any compromise is not clear, moderates allied with PLO Chairman Yasser Arafat are seeking a way to restore the dialogue, suspended last week by Washington after what it considered an inadequate PLO response to an attempted sea attack on an Israeli beach last month, diplomats said.

"The doors are open," said one European envoy, who has met recently with PLO officials.

He and others point to PLO statements since the suspension that it remains committed to its 1988 decision to seek negotiations with Israel, and to the PLO's promised "investigation" of the attempted raid. This investigation leaves open the possibility of disciplinary action against the raid's organizer, Mohammed Abul Abbas. Such action might comply with U.S. conditions for renewed dialogue, they said.

President Bush has said the dialogue cannot be resumed until the PLO condemns the May 30 operation and begins "to take steps" to discipline Abbas, a member of the PLO's executive committee. Although no civilians were hurt in the attempted raid, Bush said the "size of the force" that attempted the assault and its "geographical target area strongly indicate that civilians would have been the target."

"When we are convinced . . . that Abbas aimed at civilians by his operation, we will find our measures," said PLO executive committee member Abdullah Hourani. He said the PLO has "no conditions" for resuming the dialogue. Other sources said the PLO is in no position now to impose conditions.

It also is by no means certain that the PLO will meet Washington's conditions. "The PLO is in a mess," said one Arab diplomat. "They don't know what to do, resume or not resume the dialogue. Punish or not punish Abbas. There are Arab voices saying they should accept the U.S. conditions and other Arab voices saying no."

In part, the PLO moderates' response reflects the importance they placed on the 18-month-old dialogue, despite their bitter complaints about its lack of substance and its limitations. They valued it as a symbol of U.S. recognition, something denied them for 15 years, and as a way to further their strategy of attempting to negotiate a settlement with Israel for Palestinian self-determination..

Without the U.S. dialogue, that strategy becomes impossible, allowing extremists a freer hand and increasing the chances of Israel attempting separate talks with Palestinians living within the Israeli-occupied territories.

The PLO's disappointment in the dialogue, conducted through U.S. Ambassador to Tunisia Robert H. Pelletreau Jr., arose in large part because the United States simultaneously dealt with the PLO through Egypt in attempts to set up direct Israeli-Palestinian talks in Cairo. This Egyptian channel eventually overshadowed the direct U.S.-PLO contacts in Tunis.

PLO officials also were disappointed that, in deference to Israeli refusals to meet with PLO officials, the organization would have been consigned to a, behind-the-scenes role at the proposed Cairo talks over elections in the Israeli-occupied West Bank and Gaza Strip.

Nevertheless, U.S. and other diplomats in the region said this diplomatic initiative "came very close" to setting up those talks. In March, Israel refused to cooperate any further with the effort. The PLO and Arab governments, including Egypt, charged that Washington did not pressure Israel enough to gain its acceptance of the proposal.

Many PLO officials who support Arafat's policy were clearly angered by the attempted beach raid by Abbas's Palestine Liberation Front, a small, radical PLO faction. The PLO's 15-member executive committee pointedly released photographs of its sessions here last week, showing the absence of Abbas, already under a cloud for masterminding the 1985 hijacking of the Achille Lauro cruise ship, in which an American was killed.

Arafat has said Abbas can be removed from the executive committee only by the Palestine National Council, the PLO legislature, which is not set to meet until November.

There is no evidence that the PLO leader, who was said to be very angry about the raid, knew about it in advance, Western and Arab diplomats said. But his failure to immediately condemn it demonstrates Arafat's longstanding unwillingness to make an open, permanent break with those who defy his policies as he attempts to hold the PLO's factions together. As a result, the PLO chief often falls hostage to extremist PLO factions and radical Arab governments backing them.

In this case, however, it is not known for certain who Abbas's main financial and logistical backers were. Israeli officials and one of the 12 captured guerrillas, who was interviewed on Israeli television, have said the operation was launched from Libya with official Libyan backing. Libya has denied involvement. Diplomats here and in Cairo said they do not know whether Libya played a role.

Abbas also has had a long relationship with Iraq, where the Palestine Liberation Front has an office, in addition to ones in Libya and Tunisia. Arab and Western diplomats, however, said they do not believe Iraqi President Saddam Hussein authorized the Israeli beach raid, which came on the final day of an Arab League summit he hosted here.

These sources noted that Saddam Hussein was already fearful of an Israeli military strike against his country and therefore unlikely to support an operation that might heighten the chances of Israeli retaliation.

But even if Arafat were now inclined to break this old habit of equivocation, he is in a singularly weak position to do so, Arab and Western diplomats said. He is under intense internal criticism from hard-liners because he has made no political gain from his decision to seek talks with Israel. In addition, the death toll in the two-and-half-year-old Palestinian uprising in the Israeli-occupied West Bank and Gaza Strip stands at more than 800, with no end to the conflict in sight.

"Arafat is having trouble holding his center against the extremists, and any further concessions to the United States would have been a demonstration of his weakness and another opportunity for the extremists to attack him," said one Western diplomat.

He was further constrained, PLO officials said, by Palestinians' anger at the U.S. veto -- one day after the thwarted beach raid -- of a Security Council resolution to send a United Nations human-rights observer team to the occupied territories.