CAIRO, AUG. 6 -- Palestinian leader Yasser Arafat met with Egyptian President Hosni Mubarak in Alexandria today in a last-ditch effort to persuade him to accept an Iraqi-backed plan that would mean virtual capitulation by Kuwait in exchange for the withdrawal of Iraqi troops.

One senior Egyptian official accused Arafat and Jordan's King Hussein of feeding Iraqi President Saddam Hussein's "egocentrism" out of frustration at their inability to raise money in Kuwait and the other oil-rich gulf states. Mubarak, the officials indicated, is prepared to let events run their course as the West tightens pressure on Saddam.

While Arafat's plan appeared to have little chance of support here, there were indications in the immediate Persian Gulf area, however, of a growing feeling among many Arabs that Saddam has won an easy victory, that the old order in the region is gone and that the small nations of the gulf must learn to live with what they cannot afford to challenge.

The historic reluctance of the Arabs to seek solutions to regional problems from outsiders was reflected in widespread expressions of wariness about such possibilities as U.S. intervention, and it also produced confusion as different parties groped for ways to contain the crisis to their own benefit.

For example, Sheik Salem Sabah, son of the deposed Kuwaiti ruler, Sheik Jabir Ahmed Sabah, suggested today that the royal family might be willing to trade territory for Iraqi withdrawal.

"Our -- the government's -- reaction would be first of all {the necessity for} a withdrawal of all Iraqi troops. Then we can talk about everything," Salem told Reuter. Asked if this included territory, he repeated, "Everything."

"The first priority is to exist, to survive," a veteran Arab newspaper editor in the gulf region said, calling the small Arab states of the gulf "a very different world."

"The ground is moving under them," he said. "They first think about themselves. Then if you want lip service, take as much as you want."

In business offices and on the streets in the emirates and other small Arab states of the gulf, there is still much brave talk of finding a way to force Saddam to remove his troops and restore the status quo. Many still hope the United States will intervene militarily, and some say they are willing to risk their own security to stand up to an aggressor they liken to Hitler or Mussolini.

But increasingly mingled with the bravado is a different, more fatalistic theme that the West may call appeasement, but that the gulf Arabs, whose small armies cannot stand up to Saddam, see as simple realism.

Some of the signals of the change are diplomatic. In the first day of the invasion Thursday, gulf diplomats were insisting that Iraq must withdraw its forces and that the Kuwaiti ruling family be restored to power. By the weekend, some of those same diplomats had conceded that the ruling family might not be allowed to return, but they were pressing for a compromise under which Saddam would pull back and a new, independent regime would take power with a mandate to negotiate a border settlement with Iraq.

By today, yet another version had surfaced in some gulf capitals in which it would be conceded that Kuwait was effectively in Iraq's sphere of influence and that the new rulers would commit themselves to a settlement favorable to Baghdad.

Similarly, while many continue to plead for U.S. intervention, others are comparing such a step to the British-French seizure of the Suez Canal in 1956. They warn that American military action could transform Saddam into a radical Arab hero along the lines of Egypt's Gamal Abdel Nasser.

Some in the gulf region already are offering half-hearted justifications for the Iraqi invasion. Saddam, they say, felt aggrieved because he had played the role of protector of Kuwait and the other gulf states in his war against Iran. Yet once that war ended, it is argued, those states not only refused to forgive his war debts or grant him new funds to rebuild Iraq's devastated economy, they also helped depress the price of oil, which was crucial to Iraq's recovery.

"Saddam felt he had protected this area from the Iranian barbarians and he got nothing in return," one Arab analyst in Dubai, in the United Arab Emirates, said.

The gulf states have long cultivated a reputation as being among the world's most skillful survivors. Merchants and traders of longstanding, the United Arab Emirates adapted quickly to the status and wealth that the oil revolution bestowed upon them in the 1970s. Indeed, analysts say they learned many lessons by watching Kuwait's rulers, who overspent, wasted billions and almost wrecked their economy.

In recent years, as they recovered from depressed oil prices and from the economic trauma of the gulf war, the emirates have sought to diversify their economy into non-oil areas. Some 60 percent of their gross domestic product is in the non-oil economic sector, according to the latest State Department estimate. The plan was to turn the country into the new Hong Kong. Dubai has even advertised in Hong Kong newspapers to attract expatriates uneasy about that British crown colony's future after it is returned to China in 1997.

The new gulf crisis is certain to harm that attempt to diversify, analysts say. "We know that if Iraq stays in Kuwait, there will be no stability in this area," said an Arab business official in Dubai. "And without stability, we know Americans and Europeans will not invest here."

But the merchants of the gulf states have survived major economic shocks and changes in recent years, and analysts predict they will adapt to Iraqi hegemony. Better that, some argue, than a war that could devastate their region.

"I don't think Kuwait is a priority for any of the gulf states," said the Dubai Arab analyst. "The priority is to survive."

Arafat's second day of talks with Mubarak, after his arrival from Baghdad, came as Egyptian officials and the country's semiofficial press intensified criticism of him for what they said was his role in encouraging Saddam to invade Kuwait -- an accusation that one highly placed Egyptian official also made against Hussein.

Calling Hussein "one of the main architects of the whole damned thing," the official said the Jordanian monarch was also motivated by his fear of attempts by Israel to project Jordan as a "substitute homeland" for Palestinians. Hussein, he noted, has increasingly turned toward Iraq as his closest ally and has grown more dependent on Saddam for financial support than ever before.

The official said the king's bitter disappointment with the rich gulf monarchies was evident to all of the leaders at that meeting, including Mubarak.

The official's remarks about Arafat were even stronger than what has begun to appear in Egyptian newspapers that normally reflect government thinking.

An editorial today in al-Akhbar said that "some Palestinian circles try to exploit the tension among the Arab states because of this rash action by an Arab state against another that had offered a lot in support of the Palestinian question."

It also said Arafat's congratulatory telegram to Saddam Hussein following the invasion "raises astonishment and so many question marks."

Arafat's plan, which was drafted with Libyan leader Moammar Gadhafi, has been described by some Arab diplomats as an attempt to divide Arab leaders when the time comes for them to consider steps that go beyond the Arab League's and Islamic Conference Organization's condemnations of the invasion. The PLO and Jordan were among those who opposed an Arab League resolution on Friday calling for Iraq's immediate withdrawal from Kuwait.

The PLO-Libyan plan, Arab and European diplomats said, involves large cash payments by Kuwait to Iraq in compensation for oil produced on disputed border territory, and elections in Kuwait of a government that would replace the leadership of Jabir.

Also, in return for a complete withdrawal of its troops, Iraq would get control of the strategic Bubiyan and Warba islands, which dominate the Khor Abdullah waterway at the head of the Persian Gulf. During the 1980-88 Iraq-Iran war, Kuwait turned down Iraqi requests to use the islands as sites for launching attacks on the nearby Fao peninsula, where Iranian forces had moved onto Iraqi territory.

Frankel contributed to this article from Dubai.