TUNIS -- Since the Persian Gulf crisis began two months ago, the Palestine Liberation Organization has it as an opportunity to press the PLO's case against Israeli occupation of the West Bank and Gaza Strip, arguing that the same principles should apply in Baghdad and Jerusalem.

A senior Arab official sympathetic to the PLO has suggested that linking Iraqi withdrawal from Kuwait to a promise of concerted international action on the Arab-Israeli dispute may turn out to be the best hope for a peaceful solution in the gulf. Although there is no guarantee President Saddam Hussein would accept it, he added, such a bargain could allow the Iraqi leader to point to a face-saving Arab triumph while backing down on his annexation of Kuwait.

In recent days, President Bush and other world leaders also have referred, in speeches at the United Nations, to such a possibility. Bush, who told reporters later that he still rejects any linkage between the gulf and the Israeli-Arab conflict, nonetheless told the General Assembly Monday that Iraq's withdrawal from Kuwait could lead to "opportunities" to settle the conflict "that divides Arabs from Israel."

A week earlier, French President Francois Mitterrand outlined a Middle East peace plan that included resolution of the Arab-Israeli dispute at the conclusion of the gulf crisis, and the next day Soviet Foreign Minister Eduard Shevardnadze said that if the Arab states help end the gulf crisis, the "Palestinian problem" could be dealt with.

Yesterday, Saudi Foreign Minister Prince Saud Faisal told the U.N. General Assembly that continued Iraqi occupation of Kuwait lends justification to Israel's presence in the occupied territories.

Some form of connection between the issues already has been part of several failed Arab peace-making initiatives. It lies at the heart of the most recent proposals by King Hussein of Jordan, King Hassan of Morocco, President Chadli Bendjedid of Algeria and Yasser Arafat, the PLO head, a Palestinian source reported.

These efforts have foundered so far on Saddam's refusal to relinquish Kuwait, which he has annexed and declared "eternally and irreversibly" part of Iraq. But Arafat and his PLO aides have resolved to persist in their mediation with the hope that the crisis that has cost them dearly in public support so far could in the end turn to their advantage.

The connection between Arab frustrations over Israel and support for Iraq's blustering in the Persian Gulf were drawn repeatedly by Arabs in conversations last month in the streets of Baghdad, Amman, Damascus and Tunis. Not since Gamal Abdel Nasser of Egypt more than two decades ago has an Arab leader played the region's nationalist chords with such effect as Saddam and his defiant rhetoric.

While Saddam has not liberated Palestine, a Western-educated Palestinian leader said, "just imagine the feelings of the people when he talks about it that way."

Syrian Foreign Minister Farouk Charaa, who raised the linkage issue during Secretary of State James A. Baker III's Sept. 14 visit to Damascus, declared that the same principle -- the inadmissibility of taking land by force -- underlies the two conflicts. Similarly, Charaa said, the need to preserve stability and security in the Persian Gulf region is no less pressing in the region where Israel shares war-threatened borders with Lebanon, Syria and Jordan.

Baker immediately told reporters at a joint news conference that the United States refuses any linkage of the conflicts. In response, Charaa agreed that international efforts should now focus on the Persian Gulf crisis, the most immediate source of danger, but that the West's eagerness to enforce U.N. resolutions and end occupation there should, when the time comes, be turned toward U.N. Resolution 242 and Israel's occupation of the Golan Heights, the Gaza Strip and the West Bank.

"Bush goes on television talking about principles, and we just smile," agreed Bassam Abu Sharif, Arafat's foreign policy aide. "What about the 23 years of existence of Resolution 242?" he asked, referring to the 1967 U.N. Security Council resolution calling on Israel to withdraw from captured Arab land in exchange for peace with its Arab neighbors.

Arafat's Tunis-based leadership also has cited another connection between the Iraq crisis and the Arab-Israeli dispute in explaining PLO refusal to join the condemnation of Saddam's occupation of Kuwait. This refusal has drawn sharp criticism of Arafat and his organization, whose tireless complaint over the years has been Israeli occupation of Palestinian territory.

According to Abu Sharif, the PLO leadership has concluded that Egypt, Saudi Arabia, Syria and other Arab countries cooperating with the U.S. military deployment against Iraq have assumed a risk that they might end up fighting on the same side as Israel against brother Arabs. "That's why we can't even think of it," he said.

The PLO says its information is that, if Iraq is attacked, Saddam's first retaliatory volleys will head for Israel as well as oil installations in Kuwait and Saudi Arabia. Israel is bound to respond, the thinking here goes, becoming involved in the war and ensnaring Arab forces in Saudi Arabia within a de facto alliance embracing Israel along with U.S. and other Western forces in the gulf.

Rage would be so violent in Arab streets after years of Arab-Israeli enmity that any Arab leadership caught up alongside Israel in such a conflict would face immediate and explosive opposition, Abu Sharif said. "They will be torn to pieces, by hand. Take it from me," he added.

PLO decisions in response to the Iraq crisis also have been influenced by bitterness left over from the pre-crisis impasse over Baker's attempt to promote Arab-Israeli negotiations, Palestinian officials said, and by the Bush administration's June 20 suspension of the U.S.-PLO dialogue, which had been regarded as a major hope for Arafat's leadership.

"That was a mockery," a senior PLO official said, looking back on the U.S.-PLO talks. "We were humiliated by that dialogue."

Washington announced it had suspended the dialogue because of Arafat's failure to condemn an unsuccessful Arab guerrilla raid on a Tel Aviv beach May 30 and to discipline Mohammed Abbas, who acknowledged responsibility for the raid and who sits on the PLO's governing Executive Committee.

By then, however, PLO leaders already had become disenchanted with the opening to Washington, and Arafat was tightening his links to Saddam in Baghdad.