AMMAN, JORDAN, DEC. 9 -- Jordan and Algeria are renewing their campaign for an Arab diplomatic solution to the Persian Gulf crisis by attempting to broker a new dialogue between Iraq and Saudi Arabia, even as talks are set to begin between the United States and Iraq.

Senior Jordanian officials said that with the issue of foreign hostages apparently resolved in Iraq, King Hussein and Algerian President Chadli Bendjedid are trying to nurture a rapprochement between Saudi Arabia and Iraq in hopes of averting a devastating war in the region.

In a speech today, Hussein said it was difficult to understand why there should not be open, candid relations between the two major Arab powers in the gulf when the United States and European governments are now ready to talk to Baghdad.

"We call for an Arab-Arab dialogue that is parallel to the American-Iraqi dialogue on the gulf crisis because the issue is one of prime concern to the Arabs," he told a graduation ceremony at the army's staff college.

Jordan has been seeking an "Arab solution" to the crisis since Iraqi tanks rolled into Kuwait. The obstacle, thus far, has been the unwillingness of Saudi Arabia and Egypt, the two key U.S. allies in the region, to consider dialogue until Iraq signals its willingness to leave Kuwait.

But given the turbulent nature of Arab politics, where enmities as well as alliances can dissolve with startling speed, the evolution of a more cordial relationship between Riyadh and Baghdad cannot be ruled out despite the threat to the ruling House of Saud posed by Iraq's Aug. 2 invasion and occupation of Kuwait.

"We know that a schism is worsening in the Saudi royal family about the risks of war," a senior Jordanian official said. "Some members of the Saudi leadership realize that if military force is used, the Arab world will side with Iraq because the military overkill of the Americans has now made Saddam an underdog. The Saudis know if war breaks out they will never be forgiven for shedding so much Arab blood."

Jordanian officials said indirect contacts between Iraq and Saudi Arabia have continued since the crisis erupted. Moreover, they said the Saudis may now be more interested in opening their own dialogue with Baghdad in light of the Bush administration's proposal to hold direct talks with Iraq. King Fahd reportedly was informed by President Bush of the U.S. proposal only after his public announcement that he was asking Iraqi Foreign Minister Tariq Aziz to visit Washington in exchange for a visit to Baghdad by Secretary of State James A. Baker III.

Officials said that when King Hussein was in Baghdad last Tuesday, Iraqi President Saddam Hussein indicated that he was prepared to make fresh overtures to Saudi Arabia. Since then, Bendjedid of Algeria has held two meetings with Ali bin Muslim, a top adviser to King Fahd.

Algeria, which has successfully mediated previous Middle Eastern disputes including the U.S.-Iranian hostage crisis of 1979-81, maintains good ties with both Iraq and Saudi Arabia and is considered the Arab country best placed to lead mediation efforts. Jordan, Yemen and the Palestine Liberation Organization have been criticized by the Saudis as being too partial to Iraq in the current crisis, while Egypt and Syria have aligned themselves with the Saudis and dispatched troops to the kingdom.

Jordanian officials said that convening an international conference on the Middle East would be key to resolving the gulf crisis peacefully. They said the conference should deal with three subjects: the gulf crisis, the Arab-Israeli dispute -- including the Palestinian question -- and security guarantees through disarmament and peace-keeping forces.

Iraq insists that any solution of the gulf crisis be part of an overall regional peace process, but the United States and Israel have firmly rejected any linkage between the gulf and Palestinian issues. Bush has insisted on an unconditional Iraqi withdrawal and restoration of Kuwait's legitimate government. Saddam has told the Jordanians that, in the U.S.-Iraqi talks, Baghdad intends to demonstrate to the Americans how the regional issues are connected.

Jordanian officials familiar with Saddam's thinking said Iraq will try to establish linkage between the Arab-Israeli dispute and the gulf crisis by noting the increase in U.S. military assistance to Israel since the crisis began -- including the deployment in Israel of the Patriot anti-missile system. If Israel's security is not affected by the gulf crisis, the Iraqis ask, why is it shoring up its defenses? In addition, the return to Jordan and the Israeli-occupied territories of an estimated 60,000 Palestinians who fled Kuwait has again underscored the enduring refugee problem in the absence of a Palestinian homeland.