King Hussein of Jordan on Sunday abandoned attempts to find a formula by which he could enter peace negotiations with Israel. This decision, the Monitor has learned, came only days after the King and Palestine Liberation Organization chairman Yasser Arafat were on the verge of signing a secret agreement that both Jordan and the United States believed would ultimately enable Jordanian and Palestinian representatives to sit at a negotiating table.
''It was so close,'' a Western diplomatic observer commented sadly.
The collapse of the process, according to informed sources in Amman, occurred after Mr. Arafat left Amman on Tuesday, April 5, for further consultations in Kuwait with other PLO leaders. But after an unexpectedly long delay he sent back a new proposal on April 9 that effectively negated the points worked out in six days of negotiations with the King.
If Jordan's decision is final, it will leave US Mideast policy in disarray. Informed Jordanian sources say the King will not go into talks alone or with Palestinians not endorsed by the PLO. ''We leave it to the PLO and to the Palestinian people to choose the ways and means for the salvation of themselves and their land,'' said a Jordanian government statement issued Sunday afternoon. Jordanian sources said this meant that if West Bankers had complaints about occupation, from now on they could seek the solution only at the PLO's door.
These developments end seven months of agonizingly slow progress toward the start of Mideast peace negotiations based on the Mideast proposals introduced by US President Ronald Reagan on Sept. 1, 1982. These called for an end to Israeli occupation of the West Bank and Gaza Strip - home to 1.3 million Palestinians - in favor of a West Bank/Gaza Palestinian entity linked to Jordan.
Key to this process was the participation of King Hussein, who ruled the West Bank until he lost it to Israel in the 1967 war. But King Hussein could not field such a delegation without the approval of the PLO, which was named sole spokesman for the Palestinians at the Arab summit in Rabat, Morocco, in 1974.
The PLO was unhappy with the Reagan plan because it gave them no role in the negotiations and opposed an independent Palestinian state. The Palestinian organization preferred the Fez plan adopted by Arab states in September 1982. This plan included both an independent state and a negotiating role but offered no mechanism for starting negotiations. At the PLO's National Council in February in Algiers the PLO endorsed the Fez plan and almost, but not quite, ruled out the Reagan plan.
Believing time for negotiations is running out as American attention turns toward approaching presidential elections, King Hussein pressed Mr. Arafat in critical negotiations on March 31 to April 5 to accept a compromise between the Fez and Reagan plans. This, the King hoped, might provide the framework under which to field a joint delegation.
Informed Jordanian sources have told the Monitor that the Arafat-Hussein agreement was wrapped up, typed, and sent to Mr. Arafat for his signature, when he suddenly said he needed 48 hours to consult his Fatah organization's leadership.
The agreement, three pages long, included specific mention of the Reagan plan. It said that the PLO and Jordan would ''go together in a common move'' on the basis of Arab and international initiatives, including the Reagan plan.
While the Jordanians had wanted specific mention of a joint negotiating delegation, the final language was more general. It talked of a confederal relationship between Jordan and the Palestinian West Bank as the basis which would enable both parties to move toward peace together. Jordanian sources say there was ''an understanding'' that this proviso laid the basis for a future joint Palestinian-Jordanian bargaining team. The Jordanians also said it was ''understood'' - though not specified - that the PLO would have the right to name non-PLO members of a joint team, something the US still has not accepted.
No mention was made of the PLO goal of an independent state. The statement talked of ''Palestinian self-determination'' - a term not contained in the Reagan plan - within the context of confederation, which the Jordanians believed would be acceptable to the US as a negotiating goal.
Once the agreement was signed, the scenario was to gain support from Arab moderates like Saudi Arabia and the Gulf states, and then take the agreement to another Arab summit at Fez for endorsement. This would have provided an Arab cover for the PLO and Jordan to ''find a way to proceed to negotiations,'' according to informed Jordanian sources.
Although the Saudis had not seen the text of the agreement, they were ''privy to the ideas'' and the Jordanians believed they would accept it. The Jordanians also believed that the Saudis would accept the majority endorsement rather than unanimity at an Arab summit where the Syrians were certain to reject the plan.
Thus, the Jordanians were astonished when Arafat aide Hani Hassan returned from Kuwait after a five-day break in the talks - during which Mr. Arafat went to Marxist South Yemen rather than back to Amman - with a proposal totally different from what had been agreed to. The new version talked of negotiating ''only'' on the basis of the Fez plan and did not mention the Reagan plan. ''It made it completely impossible to move toward negotiations,'' said a Jordanian source.
Why Arafat changed his mind is the subject of the hottest speculation in Ammna today - whether he was serious and bent to Syrian pressure or divisions within his own ranks, or whether he was ''playing games'' and never intended to sign.
King Hussein will not make any further moves to encourage Palestinian participation in negotiations unless the PLO changes its mind and returns to what was already agreed on.
''The King's decision is final,'' a Jordanian source said, in effect leaving US hopes for a Mideast settlement hostage to the PLO.