WASHINGTON — Should the Palestine Liberation Organization continue to receive American foreign aid?

Congress will answer that question before the end of this month.

In the meantime, the issue is shaping up as a major conflict between proponents and opponents of the Israeli government's current peace policies.

The Middle East Peace Facilitation Act, which allows U.S. aid to go to Yasser Arafat's Palestinian Authority, was enacted after Israel and the PLO signed their historic Declaration of Principles in September 1993 in Washington.

The legislation, which also permits American diplomats to talk to PLO officials and allows PLO members to travel to the United States, expires June 30.

There is little doubt that Congress will extend it. What remains to be decided, however, is what strings Congress will attach to the PLO's aid and how long the legislation will remain in effect.

Jewish activists on all sides of the debate hope to seize on the limited time remaining to sway Congress to their positions.

A barrage of activists — from the pro-aid Israel Policy Forum, which has slated a satellite hookup with Israeli Prime Minister Yitzhak Rabin, to 100 Orthodox rabbis vehemently opposed to the Israel-PLO peace accords — plan a no-holds-barred campaign on Capitol Hill.

"When your former enemy is in the process of becoming your ally and you feel you are increasingly sharing interests with this former enemy, it becomes important to encourage that movement," said Jonathan Jacoby, executive vice president of the Israel Policy Forum.

In contrast, opponents argue that Arafat has had his chance and continues to violate his commitments with Israel.

"Violating every aspect of his commitments proves that Arafat is not willing to live at peace with Israel," said Morton Klein, president of the Zionist Organization of America.

As part of its 1993 Middle East Facilitation Act, Congress decided to tie ongoing aid to the PLO to its compliance with its agreements with Israel.

As a result, the legislation links funding for the PLO to its commitment to recognize Israel's right to exist, to amend its covenant calling for the destruction of Israel, to renounce terrorism, to refrain from violence and to ensure that all PLO factions comply with the agreements.

As time runs out on this bill, the chairmen of the House and Senate committees that deal with foreign affairs, Sen. Jesse Helms (R-N.C.) and Rep. Benjamin Gilman (R-N.Y.), have begun to consider changes.

Congressional aides involved in the drafting of the legislation do not expect a public debate on the measure. Nevertheless, forces are already working to shape the measure.

On the right are those seeking to kill the legislation altogether. Others, however are looking only for some technical changes.

Central to the debate is whether the PLO has adhered to its commitments under the Declaration of Principles and other agreements with Israel.

According to a State Department report released last week, the PLO has "abided by its commitments," but "more should be done."

Those who support continuing the aid are using the State Department report to bolster their position.

Many have adopted the Israeli government's view that continued aid is essential to the continuation of the peace process. They quote Israeli Foreign Minister Shimon Peres' logic that "we do not ask for 100 percent results, only 100 percent effort."

Opponents, in contrast, seize on Arafat's failed commitment to amend the PLO covenant, which calls for the destruction of Israel.

This camp also points out that more Israelis have been killed by terrorists since the signing of the Israel-PLO accords on the White House lawn than during the Palestinian uprising, or intifada, that preceded it.

The ZOA's Klein has labeled the State Department report "a whitewash," and is leading a vocal fight on Capitol Hill to oppose aid to the PLO.

The United States already pledged $500 million to the PLO after it signed its peace accords with Israel and Arafat already has received about $100 million.

Klein, who published his own sharply critical accounting of PLO compliance, has asked members of Congress to give Arafat a four- to six-month deadline to amend the covenant, prosecute terrorists, disarm Hamas and other Palestinian militants, extradite terrorists to Israel and stop inciting hatred of Israel through hostile speeches.

"By pretending that the PLO is in compliance, the State Department is sending a message that Arafat doesn't really have to comply," Klein said.

Supporters of the peace process have fought Klein tooth and nail.

"I don't think that Congress wants to be single-handedly responsible for killing the peace process," said Tom Smerling, executive director of Project Nishma, a group which backs the peace process.

"Making policy for Gaza from 5,000 miles away is unwise," Smerling said, adding, "Congress would not be in the business of considering micromanaging the DOP if it were not for Jewish opponents of the peace process urging them on."

Klein vehemently has denied that he is opposed to the peace process.

"We owe it to the Israelis to trust them on this," Smerling said. "It's their lives and future at stake. For us to say we know more about the Palestinians then you do is arrogant and ridiculous."

But opponents of aid say it is their money and they should have a say where it goes.

"As an American taxpayer I demand a right and a voice in where money is distributed," said Rabbi Steven Pruzansky, who will lead a coalition of 100 Orthodox rabbis through Capitol Hill next week."It would be an outrage to send any more American money down the rat hole of Gaza."