AS the time nears for Israel to hand over six more towns on the West Bank to Yasser Arafat's Palestinian Authority, a violent and politically damaging split has opened up in the largest town, Nablus. The split has created a climate of fear in this town of about 100,000 Palestinians, who have spent 28 years under Israeli occupation. Nablus has become a microcosm of bigger woes facing Mr. Arafat as he is forced to unite a diverse Palestinian populace into an emerging state. Battle lines are being drawn between Arafat's youthful followers, who led protests against Israeli occupation during the intifadah (uprising) and wealthy families who run Nablus's economy. The winners will shape whatever Palestinian state emerges from the talks with Israel to create self-rule areas on the West Bank and in the Gaza Strip. In recent weeks, several people have died in shootouts, a prominent academic was wounded by unidentified gunmen, and someone fired into the garden gate of the town's popular mayor. Arafat is trying to extend his authority from the Gaza Strip and the West Bank town of Jericho (both already under self-rule) to the wealthier and more diverse 1-million-strong Palestinian community on the West Bank. He heads the dominant Fatah faction within the Palestine Liberation Organization but has not been able to take its support for granted as he gains more authority from Israel in the ongoing peace process. Fatah, founded by Arafat in 1965 to fight for the creation of a Palestinian state, itself reflects the class and socioeconomic divisions prevalent within the Palestinian community. In Gaza and Jericho, Arafat has succeeded in co-opting most of the young Fatah activists, known as Fatah Hawks, by including them in a mushrooming security apparatus for the Palestinian Authority (PA). At 18,000 strong, it is already twice the size envisaged in the 1993 Israeli-PLO peace accord. But Fatah's West Bank numbers are far greater than the 15,000 police positions that will be set up on the new self-rule areas. The process of bringing the Hawks into the PA is proving more difficult than in Gaza and Jericho. Making ties to bind In order to fully establish his influence on the West Bank, Arafat also must forge an alliance with the elite families who make up the merchant class. He has had more success on this front, but a conflict has erupted between the Fatah Hawks and the elite families who the Hawks perceive as standing between them and the power and wealth they regard as their rightful due. On Aug. 24, a masked gunman arrived at the home of Nablus Mayor Ghassan Shakah and shot up his garden gate. Mr. Shakah, a respected Fatah member and member of the elite merchant class, was not at home. But he later claimed the alleged attacker was a son of a leading Fatah official in the neighboring town of Tulkarm. Shakah, who has won universal praise for his efforts to clean up the town since he was appointed mayor by Arafat a year ago, says there is nothing he can do about the attack. Shakah says he feels he cannot turn to the Israeli authorities who are universally despised by the proud and independent population of Nablus, and widely perceived as turning a blind eye to Palestinian infighting. Until the Palestinian police arrive - and this still could be months away - there is no formal authority in the town, and Shakah has no legal recourse. He cannot turn to Arafat's Preventative Security Service (PSS), the Palestinian intelligence and secret service network with its headquarters in Jericho, 25 miles south of here. The PSS - and its notorious chief Jibril Rajoub - are seen by many Nablus leaders as the source of many of the town's problems. Mr. Rajoub has become infamous because of the heavy-handed interrogation methods of his PSS, which have been documented in several recent human rights reports. Three Palestinians have died while in PSS detention. Elites hit by Hawks In recent months, the influential families, who have close links to Jordan and King Hussein and are skeptical about Arafat's ability to run the West Bank, have become the target of the Fatah Hawks. ''Arafat is now trying to forge a bond with both groups,'' says Khalil Shikaki, director of the independent Center for Palestine Research and Studies in Nablus. ''But the new Fatah leadership, who controlled the streets during the intifadah, and are mainly from the poor and middle class, perceive Arafat's attempt to co-opt the traditional elite as a threat to their interests,'' Mr. Shikaki says. ''So they are actively trying to prevent Arafat from creating an alliance. ''The Fatah Hawks want their share of the cake,'' Shikaki adds. But the divisions within Fatah, which have intensified as rival groups compete for jobs in the PA security apparatus, are seen by many as an even greater source of instability in the town. There is open competition between the Preventative Security Services and Force 17, Arafat's personal security force that appears to have the edge over the PSS in Nablus. But there are clear indications that the PSS is using renegade Fatah elements in the town to stir trouble in an attempt to bolster the PSS. The most notorious of these renegades, Ahmad Tabouq, is known to have links to Rajoub and is a former Fatah-PSS interrogator. He operates as a self-declared head of the Fatah Hawks. Mr. Tabouq is disowned by the PSS, constantly on the move, and spends much of his time in hiding. Nablus leaders claim he is on a wanted list of the Israeli Defense Force, which, they say, appears to do nothing to contain him. Tabouq is named by the Israeli human rights organization B'Tselem in a recent report on the ''gross violations of human rights by the PSS in areas under Israeli control.'' The report notes that Tabouq, despite the various allegations against him, continues to operate openly out of Fatah's office in Nablus. ''Tabouq failed to translate his position of power and influence into wealth, so he has hung onto the sociopolitical prestige which comes with controlling his neighborhood in the old city of Nablus,'' says a civil rights worker who has had contact with Tabouq, but requested anonymity. The civil rights worker said that Tabouq has become a law unto himself and has opposed Fatah colleagues who he regards as corrupt or collaborating with the Israelis. ''It is clear that he has friends in very high places,'' the civil rights worker says, referring to the PSS leader Rajoub. The civil rights worker added Tabouq constantly fears for his life.''He once said: 'I am a dead man. All I can do now is make things better for my people.' '' IDF response An Israeli military spokesman says that the Israeli Defense Force is the sovereign authority in the West Bank and is therefore responsible for preserving the security of all its residents - Arabs and Jews. ''The IDF and the Israel police are taking a variety of measures and are investing intensive efforts in order to prevent the continuation of the internal conflict going on within the PLO,'' the spokesman says. ''In any stance where the law is broken, the IDF will use all its means to deal with the issue, and those who break the law will be brought to justice,'' he adds. For Ahmad Tabouq, making things better for his people means thwarting Arafat's efforts to forge an alliance with the merchant elite. Many of the town's elite also are doubtful about the commitment of Arafat's PA and its security apparatus to concepts like democracy, freedom of expression, and the rule of law. During the first year of phased Palestinian self-rule in the Gaza Strip and Jericho, they have seen arbitrary action against dissenting voices within the Palestinian fold. Newspapers have been shut down, human rights activists silenced, and military courts - sitting at night and without legal representation for defenders - used to jail militant Islamists opposed to the Israel-PLO peace accord. Last week, Abdel Satter Qassem, a prominent left-wing academic at Nablus's An-Najah University, was shot and wounded in the legs by unidentified gunmen outside his Nablus home. The attack followed an article he wrote in the July 20 issue of the Islamist opposition group Hamas newspaper al-Watan that criticized Arafat and said he was ''controlled by Western money and the media''. Imad Falouji, editor of al-Watan and a Hamas leader, was subsequently questioned by Palestinian police who, according to Mr. Falouji, warned him that they were out to get Mr. Qassem. Falouji reported the alleged warning in an al-Watan editorial on Aug. 3 and was detained for questioning on Aug. 5 by the Palestinian police. ''We are really concerned about democracy and human rights,'' says Said Kanan, chairman of the board of trustees of the independent Center for Palestine Research and Studies. ''The record [of the Palestinian Authority] has been very bad over the past year. Newspapers have been closed, and several detainees have died under interrogation,'' he added. Kanan insists that the West Bank will react very differently to the methods used by the Palestinian authorities in Gaza. ''The West Bank will not keep quiet if human rights are violated,'' he says.