JORDAN'S King Hussein, who paid a heavy diplomatic price for his support of Iraq in the 1991 Gulf war, has emerged as the pivotal regional player in the international drama unfolding around beleaguered Iraqi leader Saddam Hussein. The Jordanian monarch's skilful diplomatic maneuvering, which has won him admiration in Western capitals and made him the envy of some of his Arab counterparts, has positioned the relatively small and powerless state as a major player in the future of Iraq, the Gulf, and new peace initiatives in the Mideast. Since he granted Iraqi defector Lt. Gen. Hussein Kamel Hassan and his entourage political asylum in Jordan on Aug. 8, King Hussein has shifted Jordan from the diplomatically awkward position as Saddam's most important regional ally to being his most outspoken and influential critic in the Arab world. In contrast to the relatively muted and cautious response of other Arab leaders, King Hussein has adopted a high-profile role in signaling that the time is ripe for a change of leadership in Baghdad. Western diplomats now see the king as the Arab leader best placed to ensure that there is continuity between the regime of Saddam Hussein and whoever comes after him - a contest that appears to be between Saddam's impulsive and power-hungry eldest son Udai and General Hussein Kamel. King shifts strategy In three short weeks, King Hussein has swiftly and deftly bolstered his ties with Washington and has built solid bridges to Saudi Arabia and Kuwait. The latter two had ostracized him over his failure to condemn Saddam's invasion of Kuwait in 1990. It seems ironic that Saudi Arabia and Kuwait - America's key Gulf allies that have offered the most resistance to Saddam - stand to lose the most from a managed change of leadership in Baghdad. A new regime in Baghdad, with lines to Washington and the West, would inevitably be rewarded with the lifting of the 1991 United Nations-imposed oil embargo to force the Iraqi leader to disarm his nuclear, biological, and chemical capabilities. Lifting of the sanctions on Iraq would allow it to flood the world market with oil. This would almost certainly bring down the price of oil - a disastrous prospect for Saudi Arabia and Kuwait which rely on the maintenance of high oil prices to compensate for the massive losses they incurred in the Gulf war. ''King Hussein's maneuvers have placed Jordan in the center of the regional limelight and have greatly boosted his personal prestige,'' says a European diplomat based in Amman, the capital of Jordan. ''He is shifting allegiances in a way that doesn't undermine Jordan's short-term economic interests while positioning the country to benefit in the longer term from a change of leadership in Baghdad,'' he adds. Defector's secrets The defection of Hussein Kamel - the man responsible for Iraq's military machine and custodian of military secrets - has pressured Saddam's regime to disclose startling new evidence about Iraq's nuclear and biological capabilities and thus shattered any shred of credibility that his regime had accrued in its negotiations with the UN to have the embargo lifted. On Friday, US Ambassador to the UN Madeleine Albright said that because of Iraq's new disclosure that it planned to have a nuclear weapon ready by April 1991, any lifting of the sanctions is a long way long way off. The US has led the effort to keep the embargo on Iraq. ''The United States policy of dual containment in relation to Iran and Iraq would fall apart completely if Iraq implodes,'' says the European diplomat. ''Hussein Kamel may not be a particularly attractive personality - and his sudden conversion to democracy and human rights may lack credibility - but he represents the most credible figure who could keep things going in Iraq with the minimum disruption and chaos,'' the diplomat adds. King Hussein has effected this fundamental shift without kowtowing to US requests to sever economic ties with Iraq - an act that could harm Jordan's economic interests and intensify the suffering of Iraqis already reeling under the UN embargo. Jordan is Iraq's main gateway to the outside world. Iraq depends heavily on the revenue from oil sales to Jordan, whose economy has also suffered from the UN embargo against Iraq. Jordan was granted an exemption under the UN embargo that enables it to import 70,000 of barrels of Iraqi oil daily at a price of about $10 a barrel, compared with the market price of $16 . Closing Jordan's border with Iraq would also deepen the confusion of a predominantly Palestinian public that has always coveted Jordan's ''neutrality'' in the Gulf war as a recognition of Saddam's uncompromising commitment to a Palestinian state. King Hussein also has stolen the limelight from Egypt's President Hosni Mubarak and Syria's President Hafez al-Assad, who both sought leadership roles after Saddam's demise as the Arab world's strongman. Mr. Mubarak responded to King Hussein's initiative by discounting Hussein Kamel's claims of Iraq's plans to invade Kuwait and Saudi Arabia later this month and insisted that any change of leadership in Iraq was the task of the Iraqi people alone. But Mubarak raised eyebrows by offering to grant the Iraqi leader political asylum in Egypt if that would prevent a bloodbath and ''solve the problem of the Iraqi people.'' The US's major Arab ally and leader of the anti-Iraq coalition in the Arab world at the time of the Gulf War, Mubarak has long sought to play the role of broker in bringing Iraq back into the Arab world. Criticism on the air The surest sign that King Hussein has now established himself as the leading Arab figure in the Iraqi drama was that Iraq's tightly controlled television chose to broadcast his landmark Aug. 23 speech. Iraqi viewers were told cryptically before the speech that they were ''smart enough'' to draw their own conclusions. In the 45-minute speech, broadcast in full on Iraq's two main television channels, King Hussein said that he had been deceived by Iraq in the past. He portrayed the Iraqi defector ''brother Hussein Kamel'' as the man who had finally clarified the Iraqi leadership's intentions. King Hussein, who stopped short of mentioning Saddam by name or calling for him to be toppled, left no doubt that he held him responsible for the suffering of Iraq's 20 million people under the UN embargo. Western diplomats noted that the speech contained the first direct criticism by King Hussein of Iraq's 1990 invasion of Kuwait and support for the UN sanctions against Iraq. The speech was hailed in Washington and London and drew positive responses from Saudi Arabia and Kuwait. King Hussein's decision to grant asylum to the Iraqi defectors has already forged new ties with Saudi Arabia, whose intelligence chief traveled to Amman for talks with the defectors - the first such contact in five years. While King Hussein stopped short of cutting economic ties with Iraq - a move experts agree could be potentially disastrous for both Jordan and Iraq - he kept open his option to take up a US-inspired Saudi offer to replace cheap Iraqi oil with a cut-price Saudi supply. ''Closing the border with Iraq would be King Hussein's final card in an end-game with Saddam Hussein, which has only just begun,'' says the European diplomat in Amman. ''The timing of such a move would be crucial. King Hussein will probably move once he believes Saddam's fall is only weeks away.''