King Hussein's decision to partially cut ties with the occupied West Bank leaves thousands of Palestinians without a clear picture of what the Jordanian king will do next but opens the door wider to the PLO in the territory.

"Jordan is not Palestine," Hussein said Sunday, indicating that he no longer has designs on trying to retake the West Bank. "The independent Palestinian state will be on the occupied Palestinian soil."But Hussein, during a 30-minute speech broadcast on radio and television and monitored in Jerusalem, affirmed Jordan's role as a "confrontation state" and said Amman "will not renounce its commitment to participate in peace efforts."

"Hussein is telling the Palestinians that they must manage on their own," Israeli Foreign Minister Shimon Peres told Israeli Television.

Jordan and the Israeli-occupied territory - forged when the East Bank and West Bank of the Jordan River united after the 1948 Arab-Israeli war - were never meant to interfere with the creation of an independent Palestinian state, Hussein said.

"We respect the wish of the Palestine Liberation Organization, the sole legitimate representative of the Palestinian people, to secede from us in an independent Palestinian state," said Hussein, whose Hashemite kingdom ruled the West Bank for 19 years before Israel gained control during the 1967 Six-Day War.

Palestinians and Israeli officials characterized Hussein's remarks as opening the door to the PLO for a greater financial and administrative role in the West Bank.

Hussein's speech comes on the heels of two key Jordanian decisions last week to cut ties with the West Bank and to a lesser extent the Gaza Strip, which Egypt controlled before the 1967 war. The timing of Hussein's speech also coincides with the expected arrival in Amman this week of PLO Chairman Yasser Arafat.

On Saturday, Hussein dissolved the lower house of Jordan's Parliament, half of whose 60 elected seats were reserved for West Bank Palestinians.

Two days earlier, Jordan scrapped a $1.3 billion economic development program for the occupied territories. The economic program distributed roughly $50 million to the West Bank and Gaza Strip since it began in 1986.

Prominent Palestinians said those two measures would not affect residents' daily lives, but what impact any future severing of ties with Jordan would have on Palestinians was unclear.

The complete severing of ties could slash Jordanian funding to government institutions, eliminate Jordanian citizenship to West Bank residents and terminate salaries to more than 13,000 religious and government workers, forcing the PLO either to take over funding roles or admit it needs the monarchy's assistance.

But Hussein did not spell out whether a future cut in ties was imminent or specifically discuss the question of citizenship or salaries.

"It has become clear that there is a general conviction that the continuation of the legal and administrative relationship with the West Bank contradicts this orientation and will be an obstacle in the way of the Palestinian struggle to win international support for the Palestinian cause," he said.

It was never the Jordanian wish to "hamper the Palestinian struggle" and the recent measures were designed to respond to the wishes of the PLO, he said.

"We assure you that these measures do not mean the abandonment of our national duties," the king said. "Nor do they mean relinquishing our faith in Arab unity."