Four decades of a balancing act at home and abroad: The King of Jordan tells Sarah Helm in Amman of his optimism about Middle East peace

NUMBER 7, Kensington Palace Gardens, is an odd setting for the playing out of Middle East rivalries, writes Charles Richards. The prestigious address, long-time residence of King Hussein of Jordan, was sold off in the early summer to pay for repairs to the Dome of the Rock in Jerusalem.

The shrine is under Israeli territorial jurisdiction, but its upkeep is the responsibility of the Jordanian Ministry of Religious Endowments in Amman. The dome was leaking, and a dollars 10m ( pounds 5.18m) appeal was launched. King Fahd of Saudi Arabia, Guardian of the Two Holy Shrines (Mecca and Medina) saw his chance to embarrass King Hussein and claim effective sponsorship for the third most important site in the Islamic world. King Hussein would have none of it. He retorted that this was not a subject for regal one-upmanship. But without liquid cash, he had to sell his London property.

King Hussein's Sandhurst training has not given him much fortune in war. In 1967, he heeded the call of President Nasser of Egypt to join in a famous Arab victory. It never happened. King Hussein lost the West Bank and Jerusalem, including al-Aqsa mosque and the Dome of the Rock of which he was guardian.

In the Gulf crisis, King Hussein refused to join the coalition against Saddam Hussein. By standing apart, he was considered to be siding with Iraq. The US and Britain have overcome that period: James Baker, CIA chief Robert Gates, and Douglas Hurd, have all been to Jordan since then. But King Hussein is still vilified and snubbed by the Saudi monarch, the Kuwaitis and most Gulf sheikhdoms.

Two main factors guided his stance in the Gulf crisis, as throughout his reign. One, the awareness that Jordan as a small country with few natural resources (potash is its only exportable mineral) was a classic buffer state which needed alliances with a neighbour or superpower. And second, his sense of commitment to Arab nationalism, as a Hashemite, a descendant of the Sharif of Mecca who led the Arab revolt. King Hussein has always steered a middle course, often acting as go-between in regional disputes.

At home, too, he has survived through a careful balancing act, between his mainly bedouin supporters and a population more than half of which is of Palestinian origin.

While he remains absolute monarch, the country is a more open society than many others in the Arab world. Though not the stuff of headlines, the resources directed to education and health have created of Jordan a modern society. The greatest danger now is economic: the refusal of Arab states to resume subventions, the lack of commercial ties with Iraq, once Jordan's largest trading partner, and 300,000 refugees, are straining one of the region's weaker economies.

(Photograph omitted)