PLO chief Yasser Arafat said Saturday discussion of the status of Arab east Jerusalem, a bone of contention between Israel and the Palestinians at Middle East peace talks, would be raised during interim self-rule.

Arafat said east Jerusalem, which he called the "capital of the state of Palestine," would be brought up for discussion with the Israelis during the third year of a five-year interim Palestinian self-rule period."The issue of Jerusalem is not only a Palestinian problem. It is a Palestinian, an Arab, Islamic and Christian issue. . . . He who gives up one grain of Jerusalem . . . is not one of us," Arafat told Beirut's Voice of Lebanon radio in a telephone interview.

"The issue of Jerusalem will be raised in the third year of the interim period," the leader of the Palestine Liberation Organization said.

Israel insists that Jerusalem is its eternal and undivided capital and has refused to discuss it at the peace talks.

"I want to tell everyone, if (Israeli Prime Minister Yitzhak) Rabin considers Jerusalem a red line, I consider it a red line also," Arafat said.

"Arab (east) Jerusalem is the capital of the state of Palestine . . . will hoist the flag of Palestine and the flag of the Arab nation over it," Arafat said.

He said other important issues such as the status of hundreds of thousands of Palestinian refugees would be raised.