By Barbara Plett BBC Middle East correspondent

After months of resisting, Yasser Arafat has finally bowed to international pressure and announced that he would appoint a prime minister.

The decision seems to be part of a survival strategy adopted by Mr Arafat ever since US President George W Bush accepted Israel's view that there must be a new Palestinian leadership before there is a return to peace talks.

Since then Mr Arafat has tried to undermine attempts to remove or sideline him.

The prime ministerial appointment is a card - he's held it close to his chest, now he's playing it Aide to Yasser Arafat

He has carried out political reforms outlined in an international peace plan - known as the roadmap - at the urging of Europe, the UN and Russia.

The three work together with the US in a Mid-East mediation group called the Quartet, but disagree with Mr Bush's insistence that the Palestinian leader must go.

Mr Arafat has appointed a new cabinet and a new interior minister.

He has drafted a constitution, called for elections, and he has charged a technocrat, Salam Fayad, with rooting out the endemic corruption in his Palestinian Authority.

Authoritarian grip

His efforts have been met with mixed reviews - high marks for financial reforms, low for security and political reforms.

Mr Arafat has evaded devolving power

But he argues that he is doing what has been asked of him.

The demand by the Quartet for a prime minister is an attempt to devolve Mr Arafat's authoritarian grip on power.

Israel and the US see it as a way to push him out of the picture.

According to aides, the Palestinian leader never ruled out the possibility of a prime minister, he was just waiting to see what he could get in return.

"The prime ministerial appointment is a card," said one insider. "He's held it close to his chest, now he's playing it."

What he has got in return is diplomatic engagement - meetings with the Quartet, and a process set up by London to push Palestinian reforms, all of which implicitly recognise his leadership.

Iraq crisis

Mr Arafat also chose to make his announcement at a crucial time, ahead of a possible war against Iraq.

His fate has been linked with the outcome of such a war, Israel strongly hinting that the Palestinian leader may suffer the same fate as that lined up for the Iraqi President, Saddam Hussein.

The Iraq crisis makes this a critical time

Observers say he wants to leave no pretext for Israeli Prime Minister and long-time enemy, Ariel Sharon, to remove him.

The matter will be taken up now by Palestinian decision-making bodies - the central and legislative councils - who have to take legal and constitutional steps to create the position of prime minister.

It is not clear how long that will take, or whether they will tie it to the establishment of a Palestinian state, Mr Arafat's preference.

There are also no details about who will be appointed or how much power he will have.

Candidates include one of Mr Arafat's deputies, Mahmoud Abbas, Parliamentary Speaker Ahmed Qureia, and Mr Fayad, the finance minister, who has made a good impression on Israel and the West.

But all of these men derive their power exclusively from Mr Arafat, so they would not constitute a direct challenge to him.

A prime minister might gain some of his executive powers, but almost certainly not his power as the ultimate decision-maker.