NEWS ANALYSIS : Israel Ponders Response if Iraqis Attack : Mideast: Jerusalem wants to avoid overreaction. It will measure its retaliation by the degree of aggression.

In the event of war in the Persian Gulf, the Israeli government faces a deep strategic dilemma: How to respond to an attack by Iraq?

Israel has long threatened instant retaliation against Iraq in the event of missile or air attack by the Baghdad regime, but in recent days government officials have modified the extent of that retribution.

Israel now says that if attacked, it would make a measured response: If Iraq were to launch a few conventionally armed missiles that did little damage, the Israelis would reply with less than an all-out attack.

“We don’t want to be the bad guys to the allies by overreacting to Iraqi provocation,” one official said.

However, if Iraqi missiles or bombs--particularly weapons with chemical warheads, which Iraq is known to have--should kill Israeli citizens, a response would be much heavier.

“If they use chemicals,” said another official, “then they are breaking the rules, and they can expect to be severely punished.

“But even in a conventional attack,” he continued, “we must consider the possibilities: What if only six missiles get through, and five hit open fields but the sixth kills 200 people in Tel Aviv? What shall we do? Hit Baghdad, which we can, or take out their closest missile bases?”

Israel could retaliate with long-range jet aircraft strikes or with medium-range missiles. Israel is also believed to have nuclear weapons, which its government has never confirmed. In response to questions, Israeli officials traditionally say only that their country would never be the first to introduce nuclear weapons into a Middle East conflict.

Along with the fear of war is the fear that Israel might somehow be blamed for setting off the conflict.

“We believe that Saddam Hussein wants to involve us,” said a senior Israeli official, “and that presents us with a problem.

“If he attacks us before the allies attack him, do we respond--and get blamed for triggering all-out war in the gulf?

“Or do we hold off, and pay a heavy political price among our own population for not responding as we have promised to do?

“We are in the position of getting the blame from the United States if we retaliate against Iraq, or from (the political opposition) if we do not.”

Members of the right-wing government of Prime Minister Yitzhak Shamir have not forgotten that the Labor Party government’s lack of preparation for the 1973 Yom Kippur War was one reason for Labor’s ouster a few years later.

Further, the Jerusalem government is already under fire from its own most conservative supporters for not taking a harder line in suppressing the Palestinian intifada, or uprising.

Most Israeli strategic thinkers believe that if Iraq’s President Hussein decides to go to war rather than pulling out of Kuwait, he will seek to drag Israel into the fighting to gain sympathy from other Arab governments and to attempt to split off the Arab nations that are part of the U.S.-led multinational force arrayed against Iraq.

Israeli Defense Minister Moshe Arens has denied that Israel is “in the business of preemptive strikes,” but his assistants acknowledge that if Iraq were seen to be warming up missiles for a likely attack on Israeli territory, they would consider taking them out before they were fired.

Israel is particularly concerned about two Iraqi missile sites, known as H-2 and H-3, that are closer to Israel’s borders than are the numerous launchers that are nearer Baghdad. Some Israeli strategists believe that the weapons at H-2 and H-3 could one day draw Israel into war.

“If the Americans are wise,” said one strategist, “they will take out H-2 and H-3 on their very first strike to prevent the Iraqis from firing at us and bringing us in.

“The fact is that in the gulf crisis, the U.S. has its agenda and we have ours--and they are not the same. We want to coordinate with them for political reasons, and the Americans don’t want to coordinate with us for the same reasons.”

“If the Americans attack Iraq, and then Iraq attacks us, this would be better than Baghdad hitting us first.”

There persists in Israel the thought that some of Washington’s Arab allies in the gulf, fearing the Iraqi strongman’s ambition, would like to see the Israeli military destroy Hussein’s nuclear and chemical weapons capabilities, even if he agrees at the 11th hour to pull out of Kuwait.

And the Israelis themselves would no doubt like to see that capability wiped out, since they believe that if Hussein retains his arsenal, they will be threatened by it in a year or two.

Yet to do the allies’ work would be to risk earning international opprobrium yet again, the sort of condemnation Israel endured when it knocked out Iraq’s nuclear reactor in a lightning air strike in 1981.

But meanwhile, Israel is prepared for the worst: absorbing a blow from Iraq and countering with full-scale aerial and missile retaliation.