The scornful, dignified, implacable Shylock of Hal Holbrook is reason enough to see the production of "The Merchant of Venice" that opened last night at the Shakespeare Theatre. Those who saw Laurence Olivier's performance in the recent Bravo broadcast of Jonathan Miller's "Merchant," or who saw Dustin Hoffman in the role onstage a decade ago, will notice that Holbrook's Shylock isn't as powerfully frightening as the character can be.

On the other hand, unlike both Olivier and Hoffman, Holbrook doesn't indulge in pathos. There's no anguished offstage moan after his exit, or onstage cry as he's condemned to convert to Christianity. This Shylock doesn't give a damn for the audience's sympathy. His Old Testament God is the god of justice, and that's good enough for him.

The strict letter of the law is on Shylock's side in the play, as the contract he has made with the wealthy merchant Antonio (Keith Baxter) is perfectly legal. And perfectly clear: If Antonio cannot repay the moneylender on time, Shylock has the right to take from his body a pound of flesh.

Since Jews were not even legally allowed to reside in England at the time, an Elizabethan audience would probably have found Shylock an exotic bogeyman rather the way that Asian supervillain Fu Manchu was to European readers of the '20s. The gradual revelation of his suffering and righteous rage would have pulled the rug out from under their complacent assumptions. For a modern audience, the play stands in the shadow of the Holocaust, and we come to it automatically on Shylock's side. Nasty he may be--as Olivier remarked, "It's difficult to think of Shylock as a really nice man"--but the hypocritical, casually racist Christians who spit on him are likely to strike us as more loathsome.

In which case, what are we to make of the play's ending in which, Shylock vanquished, the lovers--at least one of whom is an active Jew-baiter--prepare to live happily ever after? Do we even want them to? And if we don't, what's the reason we're watching the play? In productions that make Shylock the protagonist--as almost all contemporary stagings do--the audience may as well get up and leave once his part is over, since there's no sense in spending a minute longer with the unpleasant people whom the happy ending treats as the good guys.

Michael Kahn's direction emphasizes the racism. He makes the most of Portia's (Enid Graham) snide remark about the skin color of her wooer, the Prince of Morocco (well played, with both humor and dignity, by Nathan Hinton), has Gratiano (Andrew Long) gratuitously kick black servants, and has the Christians not only steal away Shylock's daughter and taunt him in his humiliation but also stone him and cut his face. We get the message: These are horrible human beings. But it only compounds the problem of keeping the audience interested in the purported Christian heroes.

The script is full of ambiguities--not the kind that lead us to think, "Ah, yes, the relativity of truth" but the kind that need to be resolved if the play is to make any sense. The comic servant Launcelot Gobbo (Teagle F. Bougere) claims that Shylock starves him. Shylock complains in passing that Gobbo eats too much and sleeps all the time. This contradiction is usually addressed by casting either a thin or a fat actor as Gobbo (Bougere is thin; the Gobbo in the Hoffman production had a belly).

Other puzzles are more difficult. What exactly does Shylock's daughter Jessica (Eve Holbrook) mean when she says "Our house is hell" and, whatever she means, does it justify her robbing her father of, among other things, a ring given him by his late wife? What, if anything, are we to make of the fact that the pairs of lovers whom Lorenzo (Mark H. Dold) and Jessica list in a tender scene all came to bad ends? (Among them are Jason and Medea!) The question about the source of Antonio's melancholy is explained by his being silently and hopelessly in love with Bassanio (Hank Stratton), for whom he goes into debt to Shylock in order to lend the younger man money with which to woo Portia. But the question of how an audience should feel about Antonio, once we learn he has spurned and spat on Shylock, is not addressed.

The production is set in the Renaissance, and its most effective moments come when Kahn populates the Ghetto of Venice with yeshiva boys, old men going to prayer, women carrying baskets of food. Shylock's tribulations are not just his own but those of the whole community. And it is that community and its faith that sustains him when, driven to the limit, he determines to enact his own justice on the Christians.

From Shylock's point of view, Portia's arguments about the virtue of mercy are just so much blather. The Christians set up the rules so that the Jews have to lose and then, when they do lose, tell them it's their fault because they're Jews. Who can take them seriously? Holbrook's Shylock retains his steely contempt to the end--bowing mockingly to the Duke of Venice (Emery Battis) as he leaves the court in which he has lost his suit.

When it's not telling Shylock's story, though, the production fumbles (in a way markedly atypical of Kahn, who has directed some of the great tragedies and histories with almost insolent ease). Graham is a beautiful and charming Portia, likably shy in the face of love, innocently shocked by the Venetian court's ugliness toward Shylock. And Stratton's Bassanio is boyishly straightforward and decent. As these actors play them, the lovers seem made for each other. But why should we care?

The Merchant of Venice, by William Shakespeare. Directed by Michael Kahn. Set, Ming Cho Lee; lights, Howell Binkley; costumes, Martin Pakledinaz; composer, Adam Wernick. With Mark Alan Gordon, Herb Downer, Robin Moseley, Sean Arbuckle, David Bryan Jackson, Durand Ford, Casey Groves, Joe Barry. At the Shakespeare Theatre through July 18. Call 202-547-1122.

CAPTION: Hal Holbrook, with daughter Eve Holbrook, plays a flinty Shylock in a Shakespeare Theatre production that doesn't solve the Bard's puzzles.

CAPTION: Hank Stratton and Enid Graham, made for each other as Bassanio and Portia.