Rushing to meet a January deadline, yellow bulldozers are making their final slices into the red clay Virginia countryside here that will become a new interstate highway north of town. But the beltway they were supposed to carve out of Richmond's suburbs ends abruptly 27 miles short of its ultimate destination -- a symbol of a prolonged and bitter dispute over this road and the future of the city it seeks to encircle.

Richmond officials, who see the road as a $487 million concrete noose around the city's economy, have fought it for the last four years with every weapon they have, including calling in their political IOUs with Jimmy Carter.

The result: a classic confrontation between white, mostly Republican suburbanites, who believe the road will ease their traffic-choked streets and spur large-scale development, and predominantly black and Democratic urban dwellers. Echoing the civil rights struggles that rocked this region two decades ago, Virginia's state government has sided with the whites while the federal government has assumed the role of protector of the blacks.

Forces favoring the beltway say they hope that will change next month when Carter leaves office. The Richmond beltway, some say, could prove an early test of Ronald Reagan's commitment to urban America. For ammunition, he now has to consider the advice of a transportation department task force that questioned last week whether the new administration can afford to build more interstate highways in urban areas.

Despite that cautionary report, the battle of the Richmond beltway is a contest that suburban officials and their champion, conservative Republican Gov. John N. Dalton, fully expect to win.

Virginia highway chief Harold King rejects Richmond's fears that the road will hasten the city's economic deterioration and he complains that the city's delaying tactics have added between $50 million and $100 million to construction costs. But city officials point to a new federal study that estimates that Richmond and its southern neighbor, Petersburg, could lose as much as $45 million in annual sales, $1.5 million in annual tax revenues and 1,500 jobs to the road by 1995 -- losses that they say the two cities' fragile economies cannot afford.

"It's like taking a wounded man, tying his hands behind his back, planting his feet in concrete and throwing him in the water and saying 'Okay, let's see you survive,'" says Richmond Mayor Henry L. Marsh.

The Richmond beltway began 25 years ago as a circle on a map at the U.S. Bureau of Public Roads, now called the Federal Highway Administration, part of the federal conglomerate that is DOT. Highway planners say it was then general policy to plan an interstatet circumferential around every urban area of more that 200,000. Once drawn, the circles were rarely erased.

"It stayed there through the decades and no one ever questioned it," recalls Deputy City Manager A. Howe Todd, a Richmond city employe for 34 years.

The questions finally came four years ago from officials of Richmond, whose population is nearly 50 percent black and contains most of the area's poor and elderly. City leaders were particularly concerned with statistics showing the downtown area's share of the region's retail sales had declined 40 percent in five years, a trend they feared the beltway would accelerate.

In April 1976, the city asked the state highway commission to postpone construction of the northernmost section of the highway, designated as I-295, pending completion of a city-financed study of the road's economic impact. Not only was the request denied, but Richmond officials contend the state highway department actually speeded up right-of-way purchases and letting of construction contracts -- a charge that Highway Commissioner King denies.

"They wanted to put us in our place and let us know that even if the study turned out negative, it would be too late to stop them," says one city official.

The study, produced by the non-profit Urban Institute in Washington, concluded that the road's impact on Richmond was indeed "likely to be adverse . . . the construction of a beltway would divert retail business away from downtown."

Armed with that finding, city officials went in 1977 to then-governor Mills E. Godwin who sent them back to the highway commission. Its blunt response in May 1979: build the highway.

By then, control of Richmond City Hall had passed from the city's conservative white business community, which mistrusted Washington and felt at home with state officials, to Mayor Marsh and his black constituency. A political gamesman and an early supporter of Jimmy Carter, Marsh had little hesitation in bypassing the state and going directly to his friends in the White House.

Although it was too late to stop the northern I-295 segment, Marsh hoped to halt the as-yet-unbuilt eastern section, designated as a new portion of I-95. In early 1979, the mayor met with presidential aide Jack Watson, who quickly agreed that the beltway appeared to violate Carter's announced policy of avoiding federal projects that could harm urban areas. Watson passed the word to then-Transportation Secretary Brock Adams.

The result was a strong letter from Adams to Republican Gov. Dalton warning that federal dollars, which account for 90 percent of the road's funding, might be withheld until a deal was worked out that would satisfy Marsh. Dalton, whose aides privately branded the letter "blackmail," was said to be incensed that it arrived just three days before the highway commission's May 1979 meeting. Ignoring the threat, the commission, composed of gubernatorial appointees, approved the road.

That vote, however, only increased Marsh's determination to hold out for a settlement favorable to the city. He has made clear just what his terms are. He says the city wants a share of whatever taxes are generated by beltway-related development plus a "voluntary" annexation of some county lands. "It's all negotiable," says the mayor.

But suburban officials, after years of hostile relations with the city, are not buying. "We met with Mayor Marsh last year and I thought we made it pretty clear that we are not going to give up any land or any taxes," says Charles M. Johnson, chairman of the Henrico County Board of Supervisors, the fast-growing, rabidly conservative county to Richmond's north.

Marsh also cannot expect any help from state officials. Rather than play the role of mediator between warring localities, Dalton and the highway department have thrown all their support behind the suburbs.

"Dalton doesn't like Marsh and he doesn't like the way Marsh has played the game," says Richmond lawyer Patrick McSweeney, a beltway opponent. "But it goes deeper than that. The suburbanites who support the road are Dalton's people. He has no kinship with the people who live down here [in the city]."

The city also can expect very little help from Highway Commissioner King, a Federal Highway Administration bureaucrat before he became state commissioner in 1978, who once described himself as "mostly a highway man." City officials say King, a highway engineer by training, has made it clear many times that he remains a firm believer in the gospel of the Interstate.

King, who in recent years has taken to calling the road a "bypass" instead of "beltway" in order to remove some of its stigma, insists it is necessary to relieve increasingly clogged traffic conditions along the present I-95 as it passes through Richmond on its way from Washington to the South. City officials argue the department is using obsolete traffic projections and indulging its traditional, though outdated, fondness for big and expensive roads.

With no friends at the statehouse, Marsh has continued to push the Washington connection. His latest gambit came this summer when he and black Petersburg Mayor Hermanze Fauntleroy, without informing any area officials, asked Neil Goldschmidt, Adams' successor as transportation secretary, for a "community impact analysis," a process that has held up final federal approval of the beltway for the past six months.

Marsh cited a number of beltway-related projects, including an office park complex, regional shopping mall and corporate headquarters plan, as proof the road would cause development to shun the city for the suburbs.