There is controversy in the United States over the Reagan administration's plan to "reflag" Kuwaiti oil tankers. But concerned as Americans may be about slipping into a confrontation with Iran, reflagging is also emotionally and politically agonizing for many Arabs. Americans may be wary of seeing their flag go up in the Gulf. Many Arabs are equally uncomfortable about seeing the flag of a sovereign Arab state go down.

How ironic that an Arab state should seek to protect its cash income by turning to the United States -- the same country Arab oil producers boycotted in 1973, the same country we condemn for supporting our enemy Israel, the same country we criticize for selling arms to Iran. That Kuwait has also asked the Soviets and the Chinese to help safeguard oil exports is only to assert that dealing with three devils somehow negates the danger of dealing with one.

The symbolism of replacing one's flag with another's, to ensure one's income, should be generating public debate in an Arab world otherwise preoccupied with issues of national security, identity and viability.

Kuwait has always been a pioneering state. It has invested its oil income wisely in downstream oil industries and equity in international firms that could transfer technological know-how to the Arab world. It has set aside a percentage of its substantial oil income for use by future generations and has provided generous foreign aid. With an annual investment income of $4 billion to $5 billion a year, it could easily suspend oil exports for a time and live off that investment income.

I have always viewed a flag as something precious -- a symbol not only of sovereignty but also of one's very identity. I have always thought that flags were to be defended to the last man or woman, and were lowered or surrendered only after battling with all one's resources and energy and will.

It was thrilling to see the Kuwaiti flag fluttering during the quarterfinals of the World Cup football competition in 1982. It would be equally painful to watch the Kuwaiti flag come down from the masts of Kuwaiti oil tankers, to be replaced by American or Soviet flags. And what would happen, I ask myself, if Kuwait were to win an Olympic medal next year at Seoul? Would we cheer the flag of an oil tanker charter company in Delaware?

Kuwait will "reflag" its oil tankers. It sounds a little bit like repainting your car. It is, in its linguistic simplicity, antiseptic, almost clinical. This week, we repaint. Next week, we reflag. Next month, we repair the broken windows.

But do Kuwaitis fully appreciate what this means to them and to other Arabs who watch it ''reflag'' its tankers? What happened to those hundreds of billions of dollars spent on armaments by the Arab states of the Gulf Cooperation Council in the past 15 years? What are those weapons being used for, if not to defend the sovereignty and territorial integrity -- and the flags -- of member states? What happened to the ability of one Arab state to call on other Arab states to help defend it in times of threat?

Kuwait is a small country, with plenty of cash reserves, close defense links with its other GCC partners and excellent relations with all other Arab countries. It should not have to resort to the protection of foreign powers. If, in such circumstances, it cannot defend itself, or call on its Arab friends to defend it collectively, what does this imply for others of us around the Mideast who have less money and are less intimately plugged into collective regional defense arrangements?

I am unconvinced by the rationale that foreign protection is needed to maintain the freedom of international navigation in the Gulf. If this were so, foreign powers should have offered their flags five years and several hundred maritime attacks ago. If we wish to keep the sea lanes open -- certainly an admirable and reasonable goal -- we would have to reflag all ships in the Gulf, not only Kuwait's.

Freedom of navigation is important but not more important than national sovereignty. Income from oil is important, but not more important than ensuring that future Arab generations can look upon their national identities with the same certitude with which they look upon their national income.

We should perhaps talk about reflagging our souls, or our children, or the memories of our ancestors, or something more poetic than big, fat smelly oil tankers. I am convinced that reflagging is not the answer -- and that freedom of navigation is not the question.

These are mere symptoms of a wider Third World dilemma involving the essence of nationhood, of political and human rights, of the purpose of one's armed forces, of the quality of relations with one's neighbors, of the strength of one's individual and collective identity, and of being able to call upon one's own people to defend one's land and country and community. These are challenges that most Arab states and people still have to deal with. Kuwait is, in this sense, the tip of the iceberg. This is why I look with dismay at the reflagging of Kuwaiti tankers, and wonder if we shouldn't we pay less attention to our tankers and more attention to our flags.

Rami G. Khouri is a writer in Amman, Jordan.