THE "WATER BOMB" is the name South Koreans give to the Kumgangsan hydroelectric project. This vast structure is taking shape across the demilitarized zone in North Korea, on a tributary of the Han River upstream from Seoul.

When completed and filled, the Kumgangsan Dam will hold 20 billion metric tons of water. If it were breached after completion, it would release enough water into South Korea to raise by some 50 meters the level of the Han River as it passes through Seoul. A flood of this magnitude would completely cover the National Assembly Building, home of South Korea's legislature; it would cover one-third of the 63-story DLI Building -- the tallest building in northeast Asia; it would rise to the third floor of Seoul's city hall.

Even a partially filled dam would create havoc. If only 900 million tons of water were in the dam, and it was breached, the Han River would rise some 20 meters, to cover the first 10 floors of the DLI Building, the first floor of the National Assembly Building, and so on. Hundreds of thousands of people would die in the event 900 million tons of water were released, as contrasted with the millions who would perish should 20 billion tons be released.

What makes the prospect of 900 million tons of water interesting is that with a little exertion on the part of North Korea, Kumgangsan could hold that much water in time for the 1988 Summer Olympic Games which seal South Korea's international political authority (to the bitter chagrin of North Korea). Nine hundred million tons of water would completely flood the splendid facilities constructed to host the games. The trick is to let the dam fill as it is being built -- a dangerous, but not unprecedented technique. As for exertion, units of the North Korean army are laboring on the project around the clock.

Is the international flooding of the Han River Valley a likely scenario? Would any country deliberately build a dam to use as a "water bomb"?

Those responsible for defending South Korea cannot know with any certainty what is the real intent of their northern countrymen. The government of North Korea insists that Kumgangsan (named for the Diamond Mountains in which it is located) is merely to generate electrical power. And indeed it may be. But it could also constitute a weapon of incredible destructive power.

U.S. intelligence analysts perceive no intentional threat to South Korea from the dam. They have studied it and believe it wouldn't make a good weapon for invading the South; that it would hurt the North almost as much as the South (i.e., it would complicate the invasion). They are also impressed that North Korea held an international press conference to deny any hostile intention -- as though a press conference subjected the project to international scrutiny. Moving forward from that lenient logic, the analysts also note that the economic situation in North Korea is grim, and so conclude that it would make no sense to tie up resources in the construction of an economic asset for purposes other than economic development.

One flaw in this assessment is that the economic situation in North Korea is always grim. In this decade the North Korean economy has crept along at an estimated 3 percent annual growth, compared to South Korea's average 8 percent, with the gross national product of South Korea (using 1983 as a exemplary year) outstripping that of the North $80 billion to $18 billion, or a factor of more than 4 to 1.

But economic hardship has not dissuaded North Korea's leaders from maintaining a military structure consuming 22-24 percent of GNP as opposed to South Korea's dedication of about 5.5 percent to its own defense. In other words, it is not reasonable to assume that North Korea will place the well-being of its people -- economic or otherwise -- ahead of its aggressive intentions toward the South.

Nor is it prudent to overlook that the Korean War has not been officially concluded; hostilities between North Korea and United Nations forces have merely been interrupted by a tense and tenuous cease-fire. How tenuous may be deduced from at least four major efforts to murder the leadership of South Korea. These resulted, in 1974, in the death of the wife of President Park Chung Hee and, in 1983 in the deaths of four Burmese and 17 Koreans, four of them Cabinet members, in Rangoon.

There is no end in sight to these depredations. Kim Il Sung, the Soviet-imposed dictator of North Korea since 1949, has chosen his son, Kim Jung Il, to carry on after him. If this effort succeeds, it will provide the first and only instance of a dynastic succession in a communist-controlled state. Intelligence sources indicate the Rangoon attack was ordered by Kim Jung Il to show any pretenders and malcontents in the North Korean army or elsewhere that the son is no less murderous than the father.

What separates the decaying North Korean police state from its vibrantly prosperous southern neighbor is the minuscule strip of land called the Demilitarized Zone: "the DMZ" to South Korean and UN security forces that patrol there (and occasionally die: two American officers were killed at Pam Mun Jom in 1976) in their efforts to maintain the peace.

It is this buffer zone that challenges North Korea's talent for creative aggression. This talent has, in the past, produced efforts to build under the DMZ tunnels large enough to permit the movement of armor and infantry forces sufficient to mount a serious strike into the South. These tunnels have been repeatedly discovered; whether they have all been discovered is anybody's guess. As they say in intelligence work, "You don't know what you don't know."

The problem with American intelligence estimates is that they are prepared by Americans. Our track record for piercing historical and cultural differences to arrive at accurate assessments of what an adversary might do is not enviable. Nor is our appreciation of the full impacts of economic disparity. Post-industrial nations can afford to keep tools of peace and tools of war separate. There are plowshares and swords, pruning hooks and spears; one doesn't attack with plows and pruning hooks -- or dams.

But consider the lessons of Asian history:

In 203 B.C. Gen. Han Shin attacked the Chi dynasty, and their forces eventually confronted each other across the Wei Sui River. Gen. Han's people dammed the river upstream under cover of darkness. The Chi commander, seeing the river running low, seized the opportunity to ford it with his troops and attack the Han Army unaware.

As the Chi forces crossed, the dam built by the Han was breached, the resulting flood destroyed the Chi army as an effective fighting force, and the Chi dynasty was destroyed.

Korean general Uljimundok used the same means to defend his country against the Chinese general Sui in 617 A.D. The Korean forces dammed the Salsoo River as their general executed a series of tactical retreats aimed at drawing the Chinese army into the trap. At the decisive moment, the Koreans broke the dam, flooding the opposing force, at which point Gen. Uljimundok counterattacked, causing some 300,000 casualties to the invading Chinese force.

More recently the Chinese Nationalist forces of Chiang Kai-shek used the same method against the Japanese, destroying 1,400 meters of dike on the Yellow River at Suchow on 12 June, 1938. The result was more than 12 million casualties, including 980,000 dead in a flooded area estimated at 54,000 square kilometers. The Japanese thereafter adopted a strategy of attrition warfare against the Chinese.

In May 1951, North Korean saboteurs blew up part of the Hwachon hydroelectric power plant in an effort to destroy a counterattack being launched by United Nations' forces.

Finally, most of us who served in Vietnam sooner or later consoled ourselves that when worse finally came to worst, we would abandon humanistic scruples and bomb the dikes on North Vietnam's Red River, thus flooding the Red River Valley and bringing Hanoi's war-making ability to a halt. (But we never did. Hanoi understood our cultural differences better than we. They put surface-to-air missile sites on the dikes, where they would be safe from attack.)

It is a primary mission of U.S. intelligence services to provide us and our allies with sufficient notice in advance of hostile maneuvers by our adversaries, knowing that it would take weeks to bring the full force of U.S. defensive might to bear against an all-out assault on vital U.S. and allied interests.

One of the nightmares of defense planners is "ambiguous warning" -- an act that may presage war, but not be seen to do so with certainty, and not be understood to do so until the enemy has already seized the initiative and inflicted decisive damage. Ambiguous warning is a term of art for the nuclear age; less refined thinkers use the old-fashioned word: surprise.

If the Kumgangsan Dam were breached, the waters would reach flood stage at Seoul within 30 hours. Virtually no time would be left for evacuation. Major national assets -- including those needed for defense -- would be tied down in rescue and relief efforts. The Han River bridges would be destroyed or seriously damaged, cutting off Seoul from defense forces in the southern part of the country. Havoc on the river would make it difficult-to-impossible for these forces to bridge the river on pontoons.

All this could occur in such a fashion as to mask any hostile intent on the part of North Korea. The destruction of Seoul, of the forward defenses of South Korea and much of its powerful economic base could all appear as the result of the sort of unfortunate accident that occurs from time to time as Third World nations reach out to the future. (Not to mention "first world" nations, as with the failure of Idaho's Teton Dam owing to faulty construction.)

The government of South Korea does not have the luxury of time on its side as it provides for the defense of the nation against threats such as those represented by Kumgangsan. Accordingly, the question is not whether everyone agrees the dam is a threat, but whether it is prudent to take a chance in light of North Korea's record of unremitting hostility toward South Korea.

Today, North Korea has deployed to the border with its southern neighbor major elements of one of the largest and best prepared (it has been on a wartime footing for 27 years) land armies in the world, reducing to zero the ability of their prospective victim to know an attack is imminent and prepare for it. Against the background of repeated North Korean aggression from the Korean War forward, the government of South Korea knows that it must be prepared for attack at a moment's notice.

Reaction to the Kumgangsan Dam is instructive. Knowing they face a grave threat to the national security, the government in Seoul has sought to draw international attention to this threat in the hope of bringing about a diplomatic solution. Being practical, however, Seoul has also begun construction of a counterdam that will trap the waters of the Kumgangsan should they be released.

They call their project the Peace Dam. Their willingness to spend the money the counterdam will cost is the best measure of the seriousness with which South Korea regards the Kumgangsan Dam.

Noel Koch, a former deputy assistant secretary of defense, is head of International Security Management, a firm providing anti-terrorism services. He has had occasional discussions with the South Korean government about security matters since leaving the Defense Department in May 1986.