FACING A seemingly unstoppable arms build-up by its Arab enemies, Israel is changing its clandestine nuclear strategy. According to Western analysts and intelligence officials in the United States and Europe, Israeli military scientists have stepped up work on a project cloaked in secrecy for 25 years: stationing nuclear missiles aboard submarines.

Intelligence sources say Israel is only a few years away from developing sub-launched cruise missiles as a second-strike arsenal which could retaliate even if Arab forces managed to hit Israel's nuclear reactor, ground-to-ground missile sites and air force bases. The Israelis have been especially alarmed by Iraq's progress toward obtaining a varied menu of weapons of mass destruction -- chemical, nuclear and biological. The region was already dangerous enough, but any Arab leader wanting to pick a fight could find a host of excuses ranging from the continuing wave of Soviet Jewish immigrants to the suspension of the U.S. dialogue with the PLO.

Strategists in Israel have concluded that they have no choice but to prepare for a new balance of power in the Middle East: a balance of terror based on a regional version of "mutual assured destruction," the so-called "MAD" doctrine that has helped keep the peace between the United States and Soviet Union.

Under the new mini-MAD strategy for the Mideast, Israel can feel safe only if its Arab foes are convinced that they themselves would be destroyed if they dared to attack the Jewish state with non-conventional weapons. What the Israelis are convinced they need is a stockpile of weapons which would surely survive a first strike by the Arabs.

Through a series of leaks over the years, many of them calculated, Israel has let it be known that it has nuclear arms -- "doomsday weapons" to be used only if the very existence of the state were in jeopardy. The most convincing evidence came in photographs and detailed description given to a British newspaper in 1986 by Mordecai Vanunu, who worked in the underground nuclear facility near Dimona in the Negev Desert. While Vanunu was captured by the Israelis and sent to prison for 18 years, and security was tightened, it soon became apparent that Dimona could not forever be considered safe from attack.

Iraq and other Arab nations have made rapid progress in improving the range and accuracy of their missiles, menacing both the reactor and the Israeli warplanes and ground-to-ground missiles that could deliver nuclear weapons. Syria and Libya are stockpiling chemical weapons. So are the Iraqis, who are said by intelligence analysts to be barely five years away from developing an atomic bomb.

According to Western analysts, Israel's strategic planners have settled on a five-pronged response. First, Prime Minister Yitzhak Shamir called for negotiations to turn the Middle East into "a zone free of mass-destruction weapons." Israel also agreed for the first time to cooperate with United Nations committees working on similar proposals by Iraq and Egypt.

Second, the foreign espionage agency, Mossad, and the military intelligence agency, Aman, recently intensified their efforts to discover everything possible about the Iraqi nuclear, chemical and missile programs. The primary task is to identify who is working on these projects, so that measures might be taken to stop them.

If diplomacy and indirect strong-arm tactics should fail, part three of the Israeli plan would be military action -- either by covert combatants or by the armed forces, styled on the air raid that destroyed the French-built nuclear reactor on the outskirts of Baghdad in 1981. Such raids would now be more difficult, however, because Hussein's secret defense projects are spread out around various parts of Iraq and facilities have been hardened to make them more likely to withstand an attack.

A fourth phase of Israeli strategy has been in operation for several years: developing the ability to intercept ballistic missiles in mid-flight. The United States, through its Strategic Defense Initiative research effort, is providing an estimated $100 million for Israeli work on an anti-missile missile called Arrow.

The director-general of the ministry of defense, General David Ivri, recently made a rare admission about the fragility of the public mood. "If even a few missiles were to hit Tel Aviv, Israel would not be the same country in terms of psychology and morale," said Ivri. Referring to Arab missiles and chemical arms, he added: "The question is whether we as a country or a people are ready for such a challenge. My assumption is no, not politically, strategically, or militarily."

In the absence of totally reliable countermeasures, Israel has little choice but to pursue a fifth response: changing its nuclear strategy by reconfiguring its ultimate arsenal. Israel's goal is to develop a long-range strike capability similar to America's Tomahawk, a sea-launched cruise missile. "Building a homegrown cruise is not beyond the grasp of the Israelis," says arms expert Paul Rogers at Britain's Bradford University, even though they are not considered capable of producing a submarine-launched ballistic missile -- one which flies high into the air before dropping onto distant targets.

The Israelis are known to have made great strides in the field of cruise missiles, which fly so close to the ground that they are difficult for the enemy to detect. The Israelis have nothing as formidable as the Tomahawk, with its 1,600-mile range, but their three British-made submarines are already equipped to fire the American-made Harpoon anti-ship missile from their torpedo tubes. The Harpoon has an effective range up to 80 miles but could be extended.

Another rapidly developing missile is deployed on more than 20 of the Israeli navy's surface vessels. This is the sea-to-sea Gabriel, which the Israeli manufacturers have upgraded to a 20-mile range. A third variant is said to be even better, and now there are reports of a Gabriel-4 with a range of nearly 100 miles.

The Gabriel qualifies as a small cruise missile. It probably could be adapted to be launched from the standard 21-inch torpedo tube. And it could conceivably be improved enough to reach Iraq. Israel is 220 miles from the nearest point in Iraq, and 600 miles from Baghdad. These distances could be slightly reduced for a sea launch, and the range of any missile could be stretched if it carried a light-weight nuclear warhead rather than heavy high explosives.

Sea-to-sea or cruise missiles that attempt to travel long distances are notorious for poor accuracy and might drift one mile off course for every 100 miles of flight. But still, in the safe hiding place of an unlocatable submarine, such a nuclear-tipped missile would represent enough of a threat to deter a potential attacker.

There was, until recently, a large hole in the logical strategy of stationing part of the nuclear deterrence force undersea: Israel's three existing subs are practically obsolete. However, far away from prying eyes, modern replacements are being arranged.

In a closed-door session in Bonn this past January, West Germany's federal security council -- a committee of Chancellor Helmut Kohl and his top ministers -- approved the sale of two submarines to Israel. The decision was leaked to the press, but with few details: The Howaldtswerke Deutschen Verft AG shipyard in Kiel would be the manufacturer and these would be "strategic subs." The term usually indicates that they will be capable of remaining submerged for weeks. Norbert Gansel, a Social Democrat member of the West German parliament is an opponent of arms sales to both Israel and Arab nations and finds it ominous that the subs will be "an entirely new type" designed to meet unpublished Israeli requirements.

They would have diesel engines, not nuclear, and in that regard one more fact emerged: that the United States would pay at least $180 million of the estimated $500 million dollar cost, even though the work would be done in a third country. U.S. military aid usually must be spent in America, but U.S. shipyards only make nuclear-powered submarines rather than diesels.

As part of the strategic shift, scientists will have to work with exceptional speed and brilliance to add long-range cruise missiles to the Israeli arsenal. But chances are they will succeed. As long ago as 1977 in a secret meeting with a top Iranian official visiting Israel, then-defense minister Ezer Weizman referred to "impressive" missile projects including one code-named "Flower." Seth Carus, of the Naval War College in Rhode Island, believes this to be a reference to early work on a sea-launched cruise missile. Israeli officials refuse to comment.

Israel has long played the peek-a-boo game of neither confirming nor denying that it has joined the exclusive nuclear club of nations. When an American U-2 spy plane photographed the French-built reactor in the Negev desert in 1960, the official cover story spoke only of a textiles factory. Israel never signed the Nuclear Non-Proliferation Treaty, but the government in Jerusalem repeatedly states that "Israel will not be the first to introduce nuclear weapons into the Middle East." That oft repeated refrain defies precise definition: Are the bombs just one small step away from being assembled? Is the policy pronouncement a smokescreen to avoid worldwide uproar?

British atomic physicist Frank Barnaby believes that any nation's nuclear program takes on a life of its own, especially in Israel where it is so secret that politicians do not exercise effective supervision. Changes in strategy, says Barnaby, "may not reflect the current wishes of the political leadership but be brought on by the momentum of military technology."

Around 25 years ago, the CIA detected signs of an Israeli nuclear strategy that called for developing weapons of all types and all sizes -- including nuclear weapons in submarines -- to give the widest possible choice should the arsenal be unleashed. Moscow apparently had similar suspicions. After the commander of South Africa's strategic naval base near Cape Town, Capt. Dieter Gerhardt, was arrested in 1982 as a spy for the Soviets, it emerged that he and his wife Ruth had been ordered to report on Israeli naval cooperation with South Africa -- specifically, whether the Israeli-made Gabriel missile could be armed with nuclear warheads.

For the public record, the Israelis issue an occasional denial that there is any nuclear arsenal. Work on increasing the range of the Gabriel and other missiles is secret, although the launch of a second Israeli satellite into orbit in April suggested substantial investment in rocket R&D. Neither the first satellite of 1988 nor the one now circling Earth contained a camera, but future models are likely to have reconnaissance functions that would eliminate Israeli dependence on "spy in the sky" photographs shared by the United States. Israel would then have a far greater ability to keep an eye on military activities in the Arab world, but no certain way of stopping them.

In establishing a new level of deterrence, Israeli officials continue to rely on the ambiguity that has served them well for over three decades. They deny that their satellites have any military function, while lauding the technological excellence they demonstrate. As for the "strategic submarines" being purchased from West Germany, the Israeli navy needs them for ordinary, conventional patrol duties. The Israelis deny plans for sea-launched nuclear missiles; but some relish any rumors that could help polish the recently tarnished image of Israeli invincibility.

Carus finds it "only natural that Israel would develop a cruise missile that could carry a nuclear warhead." It is unlikely, however, that Israel's strategists see sea-launched cruise missiles as a tactical, or "useable," weapon which could actually win a war. More likely, the Israelis seek the presumably deterrent effect of possessing a second-strike capability. But will such a strategy work in the Middle East with its Saddam Husseins and Moammar Gadhafis?

Struggling to survive rather than pausing to ponder such questions, Israel hopes to receive the two German-made submarines in around four years. Western intelligence believes that the ongoing work on missiles will, sooner or later, produce something for the subs. And then the Israelis would have to decide precisely how to leak the news, for what deterrence is there in a weapons system known to no one?

Dan Raviv is a CBS News correspondent. Yossi Melman is an Israeli journalist. This article is adapted in part from their book "Every Spy a Prince: The Complete History of Israel's Intelligence Community," published this month by Houghton Mifflin.