Recent reports that Taiwan is buying missles from Israel prompted denials from the government here, shrugs from the American military, and winks fromt he Israels here in Taipei.

Negotiations of arms deals between Israel and Taiwan have taken place for years and Taiwan's Ministry of National Defense periodically denies it has ever bought any weapon from Israel. Nevertheless, even outdated volumes of "Janes: All the World's Aircraft" indicate that sales of Israel's Shafrir air-to-air missile "are reported to have been made to several overseas customers, including Taiwan." Publicity about such a transaction might offend Saudi Arabia, which not only supplies Taiwan with oil but is also one of the less than two dozen countries still maintaining diplomatic relations with Taiwan.

Taiwan purchased arms almost exclusively from the United States for years and th United States is still Taiwan's main source, but American reluctance to sell certain arms has encouraged the Nationalist Chinese to seek other suppliers. Nonetheless, neither the Shafir nor the Gabriel missile, both sold by Israel, have the Strategic capability that the United States is trying to keep from Taiwan, according to an informed source. The Gabriel is a short-range anti-ship weapon and the Shafrir is a short-range air combat weapon.

A decade ago, the United States was worried that the Nationalist Chinese moght provoke full-scale war with China by attacking the mainland. This seems unlikely now, despite intelligence missions and small-scale commando forays.

In evaluating arms sales to Taiwan today, Washington weighs matters of availability, unwillingness to offend Peking and the possibility of technology "leakage" through espionage or defection.

Approval of certain sales to Taiwan has been delayed, causing consternation amongthe Nationalist Chinese who feel their future may be endangered. One item that Taiwan has avidly sought is the F-16 Fighter and complaints were expressed when the U.S. Defense Department proposed the sale of 160 F-16s to Iran while refusing to sell the plane to Taiwan.

The Nationalists have also requested the Harpoon anti-ship missile. Even if the permission is granted, the missile will not be available until the 1980s and the uncertainty may have prompted the Nationalists to buy Israel's Gabriel to update their highly vulnerable World War II-vintage navy.

Even more alarming to the Nationalist Chinese are hints that Peking is interested in U.S. military technology, and that the United States may be interested in providing it. Last fall the State Department approved the saled of two sophisticated computers to Peking. One is reportedly intended for oil exploration and the other for seismic research, but both can be used with radar systems and for nuclear testing.

Taipei was also perturbed by the premature termination of a $1 million program under which the Massachusetts Institute of Technology was to train Taiwanese to design and build inertial guidance systems. This equipment could be used for navigation of aircraft and ships - and also for targeting missiles over long distances. On U.S. State Department recommendation, the program ended n June 1976, six months early.

Despite the program's premature end, and informed source said the Taiwan engineers "got what they went for" and speculated that the Nationalist Chinese have mastered the technology for developing inertial guidance systems.

Taiwan locally manufactures F5E jet fighters, helicopters, machine guns, rifles, military vehicles, trainer aircraft and missiles. Taiwan has utilized this modest arms industry and its military training facilities to cultivate relations with friendly neighbors. Troops from Singapore have been sent to Taiwan for military instruction.

The Nationalist Chinese apparently feel their pursuit of military links with countries other than the United States is a matter of survival. Since President Nixon and Chinese Premier Chou En-Zai signed the Shanghai Communique in 1972, the U.S. military presence on Taiwan has been cut from 10,000 to 1,400.

The 1954 mutual defense treaty between Taipei and Washington, moreover, is viewed abseing seriously jeopardized by normalization of U.S. Peking relations. Both American and Taiwanese sources agree that the Nationalist Chinese could not withstand a without U.S. military support withstand a Communist Chinese attack.

Taiwan has accelerated its drive for self sufficiency. "Buying weapons is good for us," said one Nationalist Military Chinese officer, "but being able to make them ourselves is better."

The Cabinet recetly announced an "arms research breakthrough" but did not elaborate upon it, reporting only that "besides trying to manufacture sophisticated weapons locally, the government is also seeking foreign licenses for the manufacture of combat vehicles, fighter-bombers and missile boats." Premier Chiang Ching-kuo recently announced that defense spending will consume almost half the $3.5 billion budget for the next fiscal year, an increase of nearly 25 per cent over the current year.

In addition, "Taiwan's industried and infrastructure projects continue to strengthen the island's military capability. For example, sections of the yet unfinished North-South Freeway are specially constructed for use as emergency runways.

Although the Nationalists say they will never manufacture nuclear weapons, the steadily progressing nuclear research and power programs are constant reminders that Taiwan has the technical capability to do so.