For centuries, this sandy islet in the Shatt al-Arab River between Iraq and Iran has been an arms smugglers' paradise. It is just a few hundred yards from the frontier and is covered with thick palm forests where traders can elude nosy customs agents and army patrols.

Shah Mohammad Reza Pahlavi became so frustrated over the furtive trade that he once ordered the Khuzestan Power Authority to install high-intensity arc lights along the coastline.

But the Arab Iranian residents of the dozens of tiny, mud hut villages here were not intimidated. First they tapped the power lines for their own sub rosa electrification program and then shot out the arc lights so they could smuggle in the safety of darkness.

Now, with ethnic Arabs in the oilrich province of Khuzestan demanding autonomy following the Islamic revolution that toppled the shah, trading in smuggled weapons is booming more than ever and Revolutionary Guards of Ayatollah Ruhollah Khomeini have resoponded with harsh crackdowns in an effort to keep smuggled arms away from militant Arabs on the mainland.

With increasing regularity, heavily armed Revolutionary Guard patrols have been searching homes and digging up ground with bulldozers in hopes of uncovering arms caches.

Villagers have been arrested and taken away to Ahwaz, the provincial capital, and in one raid early this week a revolutionary guardsman and a villager were killed in a gun battle, according to residents.

Feelings are running high among the 4,000 island residents, who say they have been trading for generations with family members and fellow tribesmen across the Shatt al-Arab.

Islamic provisional government officials say the weapons, which include Soviet-made Kalashnikov assault rifles and RPG7 hand-held rocket launchers, are being sold to members of the Khalq Arab, a leftist separatist movement that has been accused of much of the sabotage and terrorism that has swept this outhwestern Iranian province in recent weeks.

The villagers, in interviews today, admitted that arms smuggling is common on the island, but they insisted the traders are simply profit-motivated and that the island is not involved in separatist activities.

But one villager, while insisting that the arms dealers are "just traders," said he believed the militant Khalq Arab members are "good people." The movement, which in the past has been strongly influenced by the sheiks of the predominantly Arab province, has been outlawed in Ahwaz.

Residents of the island, closely watched by the Revolutionary Guards, particularly at night, were reluctant to be identified. But they said they supported demands for fewer ties to the Islamic central government in Tehran and the holy city of Qom, the use of Arabic as a teaching language in the province, increased autonomy and a share of profits from the oil fields, where they say Arabs constitute about 20 percent of the work force.

Minoo Island, slightly more than two miles long and not even that wide, has a reputation for violence, and it came as no surprise to anyone when the Revolutionary Guards' frequent nighttime raids prompted reprisals against Persians on the other side of the river.

In the last several weeks, several Revolutionary Guards have been killed in attacks by Minoo villagers, and explosives were detonated on the bridge linking the island to the mainland, causing no appreciable damage.

The island's reputation is so fearsome that Abboud Fealizadeh, an Iranian Arab member of the local revolutionary committee that governs nearby Abadan, today refused to drive to the side of the island facing the Iraq frontier.

Fealizadeh, who was armed, reacted nervously to the request, finally stopping his car in a village with which he is familiar and saying, "I'm not goingany farther. It's not safe over there. They'll shoot." CAPTION: Map, no caption, By Dave Cook - The Washington Post