What Libya does with its oil billions has been a subject of concern for the West, Israel and the country's Arab neighbors. But perhaps most alarming for them are reports that the unpredictable Libyan leader, Col. Muammar Qaddafi, is out to acquire the atomic bomb.

Qaddafi himself has helped to fuel these reports, no firm evidence has been produced so far that the country is presently developing nuclear weapons capability.

One of the first hunts that Qaddafi wanted a bomb came in an April 1975 interview with the Sudanese newspaper, As Sahafa, which quoted him as saying he hoped to transform Libya into a nuclear power. "Nuclear weapons are no longer a secret," he told the paper.

The next month, however, Libya ratified the Nonproliferation Treaty, thereby pledging that it would not seek to acquire atomic weapons. This evidently was a prerequisite for a June 1975 agreement for the Soviet Union to supply Libya with a two-megawatt research reactor that could be expanded to 10 megawatts.

U.S. nuclear experts at the time expressed only mild concern about the deal, saying a reactor that size was too small to produce bomb quantities of plutonium.

Of greater concern was a preliminary agreement reached with France in March 1976 to sell Libya a 600-megawatt nuclear power plant. France later had second thoughts about the deal and quietly backed out of it.

In December 1977, however, a contract reportedly was signed with the Soviet Union for construction of a plant worth $330 million on the Mediterranean coast. Soviet officials later said the deal included a 300-megawatt reactor and a nuclear research center and laboratory.

In November 1977, the 5,000-member Federation of American Scientists called on Moscow to reconsider the agreement, charing that Libya was violating the Nonproliferation Treaty and that there was evidence the Tripoli government was working to obtain an atomic bomb.

Earlier this year it was reported that Qaddafi had sent an aide to China in 1970 or 1971 to ask the Peking government to sell Libya an atomic bomb, but that the Chinese turned down the request.

Columnist Jack Anderson wrote in April that Libya's effort to get the bomb was continuing.

It is considered doubtful, however, that the Libyans could achieve this goal by diverting bomb-grade material from the Soviet-supplied plant. In all their foreign deals, the Soviets have insisted not only that their customers be signatories of the Nonproliferation Treaty but that all spent nuclear fuel be returned to the Soviet Union CAPTION: Illustration, no caption