It was an elegant national day garden party that Saddam Hussein chose as the stage for his first appearance before foreign ambassadors as the new president of Iraq.

Tailored, polished and cool, he stood in a reception line and took the homage of foreign envoys, consecrating his rise from a drab village through exile and violent Baath Party plotting to the acme of a rich nation emerging as a center on increasing power in the Arab world.

In the assessment of Iraqi and foreign observers here, Hussein, 42, is determined to use that power and Iraq's building oil wealth to fortify the Arab camp opposed to peacemaking with Israel and to establish Baghdad as its regional capital with influence across the Persian Gulf and throughout the nonaligned nations.

Iraq has shown moderation and new pragmatism in recent months in relations with fellow Arab and other foreign governments. But analysts here say that Hussein's ambitions, if realized, could mean more pressure for even higher petroleum prices and added difficulties in broadening the Egyptian-Israeli peace treaty into a comprehensive Middle East agreement.

In the secret world of Iraqi politics, there is little public enunciation of what Hussein and his Revolutionary Command Council intend. But signs are being analyzed by Iraqis and foreign observers for indications of where Hussein is heading and what his chances are.

Some are symoblic, like the presence beside Hussein in that July 17 garden reception line of a little wiry-haired man who resembled a retired country school teacher. He was Michel Aflaq, the Syrian cofounder of the Arab Baath Socialist Party that spawned Hussein and has ruled Iraq since 1968.

To some veteran observers here, Aflaq's rare public appearance at Hussein's side amounted to a Baathist laying-on of hands, on ideological anointment designed to show the outside world that Hussein was the legitimate heir to the party line.

The day before, Ahmed Hassan Bakr, 65, resigned after 11 years as president and head of the all-powerful Revolutionary Command Council. Hussein already had taken over most of his duties because of Bakr's failing health, the reason cited for stepping down.

Aflaq's benediction the next day was interpreted as a gesture to lay to rest speculation abroad, particularly in Egypt, that Hussein had forced out Bakr, his uncle and mentor. After sifting through such indications, Western diplomats here appear convinced that the succession indeed was harmonious and that Bakr's diabetes and heart troubles were the main reasons for its timing.

Other signs in Iraq are more explicit. One of the most telling-- with the clear message that Hussein would brook no dissent in his new role-- came in August with the arrest of more than 65 officials and political leaders and the execution of 21 of them for treason.

Several of those shot were Cabinet ministers who had mingled at the garden party only three weeks earlier. Hussein is reported to have attended the executions by firing squads made up of Baath Party officials, civilians and soldiers.

The official execution announcements said those arrested were involved in a plot to overthrow Hussein and had been aided by a "foreign power." Baghdad named no names but reports swiftly leaked that Syria was suspected.

The rival Baathist government in Damascus has been a traditional enemy here. The two wings of the party are bitterly divided about tactics and split by personal grudges between Syrian and Iraqi leaders. Hussein is reported to harbor particular dislike for President Hafez Assad of Syria.

But for the last year, the two neighbors had buried their dispute and were working toward increased coordination of their governments and parties. Their reconciliation had helped open the way for Baghdad's convocation of the Arab summit here one year ago that charted Arab strategy against the Camp David accords.

The reports that Syria was suspected of fostering a plot against Hussein have now frozen the efforts at reconciliation. The Syrian ambassador here has predicted to his colleagues, however, that coordination talks are likely to resume within a few months, particularly if developments in the Egyptian-Israeli negotiations generate enough shared outrage to eclipse the quarreling.

In any case, many foreign diplomats suspect that those arrested were not mounting a plot at all, with or without Syrian encouragement. In their reading, Hussein saw a group forming among his followers that was thinking of limiting his newly accumulated powers as president, ruling council leader, prime minister and Army commander in chief.

"The assumption is that Saddam [Hussein], faced with the rumor that some people were gathering to trim his sails, overreacted, somewhat violently, because that's the kind of person he is," one of them said. "Then he looked around for someone to blame and pointed at the Syrians."

There is little doubt among those who study Hussein that he is capable of such decisiveness to keep his hold on power.

In 1959, after a failed assassination attempt against then-president Abdul Karim Qassim, Hussein cut a bullet out of his own leg with a knife rather than go to a doctor and risk imprisonment. After a brief Baathist reign in 1963 was overthrown, he held out alone in a house surrounded by police for an entire day of shooting.

More recently, he helped organize last year's crackdown on the Communist Party after it was discovered that Communists were trying to organize in the Iraqi Army. The party lost its place in the government and 21 of its members to the gallows.

Amnesty Internationl, the London-based civil rights group, estimates Iraq has executed an average of 100 political prisoners a year during the last five years.

"For the men ruling Iraq, it is either stay in power or face the coffin," said a European diplomat. "They know there is no escape to exile if they fall."

In addition, the Iraqi government's tough repression and generous economic aid in the northern Kurdish areas appear, for the time being at least, to have quieted Kurdish separatist ambitions despite turmoil in neighboring Iran. In a move apparently designed to underline this, last week Hussein ordered that rebel Kurds, who had been forcibly moved south several years ago to help calm a revolt, be allowed to return to their home region in the northern mountains.

There is no real threat from the Kurds or the Shiites," said the European diplomat. If something happens, it will come from within the Revolutionary Command Council or from the Army."

(Although Iraq's overwhelmingly Moslem population is nearly equally divided between members of the Sunni and Shiite sects, most of the leadership is Sunni and there has been recurrent unrest among the nation's Shiites.

Apparently solidified. Hussein is said to be particularly eager to play a strong leadership role in the nonaligned movement. He is the upcoming president after Cuba's Fidel Castro. The next nonaligned conference, in 1982, is scheduled for Baghdad.

In addition, he has called for a summit meeting of the Organization of Petroleum Exporting Countries next year in Baghdad and last month he turned down an Omani suggestion of Persian Gulf security arrangements on the ground that it sprang from U.S., British and West German plans. Hussein's Iraq clearly has its own plans for Gulf security, with neither the United States nor the Soviet Union involved.

This ambition fits into Hussein's apparently sincere effort to avoid aligning his nation with either East or West. At the same time, it underscores the drive to use Baghdad's new wealth -- oil revenues estimated to reach $14 billion this year -- to help it gain greater weight in Arab and world affairs.