SCARCELY had the administration announced its crusade against "state-sponsored terrorism" than it embraced the state, Chile, that has incontrovertibly sponsored terrorism on American soil. An American court had actually convicted four men for acting at the behest of the Pinochet dictatorship and murdering the Chilean political exile Orlando Letelier and an American colleague on Massachusetts Avenue. The previous administration had demanded that Chile bring to trial or extradite three high officials implicated in the assassination and, when Chile refused, had imposed limited sanction. The Reagan administration is now lifting those sanctions in the name of American security and business. It is an appalling decision, signaling that right-wing thugs can get away literally with murder on the very streets of Washington and cutting the moral heart out of the Reagan anti-terror campaign.

The administration's decision contributes, too, to the evolution of its human rights policy. That Mr. Reagan was not going to follow the explicitly moralistic, interventionist, high-profile line of his predecessor was certain. That line had not proved wise or possible to sustain, diplomatically or bureaucratically, even to Jimmy Carter. Some of the president's advisers have been suggesting, nonetheless, that a more modest line could still be developed as a useful element of a broadly conceived anti-communist foreign policy. They have hoped Mr. Reagan would avoid the ripples Mr. Carter encountered when he was seen to have an inconsistent focus -- more on the shortfalls of authoritarian friends than of totalitarian foes.

It is against this hope for a more contained, pragmatic but still respectable human rights policy that the decision on Chile must be seen. It represents a victory for a contrary current flowing in the administration. This current holds that the United States does not have the geopolitical luxury of being able to tax friendly anti-communist states for their internal failings and that, to the extent that the United States has any interest at all in the matter, human rights in those countries can best be advanced indirectly in the course of pursuing security and peace.

The Chile decision indicates a lack of the two essential elements of a sound conservative human rights policy: proportion and consistency. A sense of proportion would have let the administration anticipate and avoid the scandal of coming to early and conspicuous terms with a regime that commits murder. A sense of consistency would have kept it from a decision that turns its anti-terror and human rights policies alike into one-dimensional political campaigns.