This basically defenseless super-rich city-state has learned to live with, if not love, the dangers and uncertainties of seemingly institutionalized instability swirling around it.

Call it studied cool or mindless insouciance, but Kuwaitis, especially the business and financial elite that runs the 11,000-square-mile country, are proud of their growing self-confidence and resilience.

It's not just that the events of the last 20 years have toughened Kuwaiti skins. Kuwaitis have also embarked on a policy of aiding Third World -- and especially Arab -- countries to win their respect and good will if not necessarily their love.

The advisability of such a policy of spreading the oil wealth within and without became apparent within months of Kuwait's independence in 1961, when the recently departed British were recalled after Iraq threatened to annex the country outright.

Today Iraq, which has yet to settle the border dispute with Kuwait, is bogged down fewer than 100 miles away in a stalemated war with Iran. And Iran's Islamic revolution runs its erratic course but no longer with the potential to stir up Kuwait's Shiite Moslem minority.

Elsewhere in the Arab world Kuwaitis see other causes for concern. In Kuwaiti eyes Saudi Arabia refuses to come to terms with the lessons of the November 1979 Grand Mosque siege in Mecca -- specifically the need for increased democratization and reform. And seen from here the Arab world, thanks to Egypt's separate peace with Israel, is split as never before.

For Kuwaitis, much of the renewed belief in their own survivability also comes from a dawning realization that the self-styled pan-Arab regimes have been revealed as false prophets who have failed to deliver the goods. Kuwait -- and even less enlightened larger conservative regimes with more intractable problems -- on balance are seen as having provided a certain modicum of services if not on the lavish welfare-state scale practiced here.

By way of contrast, the record of the rival Baath Party leaderships in Iraq and Syria, or of Col. Muammar Qaddafi's rule in Libya, or the all but effaced memory of the late Gamal Abdel Nasser of Egypt, by their own shortcomings or the passage of time, have tended to make conservative regimes look good.

Kuwaitis would say that some conservative regimes look better than others, putting themselves in the front ranks because of their recent return to an elected parliament after a four-year suspension.

They are especially pleased because the election results swept away both old and new fears -- the remnants of Nasser's leftist ideology and the danger of Shiite Moslem militancy inspired from across the Persian Gulf in Iran.

Yet in itself such reasoning has severe limitations. It is based on the kind of general Middle East disarray that allows small, conservative states such as Kuwait to go about their business of making money and friends untroubled.

Indeed the recent consultative machinery for gulf defense set up under a Saudi aegis -- and grouping as well the United Arab Emirates, Bahrain, Kuwait, Oman and Qatar -- adds up to little more than a step in the right direction. The grouping makes little sense without the participation of Iran and Iraq, the two most populous regional states. Even before the gulf war their rivalry had been a major obstacle blocking meaningful regional security coordination.

A Kuwaiti decision this week to spend $1.8 billion more on defense over the next seven years does not significantly change the fact that this country, as well as the other gulf oil producers, are too small and underpopulated and thus too weak to protect themselves.

At best, Kuwait relies on Saudi Arabia for its defense and, given the nature of U.S. protection for Riyadh, also benefits from the American defense commitment at one remove. In practice, that complicated formula risks being of little comfort in any real pinch, many Kuwaitis concede privately.

But Kuwait's growing ability to live with the previously unthinkable is nonetheless a sign of maturity.

For example, the outbreak of the gulf war last September did not stampede capital out of the country, largely because a great deal had already left as much as a result of high interest rates in the West as of the shah's fall or the Mecca mosque incident.

Even two Iranian Air Force attacks near the Iraqi border -- signaling Tehran's displeasure with Kuwait's decision to supply Baghdad with goods and refined petroleum products -- did not cause more than passing consternation here.

"The Kuwaitis didn't issue visas for a few months and the planes were booked out briefly and the gold ashtray crowd packed up their valuables," a diplomat recalled, "but they didn't actually ship much abroad and soon it was business as usual."

Kuwaitis point out that the stalemate in the gulf war has now actually made things easier, since it weakens both their bigger neighbors.

Some Kuwaitis even find some positive effects from the initially denounced U.S. decision freezing Iranian assets in the United States during the hostage crisis in Tehran.

The freeze frightened Kuwaitis and other gulf oil states with surplus assets invested in the United States, since they worried about the precedent if they were to apply another oil embargo as they had in 1973. But now, a banker noted:

"Kuwaitis are using their own financial institutions to a larger extent as a result of the freeze, although with assets of as much as $67 billion they can hardly hope to recycle much through their own system.

"There's something like $8 billion sloshing around Kuwaiti banks," he added, "and that's not bad in these parlous times for a place which used to be written off not so many years ago as just a spit of sand spouting oil."