On a fateful weekend in mid-October 1986, President Reagan met with Soviet leader Mikhail Gorbachev in Reykjavik, Iceland, and engaged in what Secretary of State George P. Shultz subsequently described as "the highest-stakes poker game ever played."

During 15 hours of intense discussions, Reagan and Gorbachev exchanged ideas for eliminating almost the entire nuclear arsenals of the two superpowers, the most potent military force ever assembled and the basis of international security in the modern world. When the summit concluded without agreement, a weary Shultz appeared before reporters to mourn the lost accord. "We are deeply disappointed at this outcome," he said.

Within a few days, however, Shultz had changed his tune. He became a leader of the Reagan administration's "spin patrol," which reconstructed events to put a happy face on the Reykjavik summit during a critical period of the 1986 election campaign.

The official version depicted Reykjavik as a negotiating triumph, stressing the vistas of arms control opened by the summit. Reagan, who rarely understates, called the U.S. proposal to abolish all offensive nuclear ballistic missiles within 10 years "perhaps the most sweeping arms-reduction proposal in the history of the world."

U.S. officials walked a fine line in defending the Reykjavik summit. They sought to capitalize on the popular appeal of arms control by stressing Reagan's commitments to reducing nuclear arsenals. Simultaneously, they tried to appease conservatives by portraying Reagan as a principled president unwilling to sacrifice his visionary missile-defense plan, the Strategic Defense Initiative (SDI), for the short-term political benefits of a stunning arms accord.

In fact, both portrayals were accurate. Reagan holds conflicting visions, which he has called his "dreams," of a nuclear-free world and of a "space shield" that would protect civilian populations from nuclear attack. At Reykjavik, one dream got in the way of the other. What killed the deal was Reagan's refusal to understand that Gorbachev saw SDI as a dangerous dream, one allowing the United States to construct a space shield that could conceal a nuclear first strike. The summit collapsed when Reagan refused to accept Gorbachev's proposal restricting SDI to the laboratory.

Reykjavik gave important momentum to the treaty scrapping medium- and short-range nuclear missiles that Reagan and Gorbachev are to sign in Washington next month. Because of the Reykjavik summit, the idea of halving the superpowers' offensive nuclear arsenals became the benchmark for future strategic negotiations, advancing an arms-control dialogue bogged down on the margins. Former assistant defense secretary Richard N. Perle, a participant at Reykjavik, observed recently that it is "inconceivable" that U.S. and Soviet negotiators will ever return to the minimalist proposals they were discussing before the Iceland summit.

Whether Reagan and Gorbachev can transfer their bold talk into a strategic treaty that can be signed next year in Moscow is another question. Reagan is sincere in his view that SDI is designed for self-defense, as Gorbachev probably understands. But Gorbachev also knows that Reagan will be long out of office before a missile-defense system is deployed. At Reykjavik, he told Reagan that it would have "taken a madman to accept" massive offensive arms cuts without restricting deployment of a defensive system.

Reagan should be credited for developing SDI, which brought the Soviets to the bargaining table. But history will credit him even more if he understands that his dream of a space shield contradicts the larger dream of reducing offensive nuclear weapons.

If Reagan and Gorbachev can strike a bargain reducing offensive weapons and restricting defensive systems, Reykjavik could become what the U.S. spin patrol claimed it to be: the beginning of a bright new era in the nuclear age. If not, Reykjavik will be remembered largely for what might have been.

Reaganism of the Week: In a "Worldnet" speech to Europe last Wednesday, the president said: "Wouldn't it be a wonderful sight for the world to see, if someday General Secretary Gorbachev and I could meet in Berlin and together take down the first bricks of that wall -- and we could continue taking down walls until the distrust between our peoples and the scars of the past are forgotten."