Iraq has moved nearly 30,000 elite army troops to its border with Kuwait and the Bush administration put U.S. warships in the Persian Gulf on alert as a dispute between the two gulf nations over oil production quotas intensified, U.S. officials and Arab diplomats said yesterday.

The Iraqi buildup, only days before this week's meeting of the Organization of Petroleum Exporting Countries (OPEC), was spotted during the weekend by a group of Western military attaches allowed to cross the Kuwait-Iraq frontier to travel to Baghdad. Along the road they counted 2,000 to 3,000 Iraqi army vehicles moving south, transporting what the attaches estimated to be two divisions of Republican Guard Corps troops. Convoys included tanks, armored personnel carriers and ground-to-ground battlefield missiles.

Cash-strapped Iraq is angry because it contends Kuwait is exceeding the oil production levels agreed to by OPEC members, driving down the price of the commodity.

Officials said the United States and Arab governments were treating the Iraqi military buildup as "brinksmanship" and "muscle flexing," because the logistical and supply lines needed to support combat operations were not visible. That attaches were allowed in the area where the convoys were moving was being interpreted as an Iraqi attempt to intimidate Kuwait.

"The Iraqis are just flexing their muscles and this is designed for political effect," one Arab diplomat said yesterday.

Still, the positioning of military forces able to strike on relatively short notice inflamed the already dangerous standoff between Iraqi President Saddam Hussein and the ruling family of Kuwait, the small and oil-rich neighbor that supported Baghdad during its eight-year war with Iran.

The Iraqi force on the border is larger than Kuwait's entire military, which barely exceeds 20,000 troops.

The Kuwaitis also have moved troops and Soviet-made missiles to the border area and yesterday reactivated a full military alert that had been called off last Friday, Arab diplomats reported. Kuwaiti military units stepped up patrols on the two strategic islands of Bubiyan and Warba, which command the waterway access to Iraq's chief naval port at Umm Qasr.

U.S. military officials said late yesterday that the U.S. Middle East Force, the seven-ship Navy contingent that patrols the Persian Gulf, had been put on alert even though they expect the crisis to blow over. Shore leaves were canceled and ships were readied to get underway.

The United Arab Emirates, which like Kuwait is under verbal attack from Iraq for exceeding its oil production quota, has asked the United States for military assistance to improve its ability to fly combat air patrols over UAE territory and vulnerable offshore oil fields in the southern gulf.

Egyptian President Hosni Mubarak, Jordan's King Hussein and Iraqi Foreign Minister Tariq Aziz huddled in the Egyptian port of Alexandria yesterday to defuse the tension, which was triggered when Hussein publicly denounced OPEC quota cheating by gulf sheikdoms, whose full-production tactics were flooding the market and driving down the price of crude oil.

Iraq, Saudi Arabia and Iran have led an OPEC campaign to push prices higher by restraining output by all OPEC members. Iraq is strapped for cash and faces a $45 billion war debt.

Arab leaders criss-crossed the region and conferred by telephone in what has become a major test of Arab cohesion after Iraq's victory in the gulf war. "The purpose is to calm things down and reduce tension. . . . The more tense things get, the more likely you are to have an accident," one Arab diplomat said.

Both Kuwait and the UAE agreed earlier this month at a meeting of Arab oil ministers in Jiddah to cut oil production to 1.5 million barrels a day. Both Kuwait and the UAE have been exceeding their quotas by as much as 500,000 barrels a day.

Last week Saddam Hussein warned in a public address that "Iraqis will not forget the saying that cutting necks is better than cutting means of living."

Hussein's pressure tactics might have found some sympathy among other OPEC members had he not escalated the rhetoric to threats of violence. One Arab envoy in Washington said that Iraq had shifted the controversy from "economics to politics."