JERUSALEM, AUG. 28 -- The prospect that the Persian Gulf crisis may be resolved through United Nations mediation has alarmed Israel's right-wing government, which is intent on bringing about the destruction of Iraq's military potential and the downfall of President Saddam Hussein.

In public, senior Israeli officials insist that they are not advocating war between the United States and Iraq. Still, they say that the Middle East will remain unstable and Israel will be severely threatened if Saddam is allowed to remain at the head of his powerful army and arsenal.

If Saddam "stays in power and retains the weapons, there will be grounds for concern here in this region and, I think, throughout the world," Defense Minister Moshe Arens said in a television appearance last night. "I hope this will not be the way the crisis ends."

Commentators outside the government have put the argument even more forcefully. "In truth," said an editorial in the mass circulation newspaper Yediot Aharonoth, "successful mediation of the crisis arouses fear, not because Israel delights in war" but because "a diplomatic compromise for the Kuwait crisis, leaving the Iraqi war machine intact and bringing about the withdrawal of American forces from the region, would mean that we would remain here alone with Saddam and his mad ambitions."

Senior government officials say they believe the mediation effort launched by U.N. Secretary General Javier Perez de Cuellar may only derail what has been a steady buildup of U.S. pressure on Saddam, and they have expressed concern about the apparent interest of President Bush in the effort. "We are puzzled about Bush's intentions," one official said. "We're afraid that because of the hostages, he may be losing the resolve we saw until now."

Another official close to Prime Minister Yitzhak Shamir said that Israel does not oppose a diplomatic solution to the crisis per se but feels strongly that there can be no compromise with Saddam.

"We would like Saddam Hussein to disappear one way or another," the official said. "We believe that if there is a diplomatic solution that is forceful enough, that humiliates him and weakens him enough, force may not be necessary."

"But America needs a clear-cut victory," the official said. "Any compromise that allows Saddam to achieve any of his aims would have disastrous results. It would be an invitation to aggression."

Although it has remained on the sidelines of the gulf crisis, Israel sees itself as Iraq's ultimate target and rival in the Middle East. For more than a year before Iraq's invasion of Kuwait, Israeli leaders were trying to draw Western attention to the threat posed by Saddam, and since the crisis began, officials have expressed satisfaction that the United States and other powers had been drawn into a confrontation that Israel feared it might face alone.

As the focus has shifted toward efforts for negotiations, however, Israeli officials have begun to fear that a settlement will again leave Israel with the job of facing Iraq militarily, a challenge that could eventually plunge the Jewish state into another devastating war.

"The whole Middle East, and particularly Israel, would be in grave danger" if Saddam survives, argued Zalman Shoval, the newly appointed Israeli ambassador to the United States. "We could end up facing the same conflict later on, under less auspicious conditions."

Behind this security concern, officials said, an equally intense Israeli political interest motivates the antagonism to U.N. mediation -- preventing the Palestine Liberation Organization, an Iraqi ally, from reversing the political and financial blows it has suffered in the crisis. In recent days, PLO chairman Yasser Arafat has been promoting a compromise solution to the conflict that would involve an Iraqi withdrawal from Kuwait, but tie it to a U.S. withdrawal from the gulf and elections for a new Kuwaiti government.

Though potentially attractive to Western and Arab leaders eager to avoid war, the prospect of such a compromise horrifies Israeli officials because it would restore the PLO as a power in the region and encourage Palestinians in and outside the Israeli-occupied territories who have embraced Saddam as an Arab hero.

"You can imagine the legend that would develop -- that Saddam faced the whole Western world and still was not defeated," said one official. "This would cause an explosion, not only here but in the moderate Arab states."

Israeli officials acknowledge that even an all-out war between the United States and Iraq and the overthrow of Saddam Hussein could fail to change the character of the Iraqi regime. According to Israeli intelligence assessments, "there is no pro-Western alternative in Iraq," one senior official said. "Whoever succeeds Saddam very likely will not be much better."

For that reason, some Israeli analysts believe the main U.S. objective should be to cripple Iraq as a military power.

"Don't define it as getting rid of Saddam," said a government source. "He can even stay, as a weak puppet. But the main thing has to be to stop Iraq as a threat to the Middle East."