WEST BERLIN, SEPT. 14 -- Nearly three weeks after Iraq invaded Kuwait, West German authorities released an Iraqi arms dealer from jail after he had served half of a 6 1/2-year sentence for large-scale illegal arms transactions.

The Iraqi, Abdul Moneim Jebara, had worked closely with the Iraqi Embassy in Bonn and the Iraqi intelligence service to arrange transfers of arms and advanced technology from West Germany to his country, according to evidence at his trial. Jebara, who also was convicted of tax violations, recently was reported living in a Cairo hotel with his wife and 4-year-old daughter.

The Jebara case is the latest in a series of revelations pointing to links between West Germany and Iraq's military buildup, which has included development of poison gas and nuclear capabilities.

Government sources have contended that Jebara's release did not indicate conciliation by Bonn toward Iraqi President Saddam Hussein. Rather, they said, the case was treated as any other in West Germany, where prisoners often are freed after serving half their terms if they have behaved well.

But critics have cited the Jebara case as an example of what they describe as Bonn's failure to impose strict enough measures against Saddam's government. They have argued that even if the release was considered routine, it should not have occurred during a period of tense relations with Iraq.

Over the past year, Chancellor Helmut Kohl's government repeatedly has maintained that West Germany's law against exports of advanced military technology and weapons to Iraq and other nations believed to engage in improper conduct is the world's toughest.

In recent weeks, however, after press revelations of technology transfers to Iraq by dozens of West German companies, prosecutors have staged arrests and raids, and authorities have confirmed that they are investigating more than 50 companies suspected of illegally providing military equipment or technology to Iraq.

For Iraq, West Germany has been considered a primary source of technological aid, according to diplomats and business leaders here. Some have said they believe the connection has not been broken.

Evidence introduced at Jebara's trial in Munich showed that the arms dealer had negotiated to purchase two dozen helicopters and equip them for use as antitank weapons.

The Rheinischer Merkur, a Bonn weekly, reported this week that West German security officials wanted Jebara freed because of concern over possible action by terrorists to gain his release. The paper quoted a Foreign Ministry source as saying Bonn wanted to send a message to Iraq by releasing a prisoner valued by Saddam's government.

"The idea in the Jebara case was to prevent the Iraqis from using Germans as human shields," said Thomas Kielinger, the Rheinischer Merkur's editor.

But official sources with direct knowledge of the Jebara case later denied that Jebara's release stemmed from fears of terrorist action, and they said no message to Iraq was intended.

Rather, the sources said, Bonn gave court authorities in Bavaria a green light to release the arms dealer because Iraq had broken off talks several months earlier on a prisoner swap involving Jebara that West Germany had proposed.

The West Germans were interested in a former Iranian diplomat with "very influential friends in Bonn," a source said. The former diplomat, Ali Homann Ghazi, was taken into custody by Iraqi authorities in 1986. "We were very interested in getting him released," a Bonn source said. "When Jebara was detained, we got the idea to get a swap."