RIYADH, SAUDI ARABIA, FEB. 10 (SUNDAY) -- Defense Secretary Richard B. Cheney said this morning the Iraqi military retains considerable strength despite the serious damage inflicted by allied air attacks and added "there's a limit" to how effective the air campaign can continue to be without the introduction of ground forces.

Cheney and Gen. Colin L. Powell, chairman of the Joint Chiefs of Staff, spent nearly nine hours here Saturday with top military commanders discussing when and how to use ground forces in the next phase of the gulf war. But they gave no hint of the recommendations they will take back to President Bush when they brief him on Monday.

Cheney said he was "struck by the enormous size of the Iraqi military establishment." He said there was still a considerable role for air power in the conflict, but that there was "a point of diminishing returns" on the use of air power alone.

"At some point we would expect to bring other elements to bear to force him out of Kuwait," Cheney said. "The question is when and what's the most effective use of those forces."

Asked about the possibility of a diplomatic solution that would stop the fighting, Cheney flatly rejected any pause or cease-fire, saying, "We will continue using military force until we achieve our objective," which he said was the total Iraqi pullout from Kuwait.

As U.S. military officials on Saturday increased their estimates of the damage from allied air attacks to about 20 percent of Iraq's armor and artillery, Soviet President Mikhail Gorbachev issued a new warning to the United States that the aerial destruction of Iraq as a country threatened to exceed the mandate in the United Nations resolutions calling for the Iraqis to withdraw completely from Kuwait. "Events in the Persian Gulf region are taking a more and more alarming and dramatic turn," Gorbachev said in a statement read on the evening news in Moscow.

Gorbachev said he was sending an envoy to Baghdad for new talks and called on Iraqi President Saddam Hussein to "show realism" and abide by the U.N. resolutions.

In response, the Bush administration chose to emphasize the positive, with a White House spokesman saying the United States was pleased that the Soviet leader had again expressed full support for the 12 U.N. resolutions ordering Iraq out of Kuwait. "Our goal remains the liberation of Kuwait, not the destruction of Iraq," the official said. Saddam Responds to Iran

In Tehran, President Ali Akbar Hashemi Rafsanjani met with Iran's Supreme National Security Council after receiving a message from Saddam responding to an Iranian peace initiative launched last week. The message, whose contents were not known, was carried by Iraqi Deputy Prime Minister Saadoun Hammadi. The Iranian news agency quoted Hammadi as saying that Saddam had given "careful study" to Rafsanjani's initiative.

Iraq formally notified the State Department Saturday that it was severing diplomatic relations with the United States, a move it had announced earlier. The notification was delivered by Iraqi Charge d'Affaires Khalid Shewayish, one of the last remaining Iraqi diplomats in Washington.

Cheney and Powell spent Saturday in a hardened underground "war room" in Riyadh discussing the war with Gen. H. Norman Schwarzkopf, commander of U.S. forces in the gulf, and other military officials. The briefings also included reports from lower-ranking officers and enlisted men who have engaged in combat with Iraqi forces.

Cheney told reporters here this morning that while he believes Saddam Hussein retains the capability of a military surprise, "I do not believe he has it within his means to do anything that would fundamentally reverse the outcome" of the conflict.

He said that the allied bombardment has inflicted heavy damage to "their armor, their armored personnel carriers, their artillery, their personnel and their ability to resupply," but warned that Saddam still "retains a very significant portion of what was one the world's fourth largest army." The defense chief said major damage has been done to some divisions of the elite Republican Guard, but that "we may never know until we try to force them out of their positions." Air, Ground 'Synergism'

He said the introduction of ground forces as a complement to the aerial bombardment would produce a "synergism" that could help bring the conflict to a successful conclusion. But the timing will depend on a calculation of what will produce an end to the war "in the shortest possible time and with lowest possible casualties."

Asked about the support of the American public as Bush faces a final decision to launch what is expected to be the bloodiest portion of the war, Cheney said, "I think the support of the American people has been overwhelming -- frankly more extensive than I would have anticipated a few months ago."

Cheney and Powell are scheduled to return to Washington late tonight. In addition to briefing Bush, Cheney is scheduled to meet with Israeli Defense Minister Moshe Arens and on Tuesday with British officials to discuss the war.

Bush "will place very significant emphasis on the military advice he receives" and will decide when to begin the ground war in consultation with Saudi King Fahd and other key allies, Cheney said today.

In briefings to reporters Saturday, Marine Brig. Gen. Richard I. Neal, deputy operations chief for the U.S. Central Command, said the allied bombardment had destroyed 750 of the 4,000 Iraqi tanks in Kuwait and southern Iraq, 650 of the 3,200 artillery pieces and 600 of the estimated 4,000 armored personnel carriers. Neal said many other Iraqi fighting vehicles have been damaged by the air campaign that increasingly will focus on Iraqi troops, equipment and supplies in and near Kuwait.

U.S. and Saudi Arabian officials also reported that some Iraqi soldiers in Kuwait have deserted their units, fleeing northward toward Iraq and said there were additional Iraqi defections Saturday. They interpreted both developments as a sign that the continuing air assault has begun to sap the strength of Iraqi troops in Kuwait. "It's been three weeks now that these guys have had nothing but metal on their heads," one official said.

The damage to Iraqi ground forces and equipment detailed by U.S. officials is a refinement of figures first offered by the British on Friday. At the time, U.S. and British officials estimated that roughly 600 Iraqi tanks had been destroyed. Neal said the new estimates did not mean an additional 150 tanks were killed over the past 24 hours but were a more precise accounting of the damage. "That's destroyed, confirmed," he said.

The figures on artillery pieces and armored personnel carriers were the first official estimates by U.S. military briefers and together marked the most complete assessment of the damage caused by a massive air campaign that now totals 57,000 sorties. Damage Assessment Key

The extent of the destruction of Iraqi ground forces is considered a critical ingredient in determining the timing of offensive ground action by allied forces in the gulf, although Cheney indicated on Friday that some ground actions may be necessary to flush Iraqi forces out of bunkers and make them better targets for allied bombers.

Schwarzkopf has been reluctant to be pinned down to specific markers, saying damage assessment is often a judgment call and expressing the belief that a clear idea of his judgment could give Iraqi generals a hint of when the widely expected allied ground attack might begin.

In one indication of U.S. thinking, however, a knowledgeable U.S. military source recalled that Iraq's top-level Republican Guard units usually withdrew during the Iran-Iraq war if they lost 20 to 30 percent of their overall combat capability. Less valuable units were usually withdrawn only after loss of about half their combat capability, a measure of general readiness taking into account casualties, leadership and equipment losses, he added.

Although the air campaign has lately turned south to targets in Kuwait and southern Iraq, allied pilots continued to hit sites farther into Iraq Saturday. Eight British Tornadoes hit an oil storage facility in central Iraq, destroying eight of 19 storage tanks and damaging 10 others, according to Group Capt. Niall Irving of the Royal Air Force. British planes also hit bridges in Iraq used to carry supplies to ground forces in Kuwait and attacked surface-to-air missile support areas.

U.S. planes continued their hunt for mobile Scud missile launchers. Neal said U.S. F-15 pilots saw the Scud that hit Israel Friday night, but because of cloud cover they could not destroy the site. But he said they had attacked another Scud site about an hour before the attack on Israel.

U.S. Navy officials said they are investigating a report that a missile last week narrowly missed the USS Nicholas, a guided-missile frigate in the Persian Gulf, and exploded about 50 yards off its starboard bow. Shrapnel struck the superstructure of the frigate but caused no injuries or serious damage.

Navy pilots attacked a Silkworm missile site and scored "a direct hit" on three launchers and a control van. "We consider them destroyed," Neal said. Border Skirmishes Reported

There were also reports of several small skirmishes along the Saudi border. "They are still mounting probing attacks to try and establish exactly where our forces are," Irving said. "They don't have any of the sophisticated means of intelligence gathering, and they must feel extremely poorly placed as an army in the field at the moment." Irving also said allied intelligence has detected "minimal movement" of Iraqi forces at night, a sign that they are hunkered down.

A major goal of the air campaign, according to U.S. and allied military officials, is to demoralize Iraqi troops and so traumatize them that they surrender or, at least, put up little resistance to an eventual U.S. ground attack.

Col. Ahmed Robayan, the chief Saudi military spokesman, said an Iraqi lieutenant colonel, a captain, three lieutenants and a pair of privates surrendered to Saudi soldiers early this morning along the Saudi-Kuwaiti border. The lieutenant colonel was the highest-ranking Iraqi officer to walk across the border since the bombing campaign began Jan. 17, he noted. More Deserters Noted

Eleven other soldiers turned themselves in to an Egyptian position farther west along the border, Robayan reported, and three more were taken into custody by Saudi border guards.

U.S. and Saudi officials said Iraqi prisoners have reported that deserters are subject to being shot if they are caught trying to escape from their units. This was frequently the punishment for Iraqi deserters during the Iran-Iraq war.

Neal said some Iraqis may be heading north now because they fear they will be spotted if they head south, where desertions have been occurring for more than two weeks. In addition, many Iraqi troops apparently have only a vague idea of where they are and believe the Saudi border is more distant than it is, he said. He added that they fear they will be tortured if taken into custody by Westerners.

But a military official cautioned against interpreting the rising number of surrenders as a sign that Saddam's military organization in Kuwait is about to collapse.

Much of Gorbachev's statement was aimed at Saddam, as he urged the Iraqi leader to "consider everything that is at stake for his country and show realism, which would allow {him} to take the path of a reliable, just and peaceful settlement." But his warning to the allied coalition was the clearest sign yet that Moscow wants to distance itself from the U.S. military strategy while remaining part of the overall coalition. Statement Concerns U.S.

His pointed concern over whether the U.S. military campaign is going beyond the terms of the U.N. resolution is potentially the most troublesome part of his statement. When Soviet Foreign Minister Alexander Bessmertynkh made an almost indentical comment on his recent visit here, it caused high-level concern in the administration and led to a subsequent U.S.-Soviet statement on the Middle East.

Soviet nervousness with the U.S. air campaign in Iraq was voiced anew last week by a senior Soviet diplomat who visited Tehran for meetings with Rafsanjani. Bush administration analysts believe that the Soviets are motivated chiefly by a desire to maintain their traditionally strong ties with Iraq and other Arab nations once the conflict is over. The Soviet Union has never revoked a long-standing friendship and cooperation treaty it had with Iraq. Nor has Moscow sent any ground forces to the region.

Gorbachev made two earlier appeals to Saddam since the war began. Both were unceremoniously rebuffed.

British Foreign Secretary Douglas Hurd, after a meeting in Cairo with Egyptian President Hosni Mubarak, said the responsibility for Iraqi casualties rests solely with Saddam. "There can be no doubt in his mind that by refusing to withdraw he is exposing his people to bombardments and loss," Hurd said. He later met with the exiled emir of Kuwait, who pledged more than $1 billion to the British to underwrite their war costs.

A state-run Syrian newspaper Saturday urged the Iraqi people and military "to liquidate" Saddam "in cold blood . . . to save the Iraqi army from the massacre that's waiting for it."

Staff writers Dan Balz and David Hoffman in Washington, David Remnick in Moscow and special correspondent John Arundel in Cairo contributed to this report.