Kuwait's strong response to internal subversion alters life in oil-rich state. Kuwait, under threat from Iran's missiles, has cracked down hard on pro-Iranian domestic subversives. Some see signs this has paid off. But others fear it may backfire by radicalizing more of Kuwait's Shiite population.

Concern is rising here that Kuwait's war on internal subversion may become counterproductive. The Sunni Muslim government has held up relatively well under the strain of sabotage and bomb plots carried out in recent years by Shiite-sect extremists sympathetic to Iran.

But some diplomats and other analysts worry that a continuing crackdown by security forces may backfire on the ruling Al-Sabah family by radicalizing a larger sector of the emirate's Shiite Muslim population.

The extremists are said to represent only a tiny fraction of the Kuwaiti Shiite community, which encompasses more than 35 percent of the total population of about 1.8 million.

``The polarization is increasing here,'' says a diplomat with long experience in Kuwait.

A Shiite awakening could threaten to undermine the ruling Sunni status quo not only in Kuwait but throughout the Gulf - a development which could have repercussions far beyond the region.

The Gulf Arab states provided the US, Western Europe and Japan with 17 percent of their oil requirements during the second quarter of 1987. Kuwait's 95-billion-barrel reserves comprise 14 percent of the noncommunist world's total, and are second only to Saudi Arabia's.

According to diplomats and Arab analysts, Kuwait remains highly vulnerable to the actions of small, tightly organized cells of violent Shiite extremists that continue to operate here.

On Nov. 25, Kuwait suffered its 11th bomb blast this year. The target was the office of the American Life Insurance Company. No one was reported injured, and damage was minor. The incident follows a pattern of targeting American offices or US-related businesses that began with the car-bombing of the US Embassy in December 1983.

Kuwaiti economic installations and government offices have been bombed as well. Two years ago, the motorcade of the Emir, Sheikh Jabir Ahmad Jabir Sabah, was ambushed in an unsuccessful assassination attempt.

As a result of the extremist attacks, Kuwait has been transformed into a hodgepodge of concrete barriers, barbed wire, lookout towers, blast-proof glass, tank traps, search lights, metal detectors, and armed guards.

The government has suspended the elected National Assembly, enacted press censorship laws, outlawed public gatherings of more than three people, required identity cards for all residents, deported thousands of Kuwaiti residents of Iranian origin, restricted Kuwaiti Shiite employment to ``nonsensitive'' jobs, and stepped up intelligence operations in Shiite neighborhoods.

The situation underscores the complex task that Kuwaiti leaders face in trying to build a sense of nationalism to counter the strong attraction of many Shiites to the revolutionary ideology of Iranian leader Ayatollah Ruhollah Khomeini.

``The Shiite population is very jumpy and feeling very Shia,''says a Western envoy.

For the Gulf Arabs, Kuwait represents symbolically and literally the front-line - after Iraq - for stopping the spread of pro-Iranian Shiite extremism.

Each of the Sunni-governed Gulf states has chosen its own means to counter the threat. The United Arab Emirates takes a neutral position on the Iran-Iraq war in hopes of avoiding confrontation with both domestic Shiites and Iran. Saudi Arabia, after years of iron-fist tactics, has begun to shift toward a policy of accommodation toward its own Shiite population.

According to a well-placed Kuwaiti official, tough measures have paid off here by making it more difficult for pro-Iranian extremists to find new recruits willing to conduct subversion and plant bombs.

The official, who asks that he not be identified by name, says that recent bombing attacks have shown a much lower level of sophistication than previous attacks. In some cases, the would-be bombers have blown themselves up, apparently by accident, he says.

``They are running out of the hard-core and well-trained people. When they start running out of the well-trained people, you start to wonder if they are running out of recruits,'' the Kuwaiti official says.

But diplomatic and other analysts assess more cautiously the longevity of Shiite extremism in Kuwait. There is concern that crackdowns focused primarily on the Shiite community may eventually boomerang against the Sunni government.

``Generally, we are not encouraging this [bombing],'' a young, bearded Shiite said in an interview. Yet, he stressed, the entire community is being made to suffer for the extremists' actions. ``What they have done is having bad effects on all of us,'' he said.

The concern is that by taking actions that hurt the entire Shiite community, the government will virtually guarantee the creation of the next generation of activists, subversives, and martyrs.

According to some Kuwaiti Shiites, there is a continuing debate within the Shiite community about the value of violent action as a means of opposing the Kuwaiti government's domestic policies and its support of Iraq against Iran in the Gulf war. Such debate suggests that the majority have not embraced violent tactics and that community forces may be helping prevent escalations in bombings.

The security issue in Kuwait has been complicated by the Shiite community's historical ties to Iran.

Though Kuwaiti officials have hinted that Iran is behind the bombings bombing and other plots in Kuwait, there has been no direct evidence of an Iranian supply line. But there is evidence that some Kuwaiti Shiites have been trained in subversive techniques in Iran.

The attacks are seen by Iran as a means of pressuring Kuwait to end its support for Iraq and tone down its criticism of Iran. Some analysts say ultimately Iran seeks to spread its revolution to Kuwait.

``What Iran is really after is to destabilize Kuwait to set an example for the other Gulf states,'' says a Western diplomat.

In encouraging the Shiite subversives, Iran is taking advantage of centuries of sectarian prejudice and mistreatment of Shiites by the traditionally more powerful Sunni Muslims on the Arabian side of the Gulf.

Following the Iranian revolution, Shiites in the Gulf states began to question why they should remain locked out of the system and politically inferior to Sunnis. They looked to Ayatollah Khomeini as the embodiment of a new Shiite activism. And they saw the emergence of the powerful Shiite community in Lebanon as an example for the future.

The ruling Al-Sabah dynasty has controlled the political landscape in and around what is now Kuwait for 200 years. In more recent times the Shiites have prospered from Kuwait's oil boom, and many of the leading merchant families of Kuwait are Shiite. But the Shiites have rarely been able to advance into powerful political offices, to gain a voice in making key national decisions, or hold sensitive jobs.

Kuwaiti Shiites complain that they receive no government funding to build new Shiite mosques, while Sunni mosques are 100 percent government funded. They complain that there are Shiite quotas at Kuwait University and that Shiites are rarely promoted to management positions in Kuwaiti firms. They say that Kuwaiti authorities will not permit the establishment of a newspaper for the Shiites or the opening of a community center.

``It is a pressure to eliminate the Shia, to keep the number small,'' says a Kuwaiti Shiite.