BY brushing aside a last-minute Soviet peace proposal and launching a massive ground offensive into Kuwait, President Bush has acted to ensure that Iraqi leader Saddam Hussein will be a cypher in the postwar politics of the Middle East. United States officials say two days of intense diplomatic maneuvering leading up to the start of the ground war Saturday night sharpened Mr. Bush's conviction that Saddam must be diminished politically as well as militarily to prevent him from returning, Napoleon-like, to fight another day. Bush thus chose to reject a Soviet-proposed settlement that could have allowed Saddam to save face, opting instead for a potentially costly ground assault. ``We want him to be defeated in such a way that he loses his lure and luster in the Arab world,'' says a State Department official. Adds Peter Rodman, the senior National Security Council member under Presidents Reagan and Bush: ``It is essential that Saddam Hussein be seen as having failed utterly. The evacuation of Kuwait has to occur in a manner that deflates him and ends the strategic threat.'' Bush's determination to gamble on war was stiffened at the last minute by news of Iraqi atrocities in Kuwait. According to Kuwaiti resistance sources, Iraqi soldiers have systematically tortured and executed up to 10,000 Kuwaitis and torched nearly 300 Kuwaiti oil wells, enshrouding a quarter of the country in thick black smoke. In a brief, televised speech Saturday night, Bush said: ``The noon deadline passed without the agreement of the government of Iraq to meet the demands of United Nations Security Council Resolution 660, as set forth in the specific terms spelled out by the coalition to withdraw unconditionally from Kuwait. ``To the contrary, what we have seen is a redoubling of Saddam Hussein's efforts to destroy completely Kuwait and its people.'' The stage was set Feb. 15 for the final assault on Iraq, when Iraq's ruling Revolutionary Command Council announced its willingness to withdraw voluntarily from Kuwait. The offer contained conditions that were unacceptable to the US but was taken in Washington as a clear sign that Saddam was growing desperate under the pressures of the five-month allied air war. Iraq went further last Thursday when it agreed to a Soviet plan calling for full and unconditional withdrawal from Kuwait. Although the proposal contained fewer conditions, it posed an awkward dilemma for the White House. US officials were unhappy, among other things, with the proposed cancellation of UN resolutions requiring Iraq to renounce its annexation of Kuwait and compensate Kuwait for war damages. But they understood that it would be impolitic to begin a ground war while the Soviet plan was being debated in the UN. Following an intensive night of telephone diplomacy with leaders of the allied coalition on Thursday, the administration responded decisively, wresting the issue from Moscow and Baghdad. In a statement read Friday, President Bush issued a new ultimatum to Iraq: Be out by noon Saturday or risk a ground invasion. One administration source says the White House's main objective was to move quickly, before the Soviet plan reached the UN. Says a former Bush official: ``If the President had accepted [the Soviet plan] he would have had to put the ground war on hold and been drawn into a prolonged diplomatic haggle with unfortunate impact.'' Some private observers argued that since the Soviet plan gave the US most of what it wanted, since Saddam was weakened militarily, and since issues such as reparations and economic sanctions could be dealt with separately, the US would stand to lose more than it could gain by launching the ground war. ``The Soviet offer met our basic requirements,'' said Robert Hunter, vice president of the Center for Strategic and International Affairs in Washington. ``It's not clear how much more we would gain from a ground war versus the risks we would run'' by fighting it. Analysts also expressed reservations about the effect a ground war might have on relations with the Soviet Union, already ruffled by Moscow's freelance diplomatic initiative. ``If you move forward now you're poking a stick in Gorbachev's eye,'' says Dr. Hunter, who notes that the US-led military operation 400 miles from the Soviet border has been a significant factor in the rising influence of the military in Soviet politics. In the end, however, the administration was persuaded that a settlement that could leave Saddam with any claim to victory could come back to haunt it. ``If you have an outcome that would enable Saddam to salvage any political and military success, one month from now he can say he held the world to a stalemate. That risks a long-term strategic problem,'' says Mr. Rodman, now a fellow at the Johns-Hopkins Foreign Policy Institute. ``How do you justify the sacrifices that have been made if, months from now, you find you haven't solved the problem?'' Administration sources say the president's confidence was buoyed by the devastating effect of the coalition's bombing campaign on Iraq's ability to sustain a long ground war. Pentagon sources estimate that up to 40 percent of Iraq's tanks and 50 percent of its artillery - the backbone of any defense in a ground war - have been destroyed. The US was also encouraged by reports of domestic unrest in Iraq that have buttressed speculation that support for Saddam within the army, the ruling Baath party, and the internal security service may be eroding. In one recent anti-Saddam demonstration last week in the southern city of Biwaniya, 10 government officials were killed by an angry crowd. The incident was an almost unheard-of challenge to a regime which has ruthlessly suppressed dissent. ``Even if Saddam withdraws right now and keeps his military, his authority will be weakened, perhaps beyond repair,'' says Tom Kono, a Columbia University expert on Iraq. ``Saddam Hussein may have passed the point of no return, whether there's war or peace.'' -PATHNAME- /usr/local/etc/httpd/plweb/DBGROUPS/paper/database/tape/91/mar/week10/amoff.