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DHAHRAN, Saudi Arabia (AP) _ Iraqi forces in Kuwait must steal water, food and fuel to survive, British intelligence sources said Tuesday. They also said the Iraqi threat of chemical warfare is not as great as first feared.

The sources, speaking on condition of anonymity, said the 120,000 Iraqi soldiers now occupying Kuwait are in far worse shape than the West first believed - even President Saddam Hussein's elite Republican Guard.

Their logistics system is a ''shambles,'' soldiers are reduced to stealing water and siphoning gasoline from civilian cars, and many troops are ''young and shaky,'' the sources said.

American intelligence now paints a picture of an Iraqi army whose discipline is breaking down and whose equipment is becoming increasingly unserviceable in the rigorous desert climate, the sources said.

''There is a danger of giving too much credit to Saddam's capabilities,'' said Air Vice Marshal Sandy Wilson, commander of British forces in Saudi Arabia.

He said he is confident the allied forces now in Saudi Arabia can repel an Iraqi air attack.

''The window of vulnerability which existed in the days immediately following the invasion of Kuwait has passed. We now have a very good air defense system in place, and I am sure we can fulfill our commitments,'' Wilson said.

The intelligence sources said Iraq would probably have ''a fairly small chance'' of mounting either a successful chemical or conventional attack on allied forces.

Asked if the Iraqis would seize the chance of attack before the arrival of U.S. tanks by sea in two weeks time, the sources said it was highly unlikely.

''If they did, we would chew them up from the air and could relatively easily shut off their already stretched supply lines,'' one source said.

The intelligence sources said the threat of chemical bombardment by long- range, Soviet-made Scud missiles had been largely nullified by deployment of Saudi Patriot anti-missile missiles.

Iraq possessed a very limited amount of deadly nerve gases such as Sarin and Tabun, the sources said.

They said Iraq has large quantities of mustard and phosgene gas, but the effects of these would be ''severely degraded'' in the 115-to 130-degree heat in the potential battle area.

At Dhahran, the main Saudi air base, parking space has become a critical problem with more than 240 fighter aircraft from three nations and scores of transport and helicopter gunships on the tarmac. A steady stream of U.S. military and chartered civilian aircraft drone in around the clock as the steady build-up continues. On average, an aircraft lands every 10 minutes.

On Tuesday, U.S. C-141 Starlifter transport planes were landing at Dhahran roughly every quarter of an hour. Some were forced to sit idling on the taxiway for up to half an hour, awaiting a takeoff which would vacate a parking bay.

One U.S. pilot, stepping off a Starlifter after a seven-hour flight from Madrid, said this was his fourth visit to Dhahran in four days.

The Saudi pilots at Dhahran flying British-made Tornado fighters only received the aircraft weeks ago.

According to Lt. Col. Yahya Zahrani, 39, commander of the Royal Saudi Air Force's 29th Squadron: ''We are now operationally fully ready, and I believe, in the longterm, Saddam will be shown that his invasion was a mistake.''

He said his unit and the British Air Force Tornadoes were now coordinating their efforts and were ''in all but name a joint force.''

Morale is high and the 1,000-strong British force gleefully point out that while they are sleeping in air-conditioned huts, most of the 60,000 American troops here are bedding down in tents.

On the main airfield, U.S. air personnel have taken to sleeping at night beneath their fighter aircraft and helicopter gunships in an attempt to escape the heat.

The resolve among the British pilots was best summed up by Flight Lt. Steve Pittaway, a Tornado navigator with 5 Squadron.

''I believe what Churchill said. Britain is indeed a sleeping lion, and, given a cause and a sense of purpose, such as that which we have over the invasion of Kuwait, our resolve is absolute,'' he said.