Why Castro is Freeing Prisoners. Experts say economic pressures, not desire for closer ties to US, motivate Cuban leader. DIPLOMATIC CHARM OFFENSIVE

THE robust, bearded caudillo met with the delegation of United States congressmen for five hours. He was warm. He was witty. He promised cooperation, including intelligence-sharing, in the war against drugs.

When the subject of human rights came up, at first he recoiled - ``everyone brings that up nowadays,'' he exclaimed - but accepted nevertheless a list of prisoners proposed for release. At the end of the marathon meeting, the group was treated to a sumptuous feast.

Fidel Castro knows how to turn on the charm.

For Rep. Frank Guarini (D) of New Jersey, the denouement of that November visit came last week, with the release into his custody of Guillermo Rivas Porta and his family. Mr. Rivas was one of Cuba's last four plantados, or prisoners who refused political reeducation after the 1959 revolution.

Last week Cuban officials also made public a promise to the US Catholic Conference to release some 225 political prisoners, including 44 the government had earlier declared too dangerous to let go.

What is Castro doing - batting his eyelashes at soon-to-be President Bush in hopes of warming up relations? Or simply responding to increased international pressure to clean up his human-rights act?

MOSTLY the latter, US officials say.

``I don't think he [Castro] wants improved US-Cuban relations,'' a US official says, citing an example of a State Department official visting Cuba and being snubbed by the government. ``He has been very critical of the Soviets and China for improving relations with the US ... Castro really believes the US is the enemy.''

Still, the Cuban leader has one powerful incentive to warm things up with the US: a crumbling economy badly in need of hard currency.

The Soviets continue to subsidize Cuba to the tune of $4 billion to $5 billion a year, but Soviet leader Mikhail Gorbachev has made clear to his Caribbean ally that he's not happy with Castro's rejection of glasnost (openness) and perestroika (restructuring).

Susan Kaufman Purcell, director of the Latin American Project at the Council on Foreign Relations, sees a Cuban desire for improved relations with the United States - but on Castro's own terms.

``He wants hard currency with as little domestic change as possible,'' Ms. Purcell says. ``He wants better relations to the extent that it shows the US finally recognizes him.''

Castro has, in recent months, been trying to boost his image all over the Western hemisphere, showing up at presidential inaugurations in Ecuador and Mexico, and launching initiatives with the Dominican Republic, Trinidad and Tobago, Brazil, Argentina, and Venezuela.

Now, with 30 years at the top in Cuba, he projects himself as the grand old man of Latin politics, an aging revolutionary, a survivor.

US officials see this charm offensive as an attempt to break down his isolation - and a way to get around the US trade embargo.

US observers also see this new tack as a tacit admission of defeat in attempts to spread communism in Latin American (except Nicaragua).

Castro's recent anniversary celebrations of his 30-year rule revived discussion of US policy in Cuba.

The more liberal line of thought holds that, like him or not, Fidel Castro is there to stay, and that the US may be able to win more concessions by raising the level of dialogue and by dangling before him the possibility of eventually lifting the trade embargo.

Currently, matters of mutual concern are handled via interest sections, rather than through embassies, in each other's capitals.

``It doesn't make sense, after 30 years, not to talk,'' says Wayne Smith, head of the US interest section under President Carter. ``It's quixotic.''

The more conservative line is that the interest sections are adequate and that Castro does not deserve to be rewarded for ornery behavior. Furthermore, he actually wants the embargo, conservatives say, because it provides an easy excuse for his economic troubles.

US officials argue that US policy has brought some success: Pressure on human rights is paying off (though officials caution against overstating the reach of Cuba's nascent rights movement). The embargo has hurt Cuba's economy, which in turn has limited Cuba's ability to fund third-world ``liberation'' movements. Cuba has begun to pull out of Angola.

But the US has had the least success in its most fundamental aim, to wean Cuba from the Soviets. Some argue that US policy has only pushed Cuba closer to the Soviets. And though Castro and Gorbachev are not exactly soul mates, they have clearly reached a modus vivendi. They need each other.

So far, President-elect Bush has signaled that current policy will hold. He has more urgent Latin matters to handle, such as debt and drugs, State Department officials and outside analysts say. But this does not prevent speculation that there may come a time when Bush and Secretary of State-designate James Baker III decide to make a diplomatic splash.

After Nixon in China and Reagan in Red Square, how about Bush in Havana?

Nonsense, says a State Department official. As long as Castro is Castro, such a gesture is unmerited.

``There's no US political cost,'' the official says, ``in keeping things the way they are.''