From the time of the war itself there have been rumors surrounding the early days of the war and the US global nuclear alert which followed, rumors suggesting that Israel considered using its nuclear arsenal. Avner Cohen, who has written more extensively than anyone about Israel's nuclear program, has donated his research materials to the Woodrow Wilson Center in Washington, and the collection reveals new details about the nuclear aspect of 1973. Cohen also has details in an op-ed in The New York Times, "When Israel Stepped Back from the Brink."
As he notes:
In the four decades since the 1973 war, rumors have blossomed that Israel stood at the nuclear brink during that war’s darkest hours. A number of journalists and scholars have asserted that during a dramatic meeting in one of the war’s early days, a panic-stricken Mr. Dayan persuaded the Israeli war cabinet, including the prime minister, Golda Meir, to arm the country’s weapons with warheads for possible use.
Some analysts have even claimed that Israel used this “nuclear alert” to blackmail the Nixon administration into providing Israel with a huge airlift of military supplies. Although these stories were based on anonymous sourcing and circumstantial evidence, they have become a central part of the lore surrounding the Yom Kippur War.In 2008, Cohen interviewed Arnan Azrayahu, who in 1973 was an advisor to Yisrael Galili, a Minister without Portfolio and close ally of Golda Meir. Cohen did not release the interview until after Azrayahu's death. According to his account:
Then, as the meeting adjourned, Mr. Dayan, casually leaning against the door and talking as if he were raising only a minor point, asked the prime minister to authorize Mr. Freier to initiate the necessary preparations for a “demonstration option” — that is, a demonstration of Israel’s nuclear weapons capability.
So apparently Moshe Dayan did urge a nuclear demonstration, but was firmly overridden by Meir and her allies Galili and Allon. Avner Cohen's op-ed in effect confirms the discussion but also indicates the idea was quickly shot down.According to Mr. Azaryahu’s account, Mr. Dayan gave the impression that he’d already authorized such a demonstration and all that was needed was Ms. Meir’s approval. Mr. Dayan explained that an immediate authorization of preparatory steps for a nuclear blast would save precious time and allow the order to detonate a bomb to be executed rapidly should the need arise. At that point, Mr. Azaryahu told me, Mr. Galili and the deputy prime minister, Yigal Allon, spoke up to oppose Mr. Dayan’s plan, saying it was premature to consider the nuclear option and that Israel would prevail using conventional weapons.Siding with her two senior ministers, the prime minister told Mr. Dayan to “forget it.” He responded by saying that he remained unconvinced but that he respected the prime minister’s decision. He then left the room.
Also see this report of the interview in the Times of Israel, and Cohen's introduction to the collection of interviews at the Wilson Center's website.
Here's a three-minute clip of the key part of Azrayahu's interview (Hebrew with English subtitles). (A longer video that appeared here for a while was apparently not intended for public release and has been taken down by request.)