Baghdad sets down terms to recognise Kuwait

IRAQ's offer to recognise Kuwait in return for concessions on the UN sanctions imposed against Baghdad since the end of the Gulf war was treated with caution by British government sources last night. Under the formula Iraq would first recognise Kuwait and its borders, as set out in United Nations resolutions, and help the Red Cross in the search for missing Kuwaitis.

Iraq would also agree Russian terms for a strict timetable to test a new monitoring system to ensure that Iraq's weapons capacity has been completely eradicated. The monitoring would last six months. In return Russia would back a decision in the United Nations Security Council to review economic sanctions against Iraq 'in a complete way and without conditions'. However, the British sources said what counted would be the rescinding of the Iraqi legislation claiming Kuwait as a province of Iraq.

The Iraqi-Russian joint statement said that under the agreed formula: 'Russia will stand side by side with Iraq to lift all other sanctions in the light of the implementation of the Security Council resolutions.' The formula, said the joint statement, would lead to 'stability in the region and to cancellation of sanctions imposed on Iraq'.

Iraq has been demanding that economic sanctions be immediately lifted in the light of its agreement to destroy all its weapons of mass destruction. Its co-operation on weapons destruction has been recognised by UN weapons inspectors but not by the Security Council.

Earlier yesterday, at the UN, the Gulf war coalition showed signs of splits on how to treat Saddam Hussein.

The US envoy, Madeleine Albright, said the suggestion made on Wednesday by the French Defence Minster, Francois Leotard, that the Allies' military build-up had been politically motivated was 'ill-informed and counter-productive', and served only to give comfort to a 'brutal dictator who is a repeat offender'. She accused Paris, in the most thinly veiled terms, of taking a more conciliatory line for reasons of commercial advantage. 'While we are talking about politics, there are those who have commercial interests with Iraq . . . I think that one ought to look into that and consider reactions in that guise.' The French Foreign Minister, Alain Juppe, last night sought to smooth differences, saying there had been a 'few clumsy statements'.

Despite the spat, the amended proposals from the US seem to be winning cautious approval from France and other Security Council permanent members.

The new suggestions are a far cry from the exclusion zone for all heavy weapons the US was touting at the start of the week - the words 'exclusion zone' have disappeared. They would keep the Republican Guards out of the area: if these units moved they would be subject to air strikes. But there would be no clear cut demarcation line beyond which Iraqi units could not stray. Three regular Iraqi divisions - roughly 30,000 men - would be allowed near the border, provided they were not deployed in threatening positions.

Washington is confident it has brought the situation, at least for now, under control. This was evident in the announcement last night by the US Defense Secretary, William Perry, who said the US build-up in the Gulf would reach only 30,000 troops and they could start returning home within weeks once Iraq completes its withdrawal. But he said a powerful force of US warplanes would remain.

The looser language of the proposal and Mr Perry's announcement, US officials believe, will mollify France which has insisted President Saddam's actions violated no UN resolution.

France is still awaiting an estimated dollars 5bn ( pounds 3.1bn) payment for arms deals made with Baghdad during the Iran-Iraq war. France is also eager to tap into a traditionally lucrative market for its exports. The same goes for Russia, which can start collecting on dollars 6bn of outstanding debt from Baghdad once Iraq's oil exports start to flow.

(Photograph omitted)