Iraq Tightens Grip on Kuwait, Sets Up Interim Government : Persian Gulf: Baghdad’s forces drive on oil fields, warn that resistance will leave tiny emirate a ‘graveyard.’

Iraq said it had established a new provisional government in Kuwait on Thursday, sweeping its forces through the capital city and on toward Kuwait’s rich oil fields with a warning that any attempts to thwart the invasion would leave a “graveyard” in the tiny Persian Gulf emirate.

Although heavily outnumbered Kuwaiti forces continued to mount sporadic defenses during the evening, Western diplomats said that Iraq has taken substantial control of the country in an invasion that analysts predicted would be difficult to reverse.

Kuwait’s emir, Sheik Jabbar al Ahmed al Sabah, fled the country Thursday morning with his brother, the prime minister, Sheik Saad al Abdullah al Sabah, and was reportedly directing the Kuwaiti resistance from neighboring Saudi Arabia.

A third member of the royal family, Sheik Fahd al Ahmed al Sabah, was reported killed while trying to defend the royal palace. News accounts from the Persian Gulf estimated that at least 200 Kuwaitis, mostly soldiers, were killed or wounded in the pre-dawn assault.

All ports and airports in Kuwait were closed, and foreign travel was banned. The provisional government also announced a 3 p.m. curfew. News agency reports from the city of Kuwait, the capital, said Iraqi troops were stopping cars and yanking telephones out of the vehicles. Tanks rumbled past the city’s gleaming skyscrapers.

The U.S. Embassy compound was partially surrounded for much of the day, and the British Embassy was fired upon, according to still-sketchy reports.

Shawki Akl, an architect interviewed by telephone from the capital, said he heard the sound of bombs and gunfire throughout the pre-dawn hours and found stores jammed with people seeking to buy emergency supplies and rations later in the morning.

“What we’ve had is a lot of bombs and tank sounds . . . and then some explosions and machine gun sounds, and then it’s rush everywhere, to the grocery, to the gasoline stations,” he said. “But now everything is quiet. What we have now is shock, big shock--because we went to bed, and in three hours we found Iraqi tanks in our streets.”

Iraqi President Saddam Hussein appeared to have acted to solve his explosive oil and border dispute with Kuwait by positioning himself to seize control of one of the wealthiest economies in the Middle East and its hefty oil reserves literally overnight--while the United States and Kuwait’s neighboring Arab allies appeared powerless to intervene.

“This has happened, I think, to the genuine astonishment of everyone in the Middle East,” said one key Western diplomat with long ties to the region. “It’s truly a shocking move to have the bravado to do something like that.”

In Washington, President Bush imposed a trade embargo against Iraq and froze its U.S. assets in the strongest international response so far to the invasion. The President, in Aspen, Colo., for a speaking engagement, also refused to rule out the use of U.S. troops.

Referring to Hussein, Bush declared: “We find his behavior intolerable.”

The U.S. trade embargo affects imports of oil from Iraq, which account for 3% to 4% of total U.S. oil supplies, officials said. The move also prohibits Iraq from buying U.S. grain and other foodstuffs.

Britain followed with a similar freeze on Kuwaiti assets, designed to prevent Iraq from seizing them. Kuwait has an estimated $100 billion in foreign investments.

Kuwait’s ambassador to the United States, Sheik Saud al Nasir al Sabah, appealed to Washington for military assistance.

“My people are suffering,” Saud told reporters at the Kuwaiti Embassy. He said Kuwait is requesting aid “from everyone who has conscience and fair play around this world.

“We expect our friends to stand by us in our time of need,” he added. “I think the U.S. intervention at this stage is both paramount and important.”

In New York, Kuwait’s U.N. ambassador, Mohammed Abulhasan, said the international community’s failure to intervene would threaten nations all over the world. “No country at all will be safe after this,” he declared.

Iraqi officials said they plan to withdraw during the next few days or weeks, presumably after firmly establishing a new provisional government that would be answerable to Baghdad.

Announcing the formation Thursday of the Provisional Free Kuwait Government, run by “young revolutionaries” who allegedly sought Iraq’s assistance, Baghdad Radio said the new regime is dissolving Parliament and plans to hold “free and honest elections . . . after securing necessary stability in the country.”

Iraq’s ambassador to the United States, Mohammed Al Mashat, said in Washington, “The events currently occurring in Kuwait are an internal affair with which Iraq has no relation.” The State Department, however, dismissed Mashat’s claim as “patent fraud.”

Broadcasting from remote transmitters in undisclosed locations, the Kuwaiti government appealed to citizens to resist the Iraqi onslaught:

“Your country is facing a barbaric invasion. It’s time to defend it!” the Kuwait Radio announcer exhorted. “Oh Arabs, Kuwait’s blood and honor is being violated--rush to its rescue!”

According to Western diplomats and a Kuwaiti government official in Kuwait, Iraqi troops crossed the border at about 2 a.m. Thursday local time (3 p.m. Wednesday PDT) and were fighting their way into the capital well before daybreak.

A Kuwaiti government official said she had been prevented from going to work and had been unable to determine how much, if any, of the government remained operative. “I’m just staying home,” she said in a telephone interview. “We can still hear the bombs outside. I’m sad--what can I tell you?”

Arab League ministers recessed Thursday night after a full day of closed-door meetings in Cairo without even a statement on the invasion. Discussion of a resolution condemning the incursion and calling for possible intervention was stymied by opposition from two of Iraq’s strongest allies in the region, Yemen and the Palestine Liberation Organization, according to sources close to the talks.

The U.N. Security Council, meeting in a special overnight session, strongly condemned the incursion Thursday and demanded an immediate withdrawal of all Iraqi troops.

One Western military source reported that Egypt’s airborne brigade had been placed on active standby, and a high-level Egyptian military official, who asked not to be identified, said he could not confirm or deny the report.

“All the situation right now is under discussion,” he said. “So I can’t give you an answer. Everything is possible.”

Meanwhile, a State Department official said the invading Iraqi troops had rounded up six American oil field workers near the border of Kuwait, and the whereabouts of the captured workers were unknown.

After being briefed by CIA Director William H. Webster and other top intelligence officials, Senate Intelligence Committee Chairman David L. Boren (D-Okla.) said the Iraqi invasion was decisive.

“It’s all over in Kuwait,” Boren said. “Iraq appears to be in full control of all the ministries, and the (Kuwaiti) emir has fled the country.”

Boren said the invasion was carried out by 120,000 Iraqi troops, some of whom were airlifted into the city of Kuwait.

“This was the largest invasion force in the history of the Arabian Peninsula,” he said.

Analysts throughout the Middle East said President Hussein’s troops are so firmly entrenched in the tiny emirate--about the size of New Jersey--that any attempted military intervention, by air, land or sea, likely would result in numerous casualties.

“Military intervention is a very risky and almost impossible scenario at the moment,” said Heino Kopietz, a military analyst who specializes in the Persian Gulf region. “Not when the Iraqis have three divisions there. It’s not even to be considered.”

Some analysts said it is more likely that any military movement might involve a blockade of Iraqi shipping in the gulf, combined with international economic sanctions.

“The war’s over,” Dr. Hans Binnendijk of London’s International Institute for Strategic Studies declared.

The conflict erupted only a few weeks ago, when Hussein, facing staggering debts from his eight-year-long war with Iran, complained that Kuwait had illegally pumped $2.4 billion worth of oil from wells in long-disputed territory and, along with the United Arab Emirates, had cost Iraq an additional $14 billion by dumping crude oil onto world markets and sending the price of oil plunging.

“Iraqis will not forget the saying that cutting necks is better than cutting means of living. Oh God Almighty, be witness that we have warned them,” Hussein said in mid-July after oil prices fell below $14 a barrel.

Both Kuwait and the Emirates agreed to abide by their pumping quotas at a later meeting of the Organization of Petroleum Exporting Countries in Geneva that set a new oil target price of $21 a barrel. (In the wake of Thursday’s invasion, world oil prices jumped an estimated $3 a barrel in a single day.)

But talks to resolve the remaining border and financial disputes collapsed Wednesday in Saudi Arabia when Iraqi officials reportedly refused to back away from demands for full and immediate compensation, plus forgiveness of the billions of dollars in loans the Kuwait granted to Iraq during the Iran-Iraq War.

Broadcasting into Kuwait from Saudi Arabia, the Kuwaiti prime minister, who is also the crown prince, declared: “Under the leadership of the emir, we shall by God deter the invaders and purify our beloved country from their treachery and send them fleeing back.”

But the Iraqis did not appear to be inclined to be immediately dislodged, although one government official in Baghdad said it would be only a matter of “days or some weeks” before the Iraqis would withdraw and leave a new government in place.

Iraq claimed Kuwaiti revolutionaries initiated a coup and sought the Iraqis’ assistance later to help stabilize the country. But the Iraqi Revolutionary Council’s statement, broadcast on Baghdad Radio, was ominous:

“Iraq will withdraw when the situation stabilizes,” it said. “We issue this warning to anyone who dares to challenge us, and we will make Iraq proud, and make Kuwait a graveyard for anyone who might dare to launch aggression.”

Iraq also announced that the government it installed in Kuwait would confiscate all the funds of the emir and some of his ministers, at home and abroad.

“It is high time to return these plundered funds to their rightful owners, the sons of the Kuwaiti people,” Iraqi Radio quoted the Provisional Free Kuwait Government as saying in a communique.

The communique said the wealth of the emir and his “clique” had been “squandered in their pursuit of pleasure and deposited with their suspect partners.”

In a separate communique, the “provisional government” said it had fired four Kuwaiti envoys abroad--Minister of State for Foreign Affairs Abdul-Rahman Awadi; Abulhasan, the U.N. ambassador; the Arab League representative, Abdul al Muhsin Nasir al Buayjan, and Sheik Saud, the ambassador to the United States.

Times staff writers David Lauter, in Aspen, Colo., and Maura Reynolds and Michael Ross, in Washington, contributed to this story.

CRISIS IN THE PERSIAN GULF

Here’s how the Iraqi invasion happened: 1. At 2 a.m. Thursday, tank-led Iraqi troops cross into Kuwait and occupy border posts. 2. Gunfire heard in capital of Kuwait. Troops, with air cover, take government buildings. 3. Kuwait ruler flees to Saudi Arabia. Relative slain defending palace, which is captured. 4. Iraqi troops partly surround the U.S. Embassy compund for much of the day. 5. British Embassy is fired upon. 6. Invaders march south toward oil fields; reportedly seize some American oil workers. 7. Kuwait’s international airport is closed.