Iraq Denies It Plans to Attack Saudis, Sets Up Kuwait Army : Mideast: Attempts to mediate the crisis deadlock as a mini-summit of Arab leaders is canceled. International condemnation of invasion continues to mount.

A defiant Iraq asserted Saturday that it has no plans to advance on Saudi Arabia, even as it created a new “popular army” in Kuwait and named a nine-man military government there.

The announcements came amid reports that Iraq has redeployed large portions of its 100,000-strong invasion force south toward the Saudi border, spreading across the emirate’s primary oil fields and challenging remaining pockets of Kuwaiti resistance.

Western officials remained skeptical of Iraqi President Saddam Hussein’s promise to pull back his forces from Kuwait as early as today. Baghdad Radio reported that 140,820 new Iraqi troops have enlisted for duty near the Kuwaiti border, and most, the government said, have volunteered to join the new army in Kuwait.

All officers above the rank of colonel in the Kuwaiti armed forces have been retired, according to an announcement Saturday night by the new government.

As Arab attempts to mediate the crisis deadlocked again with the cancellation of a weekend mini-summit of Arab leaders, international condemnation of the invasion mounted with the imposition of an embargo on Iraqi oil by the 12-nation European Community.

“The community and its member states reiterate their unreserved condemnation of the brutal Iraqi invasion of Kuwait and their demand for an immediate and unconditional withdrawal of Iraqi forces from the territory of Kuwait,” the EC said in an announcement that also included an embargo on the sale of arms to Iraq, freezing of Iraqi assets and suspension of scientific and technical cooperation.

In Washington, the White House said President Bush had met with his national security advisers for nearly two hours and emphasized that “all U.S. options are under consideration” to end the occupation.

Diplomatic sources in Saudi Arabia and Cairo said they received reports of an estimated 60,000 or more Iraqi troops in the region extending south of the Kuwaiti capital to the Saudi border, and one official expressed doubts that such a massive force would be required simply to consolidate control of the oil fields.

“A report of a small number of troops there would not be surprising,” he said. “But 60,000 is not a small number, or anything approaching that. Thirty thousand is not a small number.”

Reuters news agency, quoting an unidentified Kuwaiti official outside the country, reported that Iraqi troops had moved into the “neutral zone” oil region shared by Kuwait and Saudi Arabia, to within a mile of the Saudi border.

For the past several years, the neutral zone has been divided by a one-kilometer-wide, double-fenced strip, with Kuwaiti facilities on one side and Saudi facilities on the other. The two sides share revenues from oil pumped in the zone.

Iraqi troops could be expected to penetrate the Kuwaiti portion of the zone, said one source in Saudi Arabia. But he said there have been no troops detected on the Saudi side of the zone.

“If they did, then they’d be in Saudi territory,” he said. “I’d call that an invasion, or at least an incursion.”

U.S. officials in Washington also said they could not confirm any reports of movement into the neutral zone.

An Arab embassy official who communicated with the Kuwaiti capital Saturday said life there appears to be returning to normal after the onslaught. “They said things are quiet, back to normal--hot,” he said.

A Reuters correspondent who broke through a 36-hour communications blackout with a telex message reported that hospital sources in Kuwait listed as many as 800 Kuwaitis killed or wounded in the three-day siege.

U.S. officials said Saturday that Iraq had released in Baghdad 11 American oil workers who were reported missing during the invasion. A State Department spokesman said they “appear to be in good shape.”

“As far as we know, all of the missing Americans have now been accounted for,” the spokesman added. He gave no details on how they disappeared. Up to 14 Americans had been believed missing.

A total of 35 British soldiers who were seized Friday night by Iraqi troops in Kuwait also have been released in Baghdad, the British Defense Ministry said Saturday. The soldiers had been acting as technical advisers to the Kuwaiti army.

However, news agencies, quoting shipping sources in Bahrain, reported late Saturday that Iraqi troops had seized the crews of all ships docked at Kuwaiti ports and impounded their vessels. At least 20 Americans allegedly were taken into custody, and State Department officials said they are checking on the report.

Iraq’s ambassador to the United States, Mohammed al Mashad, said at a news conference Saturday that Iraq “vehemently and categorically denies the reports that Iraq harbors designs against the kingdom of Saudi Arabia.”

Al Mashad said Iraq has “excellent fraternal relations” with Saudi Arabia, “which is in no way to be confused with Kuwait, where there has been a change in government and from which we received an appeal for help.”

Iraq had claimed at the beginning of its predawn invasion Thursday that it was responding to young revolutionaries in Kuwait who had sought Iraq’s help in stabilizing the country after overthrowing the government of Sheik Jabbar al Ahmed al Sabah.

The incursion followed the collapse of talks between the two countries in which Iraq sought a turnover of long-disputed border territory and billions of dollars in compensation for its claims that Kuwait pumped oil from disputed wells and drove down the price of oil by dumping petroleum onto world markets in excess of its production quotas.

Col. Alaa Hussein Ali was named to head Kuwait’s new provisional government, and also to serve as commander in chief and acting minister of defense and the interior. Eight lower-ranking officers were named to other government posts, and several Kuwaiti embassy officials in the Middle East said the bulk of the new nominees appear to be Iraqis. Baghdad responded that they are Kuwaiti officers.

Iraq’s official news agency said that in deciding to begin a phased withdrawal of troops from Kuwait, Iraq is “not responding to the hollow fuss launched from various places by ill-meaning people to whom we give no consideration whatsoever.”

The statement said that anyone who attempted to “interfere” with Iraq and Kuwait would be “confronted with a decisive stand that would chop its arms off from its shoulders.”

Egypt’s leading daily newspaper, Al Ahram, which is run by the Egyptian government, reported that the Iraqi military has executed 120 of its army officers who refused to participate in the invasion of Kuwait, “saying that it was an unjustified assault on a fellow Arab country.” With international telephone lines cut to both Baghdad and Kuwait, the report could not be confirmed.

The U.S. ambassador for Kuwait’s ousted government, Saud al Nasir al Sabah, appeared at a Washington news conference to make another impassioned plea for world assistance against Iraq, saying Hussein has designs on the whole gulf region and must be stopped.

“Rise up! Rise up and assist us in our struggle,” he urged.

“They have dug in in the south with the borders with Saudi Arabia,” Saud said of the Iraqis in an emotional address. “They have dug in in our country deeply. They have taken over the central bank. They have ransacked all the banks in Kuwait, all the financial institutions. They even went to the low of going into houses and taking private properties.”

Meanwhile, Arab efforts to mediate the crisis were deadlocked again when Egyptian President Hosni Mubarak announced that plans had been postponed for a weekend mini-summit in which Arab leaders had hoped to get Saddam Hussein and Sheik Jabbar to a bargaining table. Egyptian sources said Hussein had refused to attend the summit, and the sheik expressed unwillingness to meet with the Iraqi leader.

Meeting for 2 1/2 hours in Alexandria, Egypt, with Palestine Liberation Organization chairman Yasser Arafat, Mubarak said Arab leaders are working to develop a resolution that would be based on the withdrawal of Iraqi troops and the restoration of the Kuwaiti government.

“Arab efforts must succeed so that we do not need at all for foreign powers to solve our Arab problems, or that would be a disgrace to our Arab nation,” said Mubarak, perhaps hinting at the large-scale naval force recently dispatched to the Persian Gulf by the United States, Britain and France.

After meeting with Mubarak, Arafat flew to Baghdad for consultations with Hussein. PLO officials said Arafat is attempting to win a consensus for an alternative peace plan apparently developed with the aid of two of Iraq’s other strongest allies in the region, Libya and Yemen.

“President Arafat is doing his best to get Arab endorsement for a political solution to the crisis in the gulf, a proposal that will ensure an Arab political solution and prevention of external intervention,” said Arafat’s chief spokesman, Bassam abu Sharif.

Diplomats in Cairo were skeptical about Arafat’s peacemaking efforts and said the rapid round of shuttle diplomacy between Tripoli, Libya, Cairo and Baghdad was more likely a ploy by Hussein to derail the Arab mini-summit originally scheduled for today in Jidda, Saudi Arabia.

“This is a diversionary tactic designed to buy time and avoid having to go to the mini-summit,” said one envoy. “The bottom line is, he’s not going to withdraw. He may pull out a few troops, but he’ll put in new ones.”