Won’t Free Americans Until U.S. Troops Leave, Iraq Says : Gulf crisis: Hussein leaves no doubt that trapped Westerners are hostages. He says the blockade must end and offers settlement options.

Iraqi President Saddam Hussein, leaving no doubt that Americans and other Westerners trapped in Iraq and Kuwait are hostages, said Sunday that they would be freed only if U.S. and multinational forces are withdrawn from Saudi Arabia and the economic blockade is lifted.

The Iraqi leader, faced with an ever-tightening squeeze on his weapons and food supply lines, defended detention of an estimated 10,000 Western nationals as a “service to humanity” designed to prevent “death, murder and starvation.”

Baghdad officials have said that the foreigners will be moved to strategic military and industrial sites as a shield against possible attack.

In what Baghdad television called a peace initiative, the 53-year-old strongman presented two other options for a settlement to the crackling confrontation in the Persian Gulf region. None would meet the key international demand of Iraqi withdrawal from Kuwait, the neighboring sheikdom it seized in an Aug. 2 invasion.

He said the Arab nations would deal with Kuwait “as an Arab issue.”

“Our people are seeking to prevent a catastrophe,” Hussein insisted, terming his proposal an appeal to the families of the foreigners.

After his proposals were read out by a television announcer, the Iraqi news agency reported that Baghdad was making a goodwill gesture. It will free some of the 570 Austrians, Swiss, Swedes, Finns and Portuguese caught behind his frontiers, because their governments had not sent “aggressive forces” to the region.

The news agency quoted Parliament Speaker Sadi Mahdi Saleh as saying that other foreigners might be freed if their governments remain neutral, an apparent bid to trade detainees for supplies in defiance of the U.N. trade sanctions now physically enforced by U.S. and British sea power.

No mention was made of the more than 1 million Arabs and Asians working in Iraq and Kuwait, but many of the largest group, Egyptians, have been allowed to leave through Jordan over the past week.

Earlier Sunday, before Hussein’s proposals were aired, the dangers to foreigners in Kuwait, where 2,500 Americans are trapped, was underlined by a renewed demand that they report to three hotels. “Anyone who does not comply will, together with his government, bear full responsibility for any undesirable action that might be targeted against them by hostile elements,” the Iraqi news agency said.

A similar order Thursday failed to draw more than a few Americans and British expatriates. British and American officials recommended that their citizens not report and stay in the safety of their homes. But the British Foreign Office said that 40 Britons, five Americans, four West Germans, and a Frenchman did report and were taken to undisclosed locations. A French radio service said that some were sent to housing at a Kuwaiti oil field.

Sunday’s orders said that the foreigners should turn themselves in at the Regency Palace, Meridien and Kuwait International hotels.

The two other options Hussein offered for peace appeared unlikely to win acceptance from the Western powers who have mounted a military buildup that has changed the character of confrontation from one of defending Saudi Arabia from Iraqi attack to one that has Baghdad scrambling through a series of initiatives, including its surprise deal to make peace with Iran.

The other offers:

* The United States would withdraw its forces from the Persian Gulf region in return for a U.N. Security Council pledge to defend Saudi Arabia, with any available forces, if Iraq invades the oil kingdom. The Iraqi line throughout the confrontation is that it has no intention of invading Saudi Arabia, but the Riyadh government, unconvinced after the invasion of Kuwait, asked for foreign support.

* The Security Council should guarantee peace in the region and the Americans should withdraw, and Baghdad’s first “peace initiative” of the conflict would be pursued: The withdrawal of Israeli troops from the occupied West Bank and Gaza Strip and a Syrian troop pullout from Lebanon. This grand plan appeared devised to solve all Middle East conflicts in favor of the enemies of Iraq’s enemies. Neither option in this first initiative mentioned lifting the trade embargo, but a withdrawal of Western forces would make it impossible to enforce.

If either of these first two solutions were adopted, Hussein said, the detained foreigners could go free.

If not, the hard option would hold, the one of a bank robber who takes hostages and puts a shotgun to their heads when the police show up outside. The Americans and their allies must leave, lift the blockade, treat Iraq on the “basis of mutual respect,” and guarantee not to use force against it. Then the Westerners could leave if they wished. Iran would keep Kuwait, subject to an Arab solution.

For four straight days, the Baghdad government has waged psychological warfare, testing the Western will to continue the confrontation:

Thursday, in a “open letter” read by a television announcer, Hussein told President Bush that armed conflict would mean “thousands of Americans whom you have pushed into this dark tunnel will go home in shrouded coffins.”

Hussein branded Bush a liar and said “there is no going back” for the estimated 120,000 Iraqi troops dug into the desert sands of Kuwait, which Baghdad proclaims is now sovereign Iraqi territory.

Friday and Saturday, the threats were aimed at Western citizens trapped in Kuwait and Iraq by the conflict and denied permission to leave.

The foreign nationals, including a total of 3,100 Americans, said Parliamentary Speaker Saleh, would be rounded up and housed at military and industrial sites in Iraq and Kuwait. “Only this measure will keep the threat of war and aggression at bay,” Saleh concluded, raising the specter of civilian captives providing a shield against attacks on key facilities.

Hours later, a statement from the Ministry of Labor and Social Affairs said that the foreigners would share with Iraqis the deprivations of the economic sanctions. “Their share of the food will be affected by the fact that our supplies of food are reduced,” the ministry declared, suggesting that infants would suffer. “The measures have caused and will cause shortages in imported food, especially milk for Iraqi babies. . . . We have decided to treat babies of foreign families equally to those of Iraqis according to our human principles.”

The barrage of propaganda appeared directed at the American, British and other European peoples, over the heads of their governments. Iraq, whose invasion took an estimated 800 Kuwaiti lives in the first days and an undetermined number since, was portrayed by its media as a victim, bullied by Western troops and planes pouring into the gulf region.

But the Iraqi threats were treated seriously.

The White House declared that “the use of innocent civilians as pawns is totally unacceptable.” And White House Press Secretary Marlin Fitzwater commented that “it seems we’re getting a daily seminar of Iraqi ridicule these days. This one doesn’t have much relationship to our objectives. It contains no new relevant proposals, no reference at all to the U.N. and Arab League calls for them to leave Kuwait.”

The French government, whose 530 detainees include more than 70 children, warned Baghdad of serious consequences. Britain, with the largest number of Western citizens trapped behind Iraqi lines--about 4,700--termed the plan to disperse foreigners to vulnerable facilities “unlawful and inhuman.”

U.S. diplomatic officials in Baghdad had contact with 35 Americans who had been taken to Iraq from Kuwait and placed in a Baghdad hotel, the Rashid. Thursday, when an American Embassy officer went to the hotel to pay his daily call on the detainees, he was told they were gone. He was told they had been transferred to another, undisclosed location.

“We want immediate confirmation of where the 35 are and we want access to them,” Richard Boucher, a State Department spokesman, said Friday. Two days later there still was no contact, according to the latest reports from Washington.

In other Middle East developments Sunday:

* Two U.S. destroyers, the John Rodgers and the Tattnall, passed through the Suez Canal en route to the gulf region. Saturday, the battleship Wisconsin, armed with cruise missiles, entered the Red Sea after passing through the canal.

* Iran and Iraq agreed to increase the number of prisoners of war being exchanged from 1,000 a day on each side to 8,000 a day. The Red Cross, which interviews each prisoner to make certain that he wants to return home, said in Geneva that it is sending more staff to Iran and Iraq to allow the speedup in the exchange.

* The United Arab Emirates agreed to the deployment of military forces of Western and friendly Arab countries on its soil in the conflict, a Foreign Ministry spokesman said.

Saudis’SOMBER VIEW: A grim consensus is emerging among Saudi officials that war with Iraq may be inevitable A6. Related stories, A6-A13.

Westerners Ordered To Hotels Iraq ordered Westerners in Kuwait to assemble at three hotels in the capital and said they and their governments would be responsible for the consequences if they failed to comply.Reseaarch: Portia Chambliss, UCLA map library