GULF WATCH: Day 22 : A daily briefing paper on developments in the crisis

Diplomatic Front:

The eyes of the world will be focused on foreign embassies in Kuwait today, the deadline imposed by Iraq for all countries to close down their diplomatic operations. The United States and more than a dozen other nations have pledged to defy the order.

Iraqi sources were quoted as saying that embassies that failed to close on schedule would be surrounded by Iraqi troops but not forcibly evacuated. Defense Secretary Dick Cheney said that such action by the Iraqis would be a “mistake.”

Japan reported that Iraq had moved Japanese nationals from Kuwait to Baghdad and refused to let them depart for Jordan. Swedish and Swiss authorities said their citizens were being held at the border. The Iraqis previously had rounded up Americans and Britons.

About 110 non-essential American embassy personnel and their dependents left Kuwait en route to Baghdad with the expectation they would be allowed to leave the country and return to the United States. Military Front:

Although military action in the Persian Gulf remains only a possibility, U.S. officials acknowledge that they intend to launch an all-out attack against Iraq rather than a gradual deployment of forces if an assault is triggered.

Defense Secretary Cheney signed orders authorizing the mobilization of as many as 49,703 reserves by Oct. 1. The call-up will include personnel from the Army, Navy, Air Force, Marine Corps and Coast Guard reserves as well as the Army and Air Force national guards.

Officials indicated that more than half the reservists are likely to wind up in the Persian Gulf region. Others will report to domestic posts, with a few deployed to Europe to replace U.S. forces dispatched to the Middle East from NATO countries. Trade Front:

Oil prices continued to soar to new highs on spot and futures markets, causing concern that the Middle East crisis could spawn another 1970s-style oil shock. Stock prices posted broad losses as investors reacted to spiraling oil prices and the prospect of war.

Members of OPEC are expected to hold emergency talks in Vienna as early as this weekend to address the worldwide oil panic caused by the disruption of supplies from Iraq and Kuwait. Insiders said key members are pushing for production increases to offset the declines.

The government of Yemen instructed port authorities not to unload an Iraqi oil tanker that had been shadowed by U.S. naval vessels. U.S. officials were pleased that Yemen, which had appeared to waffle on enforcing the trade embargo, appeared ready to honor it. Crisis Indicators:

U.S. troops on the ground: 40,000

U.S. troops en route to region: 60,000

U.S. personnel aboard ships: 35,000

U.S. reservists to be mobilized: up to 49,703

U.S. aircraft in region: 500

Iraqi troops in Kuwait: 160,000

Iraqi tanks in Kuwait: 1,000

Total Americans in Iraq and Kuwait: 3,000

Crude oil (per barrel, September futures, New York Mercantile Exchange): $31.93, up $0.71

Wholesale gasoline (per gallon, September futures, New York Mercantile Exchange): $1.0855, up $.0444

Dow Jones industrial index: 2,483.42, down 76.73

Gold (per ounce) $412.00, up $1.00