Bush Hints at Deal on Gulf : Iraqi Pullout Could Spur Arab-Israeli Pact, He Says

President Bush today condemned Iraqi leader Saddam Hussein for his invasion of Kuwait, but he also offered an opening to Baghdad, suggesting that an Iraqi withdrawal could lead to settlement of the Arab-Israeli conflict.

The President’s speech to the U.N. General Assembly blended condemnation of Hussein with an overture for a resolution of the two-month crisis. “We seek a peaceful outcome, a diplomatic outcome,” Bush said.

Significantly, he offered the Iraqi leader the prospect of “new arrangements” among the states in the Persian Gulf region as well as a chance for a settlement between the Arabs and Israel--provided Iraq leaves Kuwait unconditionally.

“Iraq’s unprovoked aggression is a throwback to another era, a dark relic from a dark time,” Bush said. “It has plundered Kuwait, terrorized innocent civilians and held even diplomats hostage.”

The President, lining up with a proposal first advanced last week by Soviet Foreign Minister Eduard A. Shevardnadze, said Iraq and its leadership must be held liable “for these crimes of abuse and destruction.”

But, at the same time, Bush edged perceptibly closer to Hussein’s demand that his territorial dispute with Kuwait be linked to the Arabs’ grievance with Israel for holding on to territory Syria and Jordan lost in the 1967 Mideast war.

Shevardnadze said afterward that Bush had delivered “a brilliant speech.”

A similar gesture last week by President Francois Mitterrand of France drew a mixed response Sunday from Hussein, who suggested that Iraq would fight to defend its seizure of Kuwait but also offered to open a “debate” with France on the region’s future.

Bush reiterated that Iraq’s annexation of Kuwait will not be permitted to stand and that Hussein has placed his country against the world.

However, the President said, “In the aftermath of Iraq’s unconditional departure from Kuwait, I truly believe that there may be opportunities:

“For Iraq and Kuwait to settle their differences permanently; for the states of the gulf themselves to build new arrangements for stability, and for all the states and peoples of the region to settle the conflict that divides the Arabs from Israel.”

“And yet,” Bush said, “the world’s key task--now, first and always--must be to demonstrate that aggression will not be tolerated or rewarded.”

The speech seemed to reflect a U.S. policy shift. Throughout the gulf crisis, U.S. officials have insisted that Iraq’s seizure of Kuwait could not be linked in any way to the Arab-Israeli dispute or other regional problems.

The United States has long been committed to a Mideast settlement in which Israel would exchange territory for Arab recognition of its right to exist. Bush made no reference on how the talks would be held; the Soviets and the Arabs demand a Mideast peace conference, but the Israeli government objects.

In an exchange with reporters later, Bush said his position had not changed.

“There is no flexibility here,” he said.

Asked, then, if his speech reflected a shift in emphasis, Bush replied, “You are reading too much into this. There is no nuance” to be read into the remarks.