Bush Now ‘Hopeful’ of Peaceful Solution : Strategy: He says Saddam Hussein realizes he is outmatched and ‘is taking another look’ at his situation.

President Bush, saying Iraqi President Saddam Hussein has begun to realize “he is up against a substantial force that clearly could prevail in any battle,” said Saturday that he is now “hopeful that there will be a peaceful solution” to the Persian Gulf crisis.

Hussein “is taking another look” at his situation, Bush said. Economic sanctions “are taking hold” and “that is encouraging.”

But Bush repeated his stand that a settlement could not be based on anything short of unconditional withdrawal of Iraqi forces from Kuwait. “There’s nothing to negotiate,” he said when asked about the prospects for talks with Iraq.

Soviet President Mikhail S. Gorbachev, visiting Spain, also indicated Saturday that he thinks there are signs of a change of attitude among Iraqi leaders. But he did not explain why he thinks so, and White House aides also denied that Bush’s statements signify any new intelligence about Hussein’s activities.

Bush and his top advisers have followed a pattern in recent weeks of alternating bellicose statements about Iraq with other statements designed to reassure world opinion that war is not imminent.

Nonetheless, Bush’s remarks, in a news conference held during a break in a meeting here with Pacific island leaders, had a notably more hopeful tone than U.S. officials have used about the gulf crisis recently. Earlier last week, for example, CIA Director William H. Webster said in Washington that he saw little chance of the crisis being resolved peacefully.

Bush declined to make any specific comments about the recent decision to increase the U.S. troop presence in the gulf region by another 100,000 soldiers.

“We have been still--as everybody around the world knows--still moving forces,” Bush said. “The purpose is to make clear to Saddam Hussein that his aggression will not stand.”

Bush said he expects to meet with Secretary of Defense Dick Cheney, Secretary of State James A. Baker III and Gen. Colin L. Powell, chairman of the Joint Chiefs of Staff, after he returns to Washington on Monday.

“Maybe we’ll have more to say about (the troops) then,” he said.

The President, according to the Associated Press, also telephoned leaders of the 12-nation European Community, meeting at a two-day summit in Rome, to urge them not to let Iraq divide them by exploiting their desire to see the release of their nationals held in Iraq and Kuwait.

Hussein has been making separate offers to European countries to release foreigners who are being held as human shields at strategic locations in Iraq.

Bush’s call went to Italian Prime Minister Giulio Andreotti shortly before the start of a summit of the first meeting of the leaders since Iraq’s Aug. 2 invasion of Kuwait. The President “spoke of the need for solidarity . . . and strong cohesion, also regarding the hostages,” said Andreotti’s spokesman, Pio Mastrobuoni.

Mastrobuoni said Italy does not want to give Saddam Hussein any inkling that there might be “a break in solidarity.”

“We are solid, and he is failing,” said a British official, who spoke on condition of anonymity.

British officials said they expected the summit participants to release a statement on the Persian Gulf at the end of their meeting today. But French spokesman Hubert Vedrine said he doubted that it would differ greatly from previous community statements on the issue.

Meanwhile, White House Chief of Staff John H. Sununu said in Washington that the Bush Administration is reviewing whether it should seek congressional approval of a formal declaration of war should the Persian Gulf conflict require offensive action by U.S. forces.

Sununu said in an interview broadcast by Cable News Network that Atty. Gen. Dick Thornburgh, responding to congressional requests, is considering the best way to initiate a military offensive if one becomes necessary.

Although the Constitution allocates war-making power to Congress, no formal declaration has been issued since World War II. Many lawmakers, however, have expressed a desire for a greater role in the Persian Gulf crisis.

“The President will continue to consult with Congress on almost a weekly basis, with the leaders, as each step of the way goes along,” Sununu said. “There’s not going to be a lack of consultation just because Congress is not in session.”

Asked about congressional sentiment favoring a formal declaration if hostilities break out, Sununu responded: “There’s a viewpoint that that might be the way to deal with situations like this in modern times.

“We have had our legal counsel, the attorney general, reviewing that. We’ve had discussions with folks in Congress as to what the right tone of whatever response should be under different conditions. It’s part of the consultative process that’s already taking place.”

Times staff writer Don Shannon, in Washington, contributed to this report.