From Baghdad, More Mixed Signals : Iraq: A state-run newspaper publishes a plaintive editorial calling for peace talks. But the government line seems to be as bellicose as ever.

A rush of mixed official signals issuing from Baghdad in the midst of a heavy public relations campaign have heightened anticipation over President Saddam Hussein’s next move in the Persian Gulf crisis.

In unusually plaintive tones, the state-run Baghdad Observer newspaper published a Christmas Day editorial calling for peace talks. Proposed talks between Baghdad and Washington in advance of the Jan. 15 U.N. deadline for an Iraqi pullout from Kuwait were sidetracked in a dispute over dates.

“Time is running out? Who says so?” the editorial asked. “The U.S. Administration has to realize that there is no loss of face in admitting the error of the rush for war or in opening the door for just, equitable dialogue.”

In general, the government hard line on Kuwait remains unaltered on the surface. Hints of compromise are occasional, isolated and vague. During the past week, Hussein has held an unprecedented round of interviews with television crews from Germany, Spain, Italy, Mexico and Turkey, and in each case he has stuck to his argument that Kuwait is an inalienable part of Iraq and will never be relinquished.

In the first of the interviews, with Turkish television, he used a new formulation that seemed to hint at a change in position. “All should offer sacrifice on the path of securing peace and security in the region as a whole,” Hussein said.

Iraqi Foreign Ministry officials pointed to the phrasing as signifying a willingness to compromise, but the terminology was dropped from Hussein’s subsequent TV talks.

Just before Christmas, the Foreign Ministry recalled for consultation 26 ambassadors from posts abroad, including Washington, Paris and London as well as from the United Nations.

Late-night meetings in the Foreign Ministry were shrouded in secrecy. Competing sets of rumors swept the city. One commonly heard was that Hussein had prepared an important announcement and needed to brief his representatives abroad. The other, less dramatic, suggested that the government needed only to instruct the ambassadors on how to mount propaganda campaigns from their embassies in an all-out drive to avert war through public diplomacy.

During Iraq’s eight-year war with Iran, Baghdad occasionally called in its ambassadors from specific regions for consultations, but never from several continents at once.

Iraqi Foreign Ministry officials have singled out Europe as fertile ground for a New Year’s diplomatic offensive.

A Baghdad Observer editorial Monday expressed hopes that Europe might split from Washington’s apparent determination to wage war over Kuwait: “Deep inside some European hearts lies an unshaken belief that European forces might eventually find themselves embroiled in an unneeded war,” the editorial said. “Would it be wise for any European leader to see his countrymen killed in the Saudi desert for virtually no reason other than defending U.S. interests?”

Here in the capital, rumors circulated among ordinary citizens that Hussein was preparing to call for a massive street demonstration that he would use to announce either a partial or full withdrawal from Kuwait.

Such a demonstration in tightly controlled Baghdad would be unusual. Hussein is not given to Fidel Castro-style mass gatherings. The organized anti-American demonstrations held periodically at the U.S. Embassy here have been small and perfunctory.

In Baghdad, there is a marked trend toward war readiness and ensuring economic survival under the global trade embargo. There is talk about holding a citywide evacuation drill to follow the first test that took place last Friday.

Iraq is also considering a drastic adjustment of the foreign exchange rate for Iraqi dinars in order to soak up dollars from the black market.

The government trades dinars at the rate of about one for three U.S. dollars. On the black market, the rate is more than reversed. One U.S. dollar equals about five dinars.

Public rhetoric is high-pitched and belligerent. Iraq’s new defense minister, Gen. Saadi Tuma, warned that Iraqis will “crush” any U.S. attack.

“The ground will burn under their feet, not only in Iraq but Saudi Arabia,” he said.