Baker to Stress Peaceful Options : Gulf crisis: U.S. will warn Iraq of a no-hope conflict if it does not withdraw from Kuwait. But the alternatives for addressing grievances will also be emphasized.

Secretary of State James A. Baker III, in a meticulously crafted strategy for today’s talks with Iraqi Foreign Minister Tarik Aziz, plans to warn in the baldest language that Iraq faces war without hope of victory if it does not withdraw from Kuwait by Jan. 15. But he also will emphasize peaceful options for addressing Iraq’s grievances.

The subtle carrot-and-stick approach, according to senior U.S. officials, is designed not only to frighten Iraqi President Saddam Hussein but also to convince him that withdrawal is to his advantage, politically and militarily. Baker plans to tailor his words to respond to Iraq’s two main demands: action on border disputes with Kuwait and on the 43-year Arab-Israeli conflict.

Specifically, Baker will emphasize that the United States will continue to push for settlement of the Palestinian question, the officials said. He also will assure Aziz that Washington has no objections to future negotiations between Iraq and Kuwait on their disputed border and oil fields--after an Iraqi withdrawal.

Baker and Aziz arrived in Geneva on Tuesday, both expressing cautious optimism about today’s discussions, the highest-level talks since the Persian Gulf crisis began five months ago. Baker said he is “hopeful” about the outcome, although he warned that the U.S.-led alliance will accept nothing short of unconditional Iraqi withdrawal from Kuwait. Aziz said he is prepared to engage in constructive talks but added that his country would not “yield to pressure.”

Administration officials said the best-case scenario is that Hussein will use the meeting as a face-saving vehicle that will allow him to justify withdrawal from the oil-rich emirate his troops have occupied since Aug. 2. The alternative, Baker will warn, is a war far more devastating and costly than Iraq’s eight-year conflict with Iran.

“It’ll be a matter of spin control. He (Hussein) could say something like: ‘In light of the greater flexibility in the U.S. position, I’ve decided to withdraw. I have succeeded in bringing the Palestinian issue to the forefront of international concern. I’ve succeeded in assuring mediation with Kuwait on the disputed border,’ ” one Administration official explained.

“In other words, he’ll try to make it seem as if he’s won, when in fact there is no change in the U.S. position. It’s not a bad way out for him. He would probably reap a lot of political benefit from withdrawing.”

In the final days of the gulf countdown, the issue of linkage--tying Iraq’s withdrawal from Kuwait to international mediation on the Arab-Israeli conflict--has emerged as a main diplomatic talking point as well as the major hope for averting full-scale war.

Despite repeated U.S. rejections of linkage, one of the ironies of the gulf standoff is that President Bush has said at least three times publicly that greater impetus is needed on the Arab-Israeli conflict after the gulf crisis is resolved.

Asked in September about earlier U.N. resolutions on the Palestinian issue, the President responded: “We are very much interested in implementing Resolution 242.” That 1967 resolution called for a just and lasting peace in the Middle East, including an Israeli withdrawal from occupied territories.

“We have zealously been trying to do that, as have many other powers for many years,” Bush said at that time. “Hopefully, we can be catalytic in seeing that happen . . . sooner rather than later.”

And at a speech at the United Nations on Oct. 1, Bush 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 the people of the region to settle the conflicts that divide the Arabs from Israel.”

Baker will attempt to neutralize Iraq’s linkage demand during the Geneva talks by citing Bush’s comments, according to Administration officials.

“When Aziz brings it up, Baker will shoot back that we have been engaged in the past and will continue to be engaged in resolving the other conflict,” one official said. “He’ll say that the United States is on the record as supporting an international conference. He’ll say: ‘Don’t lecture us. It’s a non-issue.’ ”

Regarding Iraq’s territorial dispute with Kuwait, Baker plans to point out that the United States voted for U.N. Resolution 660. The measure calls for an Iraqi withdrawal from Kuwait but also encourages the two nations to settle their differences. “The secretary will make clear that we will not stand in the way of negotiations,” the U.S. official said.

The planned overture follows assurances by Saudi Arabia’s King Fahd last weekend that his nation would be willing to support talks between Iraq and Kuwait and that it would even consider participating in the discussions after an Iraqi retreat. The two moves are designed to encourage Iraq to reconsider the benefits of diplomacy.

Baker, however, will firmly oppose any kind of formal linkage between an Iraqi withdrawal and other issues. U.S. officials said that refusal is important not only to the outcome of the gulf crisis but also to the establishment of ground rules for the “new world order” that Bush has cited in explaining the U.S.-led military deployment in the Persian Gulf.

“Aggression simply can’t be rewarded or compromised in any form,” said one senior official.

At the same time, however, the Administration has come under growing pressure in recent weeks to accept some form of linkage, either direct or indirect.

Linkage is the premise of a French proposal that would tie an Iraqi pullback to an understanding that an international conference would be convened to deal with the region’s other conflicts. Baker has rejected the proposal.

“There is an emerging consensus around the need for a comprehensive international conference on the Middle East,” said Augustus Richard Norton, a senior fellow at the International Peace Academy in New York.

“The Europeans are out in front on this one, a month or two ahead of the Americans. But even people in the Administration say in private that there is a need for a comprehensive instrument to deal with issues like the Palestinian question, missile technology and nuclear weapons, border verification and perhaps even key natural resources like water,” Norton said.

“The Soviets support this idea,” he said. “The Europeans have endorsed it in general. Only the United States is lagging, as it wants to avoid any appearance of rewarding Saddam for invading Kuwait.”

All the other major parties in the anti-Iraq coalition, with the exception of Argentina, are Arab or Muslim nations that would favor urgent attention to the Palestinian issue.

“Most coalition partners understand that the only face-saving solution to get Iraq to withdraw is to give something on the Palestinian issue so Saddam can argue that he accomplished something. The problem is that they can’t be seen as caving in,” said Ken Katzman, a former Middle East analyst for the CIA.

Baker’s strategy appears to be crafted to implicitly accommodate the allies’ position while denying Baghdad the public credit it wants for galvanizing the international community after more than four decades of stalemate on the Palestinian issue.