Allied Leaders Wary of Baghdad’s Peace Bid : Gulf War: Britain’s Major calls it a ‘sham.’ Other nations demand that Iraq match its words with deeds.

Governments reacted cautiously today to Iraq’s proposal to withdraw from Kuwait, with allied nations demanding deeds to match Iraqi words. The United States, Britain and France said withdrawal must be unconditional.

Euphoria swept financial markets after the first reports but faded as Iraq’s list of conditions became known.

British Prime Minister John Major said the Iraqi conditions made the proposal “something of a bogus sham.”

“If Iraq were now to withdraw, decisively and irreversibly from Kuwait, and to comply fully with the United Nations resolutions without condition, then that would clearly be very good news for everyone.”

French Foreign Minister Roland Dumas urged a careful review of the Iraqi proposal, “all the while taking care that it’s not a trick.”

In Moscow, a statement from President Mikhail S. Gorbachev’s greeted the news “with satisfaction and hope.”

Japan’s leadership said it was examining the proposal to see if it could bring unconditional withdrawal of Iraqi forces. “The situation still is unclear,” Chief Cabinet Secretary Misoji Sakamoto said.

Some leaders called on the allies to look upon the move as sincere.

India’s prime minister, Chandra Shekhar, urged the allies to call an immediate cease-fire, and said Iraq should simultaneously announce a timetable for withdrawal.

Libyan leader Moammar Kadafi also accepted the offer as genuine and said Iraq “has a right not to be in a hurry until it gets assured that Kuwait will never be handed to the U.S. or another quarter.”

After initial reports of the Iraqi offer, Israeli drivers on Tel Aviv’s main shopping avenue excitedly called to each other, making sure they had heard the news.

Nomi Lev-Yahm, who was shopping with her 3-year-old granddaughter, said:

“I’m going to believe it because it’s what I want to believe. I’m so happy.”