NEWS ANALYSIS : Iraqi Turnabout Could Bedevil Bush's Strategy : Dilemma: Action could derail President's plan to humiliate Hussein and control the timetable of the war.

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Saddam Hussein's abrupt embrace of Soviet President Mikhail S. Gorbachev's peace initiative--and President Bush's decision to discuss the plan with his allies instead of reject it outright--has suddenly turned the Persian Gulf War into a game of diplomatic maneuvering.

And that could derail Bush's military plans to cut Hussein down to size, especially if it leads to lengthy and ambiguous negotiations, U.S. officials and other analysts said. Bush has repeatedly vowed that the allies--not Hussein--would control the timetable for the war, but the onset of negotiations would make it hard for the President to sustain such mastery of events.

Hussein's move exploited the worst-kept secret of American policy in the Gulf--that U.S. war aims go beyond the formal U.N. goal of forcing Iraq's withdrawal from Kuwait.

Bush Administration officials privately acknowledge that they also want to humiliate the Iraqi president, to deprive him of his political prestige and perhaps deprive him of his job as well. Only then, they argue, can peace be assured in the Gulf and future aggression elsewhere in the world discouraged.

By offering to withdraw from Kuwait if economic sanctions against Iraq are dropped, Hussein has handed Bush a considerable achievement: the acceptance of the Allies' formal war aim after a 34-day military campaign and a relative handful of Allied casualties. But he has also proposed a deal that could rob Bush of his chance to achieve his second, informal war aim.

"It's our worst nightmare come true," said a U.S. military officer involved in planning the ground war. "We were so close."

Yet if Bush ultimately rejects the Soviet-Iraqi formula, he will have to explain--at home and abroad--why a ground war and its casualties are still necessary even after the U.N. objective of an Iraqi withdrawal was attained.

The President must also consider whether rejecting the Soviet initiative would set the two superpowers against each other on a major world issue for the first time since the end of the Cold War, thereby jeopardizing Bush's vision of a "new world order."

Until now, the 28-nation coalition against Baghdad has held together because Hussein firmly rejected the one demand on which every other country agreed--that Iraq must withdraw from Kuwait.

Now, each country must decide whether to accept an Iraqi withdrawal under the terms of the Soviet-Iraqi compromise, or to fight a potentially costly ground war for the sake of handing Hussein a more crushing defeat.

Hussein himself said clearly in his radio speech Thursday that he hopes his proposal will split the coalition. "If (the proposal) is rejected, it will expose all the pretenses and will reveal the premeditated intentions of the aggression against us," he said, calling on "fair people" to note that Bush has escalated his demands beyond a simple withdrawal from Kuwait.

"I think the lights will burn late and intensely at the White House and the State Department while the Pentagon carries on with the war," said Geoffrey Kemp, a Middle East specialist who served on the National Security Council staff during the Reagan Administration.

"We can't accept this," he said, referring to the Soviet plan announced Thursday after a meeting between Gorbachev and Iraqi Foreign Minister Tarik Aziz. "Do we negotiate? I suspect we'll come back with a long string of objections. We'll say: 'Ask Mr. Aziz, then call us back.' In the meantime, we'll continue the war. I think we'll try to make the objections the kind that the Iraqis can't accept.

"What we want is total withdrawal of Iraq with most of its equipment left behind and all the U.N. resolutions in place," he added. "I think the chances of getting all of that now are zero.

"The compromise position would be getting total withdrawal with no conditions in a short time period, and leave most weapons behind. . . . We could live with that. We may not get what we want, but we'll have to play for more," Kemp said.

The Soviet plan included several clauses that fell markedly short of Bush's demands for a settlement.

The formula called for cancellation of the 12 U.N. resolutions affecting Baghdad after the Iraqi withdrawal is complete, including one demanding reparations for war damage. And it would lift economic sanctions once two-thirds of Hussein's forces have left Kuwait.

Bush has insisted on enforcement of all 12 resolutions, and his spokesman, Marlin Fitzwater, repeated that position Thursday night.

The Soviet plan also contains no clear deadline for the withdrawal of Iraqi troops, although it calls for a fixed timetable for the operation. U.S. officials have said they would insist on a withdrawal within four to six days, a time span short enough to require the Iraqis to leave most of their cumbersome armored vehicles and heavy artillery behind.

A Soviet diplomat in Washington said he believes that issue could be negotiated.

Despite the clear differences between the Soviet plan and the U.S. position, however, initial reactions at home and abroad pointed up the difficulties that could lie ahead for Bush: Some members of Congress and foreign allies saw the announcement as the beginning of what could become a peaceful compromise.

"It sounds like this may be what we're looking for, Saddam getting out without condition," said Sen. Trent Lott (R-Miss.).

Rep. Lee H. Hamilton (D-Ind.), a senior member of the House Foreign Affairs Committee, said parts of the Soviet plan were unacceptable but suggested that the beginning of the ground war should be delayed while negotiations begin.

"My reaction is that the Soviet proposal is a very serious proposal," he said. "It's certainly more attractive than the one that was discussed a few days ago. . . . We probably should not go forward with the ground war."

At the United Nations, China--a permanent member of the Security Council, which gave Bush a mandate to go to war--said the Soviet plan is promising.

"There are elements which, at first view, seem encouraging," said Jacques Andreani, France's ambassador in Washington. "We will be looking into it very carefully." France is a key member of the coalition that has sent forces to the Gulf.

"If these resolutions (demanding an Iraqi withdrawal) are met, we would have satisfied our mandate," said Ghazi Ghosaibi, Saudi Arabia's ambassador to Bahrain. "The Soviets are entitled to a very good and careful hearing."

The most likely immediate outcome, Kemp and other analysts said, is a game of diplomatic chicken in which Bush demands more concessions and Hussein decides whether to grant them.

The Administration is likely to stand firm on its demand for a rapid Iraqi withdrawal, not only because it wants to deprive Hussein's army of its heavy weapons but also because such a retreat would make it harder for the Iraqi president to claim a political victory.

"One of our objectives is to humiliate him," a State Department official said bluntly. "We don't want him to be able to claim a victory of any kind out of this."

But one demand that could be grounds for compromise is the resolution calling for Iraq to pay reparations to Kuwait for the damage done during last year's invasion. Iraq is already burdened with $40 billion in debt and would be hard-pressed to pay much; the Kuwaiti government, even in exile, is far wealthier.

In any case, Bush is likely to act fast, because any delay would allow each country in the coalition to become embroiled in detailed debate over the terms of the Iraqi offer--a process that would almost certainly deprive the coalition of its cohesion.

Even so, the President is already caught between one group of allies that may be satisfied with an Iraqi withdrawal from Kuwait and another group whose leaders are set on eliminating Hussein's influence in the Gulf region.

"If Bush rejects (the Soviet plan), it'll do a lot of harm to the coalition," said Michael Hudson, a Middle East expert at Georgetown University. "(The Soviet plan) will be seen by public opinion in much of Europe, even in England, as a serious breakthrough. . . . There will be a feeling in France, Italy and Germany that this is an equitable solution that deals with the stated objective of the U.N. resolutions.

"If there is a hidden agenda on our part or others in the coalition (to oust Hussein)--and it's not so hidden on the part of the Kuwaitis and the Saudis--then that agenda will now be exposed," he said. "But if we don't reject the plan, then several members of the coalition will be very nervous, particularly the Kuwaitis and Saudis."

Rashid Khalidi, a Palestinian historian at the University of Chicago, was blunter. "I don't think you have a coalition any more," he said. "Some countries are going to want to do what they intended to do all along, and that is to destroy Iraq. Other countries were along only to liberate Kuwait.

"Who will pay for George Bush's goals beyond the liberation of Kuwait?" he asked, pointing to the financial support the Administration has won from other countries. "If the Germans leave the coalition, the Japanese might go along with them."

William B. Quandt, a former National Security Council aide in the Carter Administration, predicted that Bush will reject any compromise with Hussein and seek a victory in the ground war instead.

"Nobody is seriously thinking diplomacy," he said. "Diplomacy involves compromise, nuance and living with half measures. This is Hitler--good against evil."

Times staff writer Norman Kempster also contributed to this report.

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