A Tale of Two Cities Emerges on Life in Baghdad : Iraq: Wide gap separates the rich and poor with luxury items for the haves and very little left for the have-nots.

Baghdad under trade sanctions is a tale of two cities.

In one, Scotch whiskey is cheap and plentiful. Restaurant wine lists are long and full.

In the other, there is no surgical spirit to administer injections, no disinfectant to clean a hospital floor.

The two cities exist a few miles apart but are separated by a wide gap between the rich and the poor.

Trade sanctions imposed to punish Iraq’s invasion of Kuwait 13 months ago have hit both haves and have-nots, but the have-nots are suffering most, Iraqis and foreign residents say.

Foreign critics berate Saddam Hussein’s government for refusing to accept U.N. terms that would permit it to sell $1.6-billion worth of crude oil to pay war reparations and import essential drugs and medical supplies.

But the Iraqi government is doggedly resisting the terms as gross violation of its sovereignty.

It is asking its handful of Arab backers to break the embargo and shame the rest of the Arab world into doing the same.

Food and medicine are excluded from the sanctions but Baghdad says it cannot fund all its needs because its foreign assets are frozen and its domestic asset--crude oil--cannot flow freely to the market.

The tussle has become one between Saddam Hussein and the United Nations, which he likens to an American gun pointed at his head.

Caught in the middle is a once robust economy that has adapted with an instinct for survival and a free-market spirit.

Life continues. But for the poor it is a struggle against rising prices for every basic commodity from detergent to flour and rice.

The government recently added chickens to its short list of price-controlled essentials, tacit admission that poultry is now out of reach of the average wage earner. Each family gets two a month at a quarter of the free-market price.

The sanctions have spawned a sort of siege economy. Traders with access to foreign exchange can import food duty-free and sell to the highest bidder in a market that moves with bewildering speed.

It means that the markets are full of food. But the commodity in shortest supply is money. Few wages have risen since the end of the Gulf War apart from those paid to the army and police and some government employees.

The foreign exchange element of the new economic realities has made the black market part of daily life.

Iraq is no Third World state. But the hunger for dollars is as keen in Baghdad as it is in Bujumbura or Bombay. The official rate is one dinar equals $3.10. The black market rate is more like eight dinars to the dollar.

Saddam City is a dormitory town a quick drive from central Baghdad and its luxury hotels and grand monuments.

It is an ugly place with the good-natured air of those accustomed to smiling through adversity. Flies love the rancid market.

In its hospital there was, perhaps still is, a skinny child born two months prematurely fighting a valiant but probably doomed battle for life.

Chronically underweight, she gasped behind the smeared window of a French incubator. If the incubator breaks, there are no parts to repair it.

“Even if she survives and puts on weight, there is a grave risk that she’ll pick up a secondary infection which we won’t be able to treat,” said Dr. Nazar Ahmed Al-Anbahki, director-general of the hospital.

“We’re short of antibiotics, drips. Nowhere in Baghdad is there spirit or cotton . . . for injections. The death rate here has gone up threefold,” he said.

Back in central Baghdad sanctions were the main item on the agenda of some 800 delegates at a five-star hotel.

They were taking part in an Iraqi-run forum of Baghdad’s few friends--Sudan, Jordan and Yemen--to mobilize opinion against the embargo and other U.N. “interference” in Iraq.

Their hotel air-conditioning was glacial, the rooms were large and pleasant and the cooking merited the establishment’s tag of “cuisine.”

The wine list boasts a well-chosen claret. Secular Iraq has no taboo about alcohol.

The delegates bristled with anger and approved texts attacking Washington and its allies in the Arab world.

Saddam Hussein was shown on television praising them. This was the old Hussein of the days before the Gulf War; he spoke as champion of the common Arab man against “evil” American designs on Arab oil and land.

“The battle is not over,” he told rapturous delegates brought to his palace from the hotel after lunch. The government paid for their stay, delegates said.

“Anyone can see we could live under sanctions for another 20 years without asking anything from anyone,” Hussein said.

“Iraqis are not ready to lose their dignity and honor for an extra price on food,” he said. His guests applauded.