Iraq Pins Hopes on Strategy of Cooperation : Mideast: Baghdad uses diplomacy in an effort to show it’s a good neighbor and throw off U.N. embargo. Even contacts with Israel have been reported.

In an old hotel on a quiet, canal-side boulevard on the outskirts of town, a huge bank of video monitors is slowly blinking to life, their electronic eyes trained on what were once some of the most dangerous weapons-manufacturing plants in the world.

Machinery capable of fashioning missiles that could plummet hundreds of miles into neighboring countries lies under the watchful gaze of 24-hour-a-day cameras. Chemical and radiation sensors pick up data at plants once thought to manufacture chemical, biological and possibly nuclear weapons.

“Nothing comes close to it. It covers an entire country,” said Dr. Guy Martelle, the American whose team installed the video system in July. “It is one of a kind, the largest and first of its kind in the world.”

By the middle of this month, United Nations officials expect to have Iraq’s long-range weapons-monitoring program in place, the keystone in a new strategy of cooperation and careful diplomacy that Iraq hopes will finally achieve an end or an easing of the economic sanctions that have closed off the country since its 1990 invasion of Kuwait.

Iraq, for years a blustery and begrudging partner to the world’s attempts to forever dismantle its arsenal of weapons of mass destruction, has in recent weeks engaged in a kinder, gentler strategy aimed at reassuring the world that it is ready once and for all to live as a companionable neighbor in the Middle East.

If Baghdad’s new promises prove genuine, analysts say, they could provide an important boost to the Middle East peace process that so far has encompassed nations such as Jordan and Syria, which have spent the last two decades verbally railing against Israel, but has ignored the one nation that less than four years ago launched long-range missiles against Israel and Saudi Arabia and invaded Kuwait.

In recent weeks, Iraqi officials have repeatedly signaled their readiness to recognize the sovereignty of Kuwait and privately have indicated they may even be prepared to accept the U.N.-drawn border with Kuwait, which until now they have steadfastly refused to do.

Just as important, there are signs that Iraq is ready to re-evaluate its stance toward Israel. In several recent interviews, Iraqi officials emphasized that Iraq no longer has a grievance with Israel if the Palestinians have decided to come to terms with the Jewish state.

“We are not a direct party in the struggle with Israel. We have had a stance since the early ‘70s that whatever the Palestine Liberation Organization accepts, we will not object, because it is their case and their fate,” said Iraq’s Parliament Speaker, Saadi Mahdi Saleh.

“We don’t have any problems with the Israelis that we can sit down and discuss,” added the information minister, Hamid Youssef Hammadi.

Israeli television reported last month that Iraq had delivered a message from a senior official, through a third party, to Israel’s ambassador to the United Nations, saying that Iraq no longer had a dispute with Israel.

Both sides have denied any direct contacts, though the respected London-based Arabic daily Al Hyatt reported three secret rounds of talks between Israeli and Iraqi officials in Europe, and the Italian press said Iraq’s deputy prime minister, Tarik Aziz, met with Israel’s Vatican ambassador during a recent visit.

Aziz was also in Morocco, historically a premier intermediary between Israel and the Arab world because of its large population of Arab Jews, last month at the same time an Israeli delegation was in Rabat to meet with the Palestinians.

Diplomats in the Iraqi capital said it is overwhelmingly likely that at least some third-party contacts have occurred. Iraq’s aim, they say, is to convince the United States that Baghdad could become a valuable partner in the peace process if the embargo is lifted.

“It’s very logical. They want the sanctions to be lifted. They are looking for contacts with the Americans. They know that if they improve relations with Israel, if they show they are not willing to undermine the peace process, they could be considered a partner,” said one envoy.

Diplomatic sources said there are reports that Iraq has sweetened the deal by offering to resettle about 800,000 Palestinian refugees from Jordan and Lebanon, potentially easing one of the major dilemmas of the peace process: what to do with the millions of Palestinians outside the West Bank and Gaza Strip.

Iraqi officials say it is too early to talk about such steps. But they say they are ready to discuss the border with Kuwait, a key stumbling block until now in any discussion about lifting the U.N. sanctions.

So far Iraq has refused to recognize the U.N.-drawn border, which awards Kuwait some lucrative oil fields formerly in Iraq, in addition to most of the naval port at Umm al Qasr. Now Iraq is saying it is willing to hold talks directly with Kuwait or through Arab intermediaries to fix the border.

European diplomats close to the negotiations say Iraq appears ready to recognize the border if it can win a commitment from the United Nations that the sanctions will be lifted. No one is ready to make such a tit-for-tat pledge.

“The danger is if you say that (make such a promise), the Iraqis will do something else that will make it politically impossible to lift the sanctions, like attacking the Kurds again,” said one diplomat.

“The Iraqis want a package, a prior assurance that when they say ‘We recognize the Kuwait border,’ sanctions will be lifted and there won’t be any new conditions imposed. If they don’t get that kind of commitment, as they see it, they will be giving up a certain amount of political capital for no good purpose,” said another envoy. “But the problem is, they’ve pretty much come to the end of the road. They’re not going to get that assurance. They’re not going to get it from the Americans, at least.

“So the key question now is: Are they going to recognize the border anyway? Or are they going to start becoming more hostile to the U.N.?”

In interviews last week, Iraqi officials attempted to emphasize their readiness to bury old scores with Kuwait at the proper moment.

“We don’t have a problem in the sense the Americans think. We have recognized Kuwait as an independent state. We are cousins,” said Saleh. “We might get angry with each other, and yet we can come to good terms later. The Arabs are like one nation, one family. We don’t have a problem as far as the sovereignty of Kuwait is concerned, and we are ready to negotiate with the Kuwaitis (on the border issue) in the sense that each party will have its right.”

Already, Iraq has made important diplomatic gains by nearing closure on a deal to sell 12 million barrels of oil trapped in its pipeline through Turkey since the beginning of the Persian Gulf crisis.

Turkish officials, reportedly after leveling threats to cut off American bases in Turkey if the United States did not accede, have won a blessing from Washington on a deal to allow Iraq to sell oil in the pipeline, earning 60% of the proceeds, from which it would buy food and medicine from Turkey. Under the deal, expected to win U.N. approval this month, Iraq would gain up to $280 million. And unlike previous U.N. requirements, it would have a free hand in distributing the humanitarian goods itself.

“It’s a one-time operation,” said an official familiar with the negotiations. “But the significance for Iraq is psychological and political.”

Most analysts expect that the United Nations, when it reviews the Iraqi sanctions this month, will order at least a six-month trial run on the new weapons monitoring program, setting the stage for a showdown in March.

“We’ll need about six months to see whether it will function in the long-term perspective,” said Goren Wallen, the retired Swedish admiral who heads the monitoring operation.

Located in the former Canal Hotel, the U.N. program is cloaked in secrecy. Wallen greets visitors at the gate and won’t let them set foot inside--part of the United Nations’ attempts to ensure that its unprecedented access to Iraqi defense secrets won’t be shared with curious neighboring nations or anyone else.

Murphy was recently on assignment in Baghdad.