IRAQ'S EXTRAORDINARY PEACE TEASER, broadcast on Friday, came on the apparent eve of a land war that Saddam Hussein eagerly awaited and American leaders dreaded.

Baghdad and Washington are fairly well agreed that the Iraqi regime can withstand more massive casualties to its own side than Washington can.

But if the American generals are not deluding themselves, the U.S. aerial damage to Iraq's army is changing the prognosis of battle. They suggested on Thursday that Iraqi tank divisions are being degraded to the point of ineffectiveness.

If their public message reflects true Pentagon thinking, a land war might go well and swiftly for the U.S., and Iraq's dictator may be changing his mind about surviving that war with strength intact. Motive enough for him to declare victory and go home.

The peace broadcast produced opposite effects in Iraq and abroad. It initially convinced the people of Baghdad that peace was at hand, conceding that Iraq would withdraw from Kuwait.

But the broadcast was full of invective against "the evil American-Zionist-NATO alliance," and conditions the U.S. and partners would never accept. Some of these were abusive: Not only linkage to the Palestine question but cancellation of Iraq's debts, reconstruction aid to Iraq by its victims and foreign withdrawal from the gulf. These conditions were designed not to be accepted.

Whether the broadcast was mere propaganda or the opening statement of a genuine bargaining process remained to be seen. Foreign Minister Tariq Aziz was due in Moscow today, no doubt bearing the answer to that question.

If it was just for propaganda, the radio tirade worked to good effect wherever sympathy lies with Iraq. It came two days after the U.S. bomb penetration of an air raid shelter in Baghdad, with hundreds of civilian deaths, which was a stunning technical feat for the U.S. and equally stunning propaganda victory for Iraq.

Saddam Hussein has been trying since August to break the coalition that President Bush and Secretary of State James A. Baker III stitched together. The bomb shelter tragedy -- regardless of the reason it happened -- looked like a chance to do that. An apparent offer of peace coming as a follow-up would aim at detaching both Arab and non-Arab partners from Washington.

The reason for Americans to hope the broadcast was intended as more than propaganda was that it raised domestic expectations in Iraq. People danced and fired guns for peace in the streets of battered Baghdad. Saddam Hussein is unlikely to imply promises to his beleaguered people that he need not make, if he intends not to fulfill them.

The major role of the Soviet Union in the unfolding diplomacy requires scrutiny. The gulf crisis began with the Soviet Union and the United States as partners, based on the very strong understandings reached by Secretary Baker and Soviet Foreign Minister Eduard Shevardnadze, before the latter's dramatic resignation.

In the middle of the crisis, the United States managed to denounce the Soviet crackdown on Lithuania. It seemed cheap and easy to do, merely words, while the European Community was taking more meaningful economic action. But this came when President Mikhail S. Gorbachev was switching his power base at home from the radical reformers to old guard military and secret police leaders.

Some of the Soviet generals had been clearly unhappy with Moscow ganging up on their former protege. They had spent decades training Iraq's army and cultivating its rulers. Mr. Gorbachev, in initially choosing Washington's side, was throwing all that away. Now those generals have greater influence on Soviet foreign policy.

So it is unclear whether Moscow remains as Washington's partner in dealings with Baghdad, or is reverting to an earlier role as its rival for influence in the Middle East, hoping to save Baghdad's game and to emerge with Iraq's gratitude.

That would be one way for Mr. Gorbachev to retaliate for the Bush administration meddling, even verbally, with what he considers to be the internal Soviet problem of the Baltic states.

The United States has both overt and unstated war aims in the gulf. The Iraqi peace broadcast threatened to thwart the latter by conceding the former.

The official aims have been spelled out again and again, and hew to United Nations Security Council Resolution 660. For our side to stop bombing, Iraq has to begin withdrawals from Kuwait and pledge to complete them without condition and to revert to the borders of Aug. 1.

But the U.S. government also desperately hopes to reduce Iraq's capacity to make trouble and to end Saddam Hussein's rule. It would be cruel to the memory of Americans who gave their lives for this affair to end with the tyrant in power, still menacing his neighbors.

The greatest way the resilient Iraqi dictator could outwit President Bush would be to give in to the overt demands, surviving in strength to make trouble. The United States has no defense against that.

Small wonder that when President Bush called the Iraqi offer "a cruel hoax" on Friday, he also invited the Iraqi people and army to overthrow their dictator.

This repeated a more subtle invitation extended by Secretary of State Baker, in testimony on Capitol Hill that U.S. aid for reconstruction of Iraq would be difficult if Mr. Hussein were still in power. Mr. Baker implied that aid might be forthcoming if Mr. Hussein was gone.

Iraq can, indeed, realize many of Saddam Hussein's outrageous aims, including forgiveness of massive past debt and reconstruction aid and perhaps even a linkage of sorts to the Palestinian question, but only by losing totally, with Saddam Hussein toppled, disgraced and replaced.

A chastened Iraq would plead inability to pay debts and would blame the toppled tyrant. The debts are to Saudi Arabia and Kuwait, for loans during the Iraq-Iran war, and to arms suppliers who sold on credit.

If Iraq withdrew from Kuwait with its ruler intact and unchastened, the United States would have to quit the war, but Washington would maintain economic pressures and moral demands and grant no forgiveness or aid. We would be in a cold war with Iraq for years to come.

Saddam Hussein can avoid that and gain much of what he wants, by sacrificing his own power and perhaps his life. That is a price that he displays no willingness to pay.

Daniel Berger is an editorial writer for The Sun.

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