NICOSIA, CYPRUS — IT was not only the world oil market and President Bush who momentarily thought that last Friday's Iraqi announcement which seemed to signal a willingness to withdraw from Kuwait meant peace was at hand. Thousands of Iraqis rushed into the streets of Baghdad firing pistols and rifles in the air in traditional Arab celebration. Having heard the opening phrases of the ruling Revolutionary Command Council's (RCC) declaration, their instinctive reaction was that their ordeal must now be over.
But the elation was followed swiftly by gloom. It became clear that Baghdad's intention to withdraw was at best ambiguous. At worst, it was shackled to a train of conditions even more demanding than those set out by President Saddam Hussein in his Aug. 12 ``initiative,'' in which he linked a Gulf solution to a settlement of the Palestinian question.
Days later, it remained unclear whether Baghdad really was willing to stage an unconditional withdrawal and was just trying to save face by marking out its position, or whether the whole thing was a ploy aimed at improving its diplomatic position and undermining the Arab allies of the coalition.
But in either case, some Arab and international observers say it was the first sign of a crack in Iraq's resolve. ``It must mean Saddam is beginning to feel weak,'' says an Iraqi analyst.
``He's blinked for the first time,'' adds another observer. ``The rug-bargaining has started.''
The key Arab members of the anti-Iraq coalition - Egypt, Syria, Saudi Arabia, and the Gulf sheikhdoms - were swift to follow official US and British rejection of the Iraqi proposal by dismissing the statement as ``not serious,'' adding that it had introduced new conditions to Saddam's original linkage between the Gulf and Palestinian issues.
But on reflection, Egyptian officials conceded that it did have ``positive aspects,'' especially after Abdul Amir al-Anbari, Iraq's United Nations envoy, had said there were no ``conditions,'' only ``issues'' for later negotiation.
``We have to know the reality: Does it mean unconditional withdrawal or not?'' demanded Egyptian Foreign Minister Esmat Abdel Meguid. ``If it does represent a change, then it should be taken seriously.''
The question remained unanswered, even as Iraqi Foreign Minister Tariq Aziz began talks yesterday with Soviet President Mikhail Gorbachev in Moscow.
But Iraq's move had clearly improved its diplomatic position. It was predictably and warmly welcomed by Baghdad's sympathizers, especially Jordan and the Palestine Liberation Organization, who had been uncomfortable appearing to defend Iraq's annexation of Kuwait.
It was equally warmly welcomed by neighboring Iran, which has been working closely with Moscow to try to defuse a crisis that it fears could lead to a permanent Western bridgehead on its own borders. Significantly too, it was welcomed by Morocco, one of the Arab nations that sent troops to Saudi Arabia.
What caused all the excitement was the first clause of the RCC's statement. Iraq, it said, was ready to ``cooperate with'' UN Security Council Resolution 660, with the aim of achieving an ``honorable and acceptable political settlement, including withdrawal.''
It was the first time the word ``withdrawal'' had entered the Iraqi political lexicon since the Aug. 2 invasion of Kuwait. It was also the first time Baghdad had said it would work with Resolution 660, which called for an immediate and unconditional Iraqi withdrawal. Even so, the RCC statement stopped short of saying outright that it accepted the resolution and would act on it as it stands.
Before, Iraq had consistently attacked all the UN resolutions on Kuwait, saying they had been extorted by United States threats, pressures, and bribery.
But then came the ifs and buts, introduced by a phrase which in the original Arabic was conceptually obscure and even grammatically dubious. It said: ``The first step required to be implemented, as a pledge from the Iraqi side on the issue of withdrawal, to be linked to the following ...''
It then listed a series of Iraqi desiderata, headed off by ``a comprehensive cease-fire on land, at sea, and in the air.'' Bracketed in the same category as the cease-fire were such demands as:
The abrogation of all 11 Security Council resolutions on Kuwait adopted after No. 660.
The withdrawal, within a month of a cease-fire, of all US and other outside forces and weaponry introduced to the region, including the Patriot missiles given to Israel.
Israeli withdrawal from Palestine, the Golan Heights, and south. Lebanon. In the event of noncompliance, the Security Council should impose on Israel the measures it did on Iraq.
Iraq's ``historical land and sea rights'' (in Kuwait) must be assured in any settlement.
The ruling al-Sabah family should not be restored (in Kuwait), but a properly democratic system including nationalist and Islamic forces should be adopted.
It went on to add other provisions: The coalition countries should pay to reconstruct the damage they had inflicted on Iraq and all Baghdad's debts should be canceled. The Gulf should be declared an area free of outside military bases or presence.