Iraq's Arab allies are trying to isolate Iran. At a meeting in Baghdad, foreign ministers from Arab League countries decided Wednesday to ask major industrial nations to stop dealing with Iran, its opponent in the 31/2-year Gulf war.
Britain, Japan, West Germany, and Italy were specifically targeted as they are among Iran's most important trading partners.
Despite the heavy cost of waging war, Iran has reemerged as a major third-world economic power in the last two years. And analysts say Arab countries will find it difficult to convince the industrial nations to stay away from the highly profitable Iranian markets.
British exports to Iran more than doubled during the first half of 1983. Japan is said to import 400,000 barrels of oil per day from Iran - 12 percent of Japan's oil imports. Trade between Iraq and those countries sharply decreased in the past month.
Although Iran has declared it has launched its ''final push'' in the war, neither side seems closer to a clear victory.
In Tehran Western diplomats say the Iranian economy is ready to sustain a renewed war effort. According to the Iranian Finance Ministry, the war costs about $14 billion per year, or about 30 percent of the government's total expenditures. These include the Defense Ministry budget as well as several war-related expenditures, such as the reconstruction of war-torn areas and the management of huge POW camps.
Iraq, on the contrary, relies mostly on foreign aid to finance its war effort.
Most Iranian earnings come from oil sales that have run at an average of 2.7 million barrels a day. But Western oil company executives say the Iranians recently increased their exports up to 3 million barrels a day.
The destruction of oil terminals on Iran's Kharg Island, which Iraq has threatened to do, would be a devastating blow to the Iranian economy. But its consequences would be felt only in the long run. Western bankers put Iranian currency reserves at about $8 billion. This means that the country could hold on without exporting any oil for at least two or three months. Iran is also said to own an undisclosed quantity of gold.
More preoccupying for the Iranians is the human cost of the war. The Iraqis say they have killed or wounded 30,000 Iranian soldiers in the last round of fighting alone. Iran says this is exaggerated. The Iranians claim to have tested a new strategy - small commando units infiltrating behind enemy lines - during their last offensive. They say this tactic substantially reduced their losses.
Western diplomats contacted in Tehran say this might be true. These diplomats also say Iran is in no way short of volunteers to go to the front. Hundreds of thousands of Iranians soldiers and Revolutionary Guards are now said to be stationed along the 600-mile front.
''We will attack in the northern, central, and southern sectors of the front, '' Iran's President, Ali Khamenei, said last week.
Meanwhile, Western observers wonder how long the Iranian population will tolerate the burden of the war, especially if ''the final victory'' is again postponed for a couple of months.
Opposition leaders in Paris claim there have been demonstrations against the war in different border towns. But Iranian television regularly shows huge demonstrations of people shouting, ''war until victory.''
The continuation of the war is not a political issue, at least officially. All Iranian leaders have expressed their determination to destroy ''the Baathist regime'' of President Saddam Hussein. But the speaker of the Majlis (parliament) , Hojatolislam Hashemi Rafsanjani, has been doing most of the talking about the fighting.
A very optimistic Rafsanjani announced in February 1983 that the ''dawn'' offensive would be the last one. He repeated this assertion at the beginning of the present battle.
President Khamenei appears more cautious in his statements. When a reporter asked him last week if the current Iraqi counteroffensive would be successful, he replied, ''probably not.''
Prime Minister Hossein Mussavi is quiet about the fighting. He reportedly worries about the future of the Iranian economy and is eager for the war to end.
On the battlefield a few miles west of the international border, the Iranians continue to control Iraq's strategic Majnoon Island, which they captured last month. In an interview on Iranian TV last week, Hojatolislam Rafsanjani hinted that Iran might use the estimated 7 billion barrels reserve of the Majnoon Island to finance reconstruction in war-ravaged areas.
No well on the island is said to be operational. The Iraqis have launched several apparently unsuccessful counteroffensives to retake the island.
Iran's news agency, IRNA, has released pictures showing Iranian fighters entrenched behind the island's dams. Ammunition and reinforcement troops are reportedly being flown in by helicopter. Iran says it is inflicting heavy casualties on the Iraqis in this area.
Iran continues to accuse the Iraqis of using chemical weapons. A team of six experts sent to Iran by the United Nations to investigate the charges has arrived in Tehran. Earlier this week, a Belgian scientist said that his tests on Iranian soldiers now being treated in Vienna showed evidence that mustard gas and mycotoxins, also referred to as ''yellow rain,'' caused the soldiers' severe burns.
The military situation is unclear in the marshy area between Majnoon Island and the Tigris River. The Iraqis say they have annihilated the Iranian troops there. Some Iranian sources say Revolutionary Guards have reached the Tigris River.
Other sources say the guards have retreated to defend Majnoon Island. Western military experts in Tehran say the vital Baghdad-Basra Highway, which runs along the Tigris, is now within range of Iranian artillery.
Rumors in Tehran continue to suggest that the United States, France, and Britain are trying to replace Iraqi President Saddam Hussein in a bid to bring Iran to the negotiation table.
''This is wishful thinking,'' a European diplomat says. But he adds: ''The Islamic Republic needs a military victory to consolidate its power and it will launch new offensives.''