With 27,000 tons of rice stuffed into its hold, the Motor Vessel Thalia sat at anchorage in the Mississippi River off New Orleans last week, a victim of the worldwide embargo on trade with Iraq.

The rice is owned by a New Jersey trading company, which has a contract to sell it to Iraq for $12 million. But the company, Westway Merkuria Corp. of Englewood Cliffs, can't collect until the ship sails, signaling that the contract has been fulfilled.

"The rice was loaded and we were about to sail," said Westway Merkuria Vice President Lee Cameron. "Then Thursday morning happened {Iraq's invasion of Kuwait in the pre-dawn hours of Aug. 2}, and we're holding the vessel, not knowing where to go."

He said the Treasury Department ruled last week that the shipment could not go through. "We're exploring other alternatives," Cameron said, "but there really aren't any good ones."

Westway Merkuria is but one of an untold number of enterprises that have been legally landlocked by the embargo, intended to keep Iraq from selling its oil, the source of its wealth, and to keep it from buying food, weapons and other products its economy depends on. The embargo was extended to Kuwait to prevent Iraq from gaining from its occupation of that country.

Cameron said the company is unable to sell the rice elsewhere -- even at a loss -- because the 27,000 tons is packed in bulk, not in bags, "and not many places can go with that. It does not have many homes."

Agriculture Department officials said other U.S. grain traders also have been left holding the bag by President Bush's swift imposition of an embargo last week on trade with Iraq and Kuwait. But Mort Sosland, editor of the authoritative Milling and Baking News, said the impact has been minimal.

"No traders or exporters expressed concern over it," he said. "In the total scheme of our markets {for grain}, it's not that important."

But Washington attorney Marshall W. Wiley, head of the U.S.-Iraq Business Council, said five small American companies face possible bankruptcy because they have sunk their own money to fill special orders for Iraq and now can't collect because the present embargo rules don't allow the goods to be shipped.

"It's a pretty nasty situation," said Wiley, an attorney with the firm of Sidley & Austin, who has served as U.S. ambassador to the Persian Gulf sheikdom of Oman and headed the U.S. interests section in Baghdad before the United States opened full diplomatic relations with Iraq.

Wiley said the five companies, which requested that their names not be used, are so small that the losses on this one deal will probably force them to declare bankruptcy.

They are seeking a new ruling from the Treasury, however, that would allow the deals to go forward. Wiley said he is making the argument that the goods are all for peaceful projects, such as municipal water treatment plants, that Iraqi President Saddam Hussein would likely postpone in the new crisis atmosphere.

Honoring the existing letters of credit to allow the U.S. companies to get paid, Wiley continued, would therefore deprive Iraq of scarce hard currency reserves that the country would otherwise use to buy military hardware or needed foodstuffs.

In the week since it issued orders freezing Kuwaiti and Iraqi assets, the Treasury Department has been laboring to straighten out the resulting confusion among bankers, business executives and agricultural traders.

Officials from the Treasury's Office of Foreign Asset Controls have been flooded with requests from banks and other companies that do business with Kuwait and, as a result, the Treasury has issued clarifications of rules nearly every day.

On Friday, Aug. 3, for example, the Treasury declared that the freeze applied to the National Bank of Kuwait in New York, effectively shutting down the bank. Treasury made its declaration because it thought the bank was owned by the government of Kuwait when, in fact, it is owned by a private group of Kuwaitis. Because the freeze doesn't apply to private individuals, the Treasury reversed its position Monday morning.

Under the initial terms of the freeze, Santa Fe International, the California-based oil services and exploration company that is entirely owned by the Kuwaiti government, would have been put out of business. But when Treasury realized that would put Americans out of work and hurt American companies that are awaiting payment by Santa Fe, the department clarified rules to permit the company to continue ordinary business transactions ranging from issuing paychecks to making supply purchases. But it blocked movement of funds back to Kuwait, where they could be seized by Iraq.

"The Treasury is trying to deal with commercial realities. With things like Santa Fe and hotels {owned by Kuwait} with U.S. employees and U.S. creditors, it would have hurt us more than them" to completely freeze companies' operations, said Joni L. Nelson, a lawyer with the New York firm of Rogers & Wells.

"Treasury has to allow some latitude. Otherwise, a company like Santa Fe will go out of business," said Robert Hormats, a Goldman Sachs investment banker and former economics official at the State Department.

"These kinds of issues have probably not come up before," said Robert Carswell, a lawyer with the New York law firm of Shearman and Sterling, which is representing various banks that do business with Kuwaiti firms and individuals.

Earlier asset freezes were designed to seize foreign-owned assets for claims instead of preserving the assets. "The whole purpose is to conserve the Kuwaiti assets while getting the Iraqis out" of Kuwait, Carswell said. The Treasury has to figure out how to let Kuwaiti companies continue to do business, or "you wouldn't have helped the Kuwaitis much," he added.

In other countries, government officials are also trying to figure out how best to put asset freezes in effect without hurting the Kuwaitis they are trying to protect.

In Britain, the Bank of England ordered banks not to cash more than 500 pounds sterling, or about $800, a day in personal checks for Kuwaiti citizens. The British government was concerned that Iraq could blackmail private Kuwaitis who have relatives at home and force the Kuwaitis overseas to send money back as ransom.