The time has come for America to spell out its terms for settling the Gulf crisis. At this stage, the crisis should be easing, and diplomacy moving forward. Both sides had to make certain moves before a settlement could even be contemplated. But that phase ended with the Helsinki summit; a breach between the superpowers was Saddam Hussein's last real hope. Rather than easing, however, the crisis is becoming more explosive, and war seems more and more likely.

War may well be the only solution. If Saddam is truly like Hitler, he lusts for war. Even so, before going to war, we must try to offer him a way out. Simply insisting that Iraq withdraw from Kuwait is no longer enough. Any peace plan has to deal not only with the liberation of Kuwait but with the containment of Iraq and the establishment of new security arrangements for the Gulf, and perhaps the entire Middle East as well.

The outlook for negotiations is quite gloomy, but a peace plan might work if all five permanent members of the Security Council -- Britain, France, the United States, China and the Soviet Union -- put it forward. Even Saddam Hussein could not simply brush it aside.

To hint at a negotiation at this stage could be a sign of weakness and encourage Saddam to hold on. Any Five Power offer therefore would have to have the character of an ultimatum -- perhaps not a strict time limit but close to it.

The starting point, of course, would be the withdrawal of Iraqi troops from all of Kuwait, and the insertion of a U.N. force. The restoration of the status quo ante would not be enough. The Kuwaiti government would have to pledge to validate its legitimacy through elections to a parliament.

Iraq would be guaranteed the opportunity to present its economic and territorial grievances against Kuwait to the World Court, and both governments would be bound by the outcome. With Iraq's withdrawal completed, one-half of its assets would be unfrozen, and the embargo against foodstuffs and nonlethal imports would be lifted.

This might just barely save Saddam's face, but it would still leave the region at his mercy. This threat would be dealt with, first, by a Five Power guarantee to the effect that an unprovoked attack against any of the Gulf States by any power would be an attack against the Five Powers. This guarantee would be extended to all Gulf states, whether they requested it or not.

A Five Power guarantee is a powerful political instrument, but it would not be enough. American and other troops would remain in Saudi Arabia and the Gulf area until the question of Iraqi armaments had been dealt with. Iraq would have to agree to submit its various nuclear-related facilities to inspection as provided for by the Nonproliferation Treaty. Moreover, its rockets and missiles would have to be assembled in a designated area and subject to continuing inspection, and preferably destroyed. Any chemical-weapons production facilities would be deactivated and also made subject to inspection. Destruction of chemical weapons stocks would be desirable, but may be impossible to verify.

At this point all non-Arab foreign ground troops would withdraw, but some U.S. and European air and naval units would remain. Iraq's remaining assets would be unfrozen and the embargo entirely lifted.

These arrangements should contain the threat from Iraq. Why would Iraq ever agree to this? It would be close to a surrender, but it ought to be preferable to a war, which could only end with Iraq's destruction. The plan's principal disadvantages are that Saddam Hussein would remain in power with a huge army, and that deterring him would depend heavily on a continuing agreement among the Five Powers.

The chances for settling the crisis would be improved by including some provisions for a broader regional settlement. A realignment of forces in the Arab world is obviously underway. The Soviet role in the area is also changing significantly. The Five Powers should include in their plan an offer to expand their efforts to explore a regional security system.

They could not be expected to underwrite the status quo, but they could stand ready to be honest brokers and to guarantee an Arab-Israeli settlement. It would be ironic if this crisis ended with a security guarantees for the Arab sheiks, while leaving Israel exposed.

The Five Powers could agree to convene a conference on the Middle East -- an old, shopworn idea, but worth reconsidering in light of the new situation. Such a conference might not yield anything; and when it collapsed another crisis might be provoked by Iraq. Baghdad would certainly then try to form a new Arab front. The Five Powers would have to make it clear that the Iraq settlement would not be dependent on the outcome of an international conference.

The current strategy of relying on the buildup of military power and the tightening of the embargo is too dependent on the calculation that Saddam will become desperate enough to capitulate or will be overthrown. He might, however, agree to get out of Kuwait, but nothing more. A settlement that goes beyond the liberation of Kuwait and contains post-crisis Iraq is surely in the American interest. Moreover, a settlement that preserves some balance of power between Iraq and Iran is also in the American interest. It would be a supreme irony if the United States destroyed Iraq, thus permitting Iran to reemerge as the strongest power in the Gulf and, in passing, also strengthened Syria.

Gen. Dugan has given us a glimpse of what the consequences might be if current calculations are wrong. Before facing this grim alternative, we would be wise to spell out our peace terms. If they are rejected, then at least we will have the support of the key Security Council members for the military action that will then be unavoidable.

The writer is editor of Foreign Affairs.