Egyptian President Anwar Sadat announced in Cairo yesterday that he was suspending payments on his nation's estimated $4 billion in military debts to the Soviet Union because of Moscow's arms embargo.

The 10 year suspension will go into effect Jan. 1, and will be coupled with a ban on the export of Egyptian cotton to the Soviet Union and Czechoslovakia.Sadat told a cabinet meeting.

Egypt ran up the dept in purchasing weapons in the years leading up to the 1973 Arab-Israeli War. Following that conflict, when Cairo wanted to replenish its arsenal. Moscow imposed an arms embargo in retaliation for Egypt's growing approachment with the United States.

In contrast to his problems with the Soviet Union. Sadat spoke warmly yesterday of the U. S. citing its efforts to promote Middle East peace, its agreement to sell Egypt C-130 transports and its offer of $1 billion in annual economic aid.

"There are no obstacles in the way of friendship and mutual understanding between Egypt and the United States Sadat said.

Indicating that payments to Moscow will be resumed after the ten years. Sadat said: "We are not refusing to pay but the other side should understand our circumstances" - a reference to Egypt's economic problems.

Sadat made no reference to Egypt's estimated $2 billion in civilain debts to the Soviet Union, and it was presumed that payments would continue.

The embargo on cotton shipments to Czechoslovakia was promted by Praque's refusal to honor a contract for heavy tanks even though Cairo had paid for them, Sadat said.

Yesterday's Egyptian Cabinet meeting was the first for several new ministers named to their post in a reshuffling of portfolios carried out bu Premier Mamdouh Salem Tuesday.

Salem replaced four ministers and combined some departments, saying the move was necessary to improve the performance of his government.

These other developments involving the Middle East were reported yesterday.

The Arab League asked the European Economic Community to break all ties with Israel and recognize the Palestine Liberation Organization. An EEC spokesman said, however, that there was no chance the group's current economic talks with the league in Brussels would be expanded to include political matters.

Former Israeli Prime Minister Yitzhak Rabin told a Jewish group in Detroit that his country had no nuclear arsenal and would not be the first to introduce nuclear weapons in an Arab-Israeli conflict. Rabin was comenting on published reports that Israel has built up a stockpile of nuclear weapons.

Police in Abu Dhabi imposed tight restrictions on passage in and out of the island city in an effort to snare possible accomplices of a gunman who killed Minister of State Saif Bin Ghobash Tuesday at the City's airport. The attack was believed to have been aimed at visiting Syrian Foreign Minister Abdul Halim Khaddam.