France plans to ship weapons-grade enriched uranium to Iraq following the failure of a three-year effort by Paris to persuade the Iraqis to buy a substitute low-enrichment fuel, French officials disclosed today.

The French decision to abandon efforts to substitute a uranium fuel called "caramel" in the contract for an atomic research reactor under construction outside Baghdad is a major blow to the nuclear nonproliferation policy President Valery Giscard d'Estaing unveiled in 1977 with great fanfare.

The disclosure came at a meeting of world nuclear experts here. U.S. nuclear nonproliferation officials who regard Iraq as the Arab state most likely to develop atomic-weapons capability in the 1980s, called the French decision "distressing."

The Iraq nuclear research program, which Baghdad officials declined to discuss, has also long been a source of keen concern to Israel. When the reactor vessel that a French firm is constructing for Iraq was sabotaged in France last year, suspicion focused privately on Israeli agents. France, after agreeing to sell the Osiris research reactor to Iraq, has become more concerned about nonproliferation in recent years and officials said in 1978 that they were hoping to provide Baghdad with caramel, which was in the early stages of testing.

French officials said today that the tests of this fuel are going well.It has an enrichment of 6.8 percent, well below the threshold of 20 percent that is regarded as the minimum for use in even a primitive nuclear explosive device.

Nevertheless, the officials said France had a contract to supply Iraq with 92 percent enriched uranium fuel -- anything greater than 90 percent is regarded as weapons-grade -- and that France intended to provide this fuel, probably late this year or in early 1981.

"Our general policy for the future is to supply research reactors with low-enriched uranium," said F. Bujon de l'Estaing, director of international relations for the French Atomic Energy Commission.

But he noted that Iraq is a signatory of the Nuclear Nonproliferation Treaty and has accepted International Atomic Energy Agency safeguards on its nuclear facilities.

"I don't see any legal basis on which this sale can be prohibited for Iraq," he said.

One of the major sources of concern about Iraq's atomic intentions has been Bagdad's reticence in publicly discussing any of its nuclear research activities, coupled with a series of remarks over the years suggesting that Arab nations should match Israel's presumed nuclear weapons capability.

Iraq's secrecy regarding peaceful nuclear research is unusual. Virtually all of the 22 developing countries with nuclear research reactors take considerable pride in discussing the projects.

Iraqi officials attending the end of the conference of the International Nuclear Fuel Cycle Evaluation here, however, flatly refused to discuss any aspect of their interests.

"I'm not prepared to talk about the nuclear program in Iraq at this time," said R. A. Kital, Iraq's atomic energy commissioner.

A report adopted by the 66-nation conference, which wound up a two-year study of ways to prevent nuclear nonproliferation and adjourned today, endorsed efforts to reduce the enrichment level of uranium fuel used in research reactors as one way of minimizing the risk of the spread of atomic weapons.

"A change to a lower enrichment would seem feasible for the great majority of these reactors and in the longer term most could use less than 20 percent enriched fuel," the report said.

French officials today expressed some irritation about American criticism of their planned sale to Iraq, noting that the United States was the prime supplier of highly enriched fuel for research reactors in a number of other developing countries.

France, they contended, has in fact led the drive to reduce the enrichment level of uranium fuel used in rereactors.

"We are particularly sure now that this is the wave of the future," said P. Savelli of the French Atomic Energy Commission, the better the result for proliferation."

Savelli said United States officials had pushed to have the target level set as high as 45 percent because the United States was having trouble developing a fuel of lower enrichment that would perform satisfactorily in most research reactors.

Bujon de l'Estaing said the French had been testing a full core of caramel in an Osiris reactor, similar to the one being sold to Iraq, at the Saclay Research Center outside Paris since December, and it has "functioned perfectly."

He said tests were continuing, however, to determine what limitations there might be on experiments that could be performed with a reactor using fuel of 6.8 percent enrichment, and that the results should be known by May or June.